my journal

[Yamato]

Well, thanks... which ones? Don't forget I have been consistently unprofitable for my 12 years long trading career.

Which moves are you talking about? Could you link the posts you are referring to?

I don't have any mysteries... I can explain you almost everything about it, except giving you the code. And I have explained it before.

 

[j2a_aj]

I am just speculating. I am basing my speculation on the stop loss of $100 / $200 with a projected short term profit potential of $2000 that you have specified in your last few posts.

I have taken a hiatus from trading until the new year begins. Taking time to hit the books on greeks. Trying to write out my trading plan. Your post on the lottery is a def. game changer. Kudos!

 

[Yamato]

Thanks a lot. I am glad if readers appreciate my analogies and my posts in general, regardless of the fact that I haven't become consistently profitable yet. I mean: I've been a compulsive gambler with a trading addiction until very recently. If I'll get my own points, I'll definitely become profitable. I'll keep you posted. Good luck with your studies on options.

In the meanwhile, I've decided to close the lottery, and obtained a prize of 300 dollars from the three contracts, after risking about the same. It's ok. What am I to complain about? I make 100 dollars a day at my job. If I can get these results in the future, I can quit my job.

Now capital is at 6400, despite today's loss on the GBP (automated trade). I am pretty satisfied. I am flat. No positions open, no gambling... everything is perfect.

We'll see if this approach will finally allow me to increase my capital after keeping it between 5k and 13k for the past few months.

 

[piker]

Well, thanks... which ones? Don't forget I have been consistently unprofitable for my 12 years long trading career.

Which moves are you talking about? Could you link the posts you are referring to?

I don't have any mysteries... I can explain you almost everything about it, except giving you the code. And I have explained it before.

One of the main problems rests in not being able to stay with a signal till its maturity reaches peak levels. The ones that have access to unlimited funds & understand order flow & mentality of retail traders can shake us all day long. We have to learn how to stay with a signal till it reaches or almost reaches peak/optimal get out levels. So many times our stops are hit, yet signal remains valid, but we pull the plug & they know how to make us pull the plug.

 

[Yamato]

I see... I've heard this story about big capitals manipulating the markets. But you could widen your stops if they get hit in vain. Or you could use a time-based exit: "I enter now, and exit in exactly 2 hours no matter what happens".

 

[piker]

I see... I've heard this story about big capitals manipulating the markets. But you could widen your stops if they get hit in vain. Or you could use a time-based exit: "I enter now, and exit in exactly 2 hours no matter what happens".

The latter is not such a hot idea IMO. Widening stop may work, but that depends on your strategy & statistics, simply saying widen a stop is not a cure.

 

[Yamato]

Yeah, I am using statistics mostly for defining how wide my stop should be. But guess what, that not so hot idea works for my statistical back-testing better than using stoplosses.

 

[piker]

Yeah, I am using statistics mostly for defining how wide my stop should be. But guess what, that not so hot idea works for my statistical back-testing better than using stoplosses.

Point is it will only take 1 bad trade & you could theoretically wipe out your account, depending on leverage used of course. If you used no leverage, then perhaps it's doable.

 

[Yamato]

Well, it's correct that theoretically I could wipe out my account (but it doesn't happen in 10 years of backtesting) and that for you that would not be the case.

I use leverage but do not invest my whole capital on one future, so that's like not using leverage. (Except that it has the advantages of using leverage).

 

[dog4]

This on p.236 of your log is what opened my eyes some months ago. Not so easy to DO this, but it IS necessary.

From Douglas:

"1. We have beliefs
2. Those beliefs cause us to act certain ways
3. We can change those beliefs
4. Therefore causing us to act in different ways."

I'm glad to see, after many good words of advice from many, many readers, that in recent days you are waking up to new beliefs and ways to benefit.

Bear in mind, this is the START of the change, not the change itself!

 

[Yamato]

Thanks. It was about time for a change in my behaviours (for some reason I wouldn't call them "beliefs"), after 12 years of this crap. Thanks to the readers again.

 

[piker]

Biggest problem is of course a psychological one. And mainly because of not knowing which signal is going to be bread & butter and which one will be a crapper. If we knew which one was the real deal, then there would be no fear to deal with. After a few losses mind goes into protective mode & locks up, making it tough to ride bread & butter trades.

 

[Yamato]

I agree.

 

[BlueChilli]

http://media.whoomp.com/media/kc0ixoh.wmv

 

[Yamato]

All right, I just looked tonight, and I saw no trades.

The EUR wants to go up, the GBP seems to want to go down, the JPY up, but the ES down... all contradicting one another. The ZN wants to go up but it hasn't done anything for the past two days so the bounce may be over... basically there are no good bets at the moment.

So I simply will not buy any lottery tickets for now.

This is the tough part: not doing anything. I have done my trading today, it went well, I am bored and this situation is usually perfect for overtrading. But I don't see probabilities on my side. I looked at all those charts and no great opportunities appeared to me.

So, even one trade per week would be enough to make a living from trading: why should i be desperately looking for a trade now when I've placed several trades in the last 24 hours? I won't do anything.

Let's see if this approach works. It'd be about time, after losing for 12 years, testing, reading and more. And writing, especially writing. And talking, and planning and dreaming. And persevering.

It'd be about time I learned a new attitude.

One more quote about this from chapter 2 of trading in the zone, before going to bed:

There's something else about the nature of trading that makes it easy to escape the responsibility that
comes with creating structure in favor of trading randomly: It is the fact that any trade has the potential
to be a winner, even a big winner. That big winning trade can come your way whether you are a great
analyst or a lousy one; whether you do or don't take responsibility. It takes effort to create the kind of
disciplined approach that is necessary to become a consistent winner. But, as you can see, it's very easy
to avoid this kind of mental work in favor of trading with an undisciplined, random approach.

So, be careful and watch out for relapses.

 

[Yamato]

more from chapter 2 of trading in the zone

PROBLEM: Addiction to Random Rewards

Several studies have been done on the psychological effects of random rewards on monkeys. For example, if you teach a monkey to do a task and consistently reward it every time the task is done, the monkey quickly learns to associate a specific outcome with the efforts. If you stop rewarding it for doing the task, within a very short period of time the monkey will simply stop doing the task. It won't waste its energy doing something that it has now learned it won't be rewarded for.

However, the monkey's response to being cut off from the reward is very different if you start out on a purely random schedule, instead of a consistent one. When you stop offering the reward, there's no way the monkey can know that it will never be rewarded again for doing that task. Every time it was rewarded in the past, the reward came as a surprise. As a result, from the monkey's perspective, there's no reason to quit doing the task. The monkey keeps on doing the task, even without being rewarded for doing it. Some will continue indefinitely.

I'm not sure why we're susceptible to becoming addicted to random rewards. If I had to guess, I would say that it probably has something to do with the euphoria-inducing chemicals that are released in our brains when we experience an unexpected, pleasant surprise. If a reward is random, we never know for sure if and when we might receive it, so expending energy and resources in the hope of experiencing that wonderful feeling of surprise again isn't difficult. In fact, for many people it can be very addicting.

 

[Yamato]

More, just a few lines later:

The problem with any addiction is that it leaves us in a state of "choicelessness." To whatever degree
the addiction dominates our state of mind, to that same degree our focus and efforts will be geared
toward fulfilling the object of that addiction. Other possibilities that exist in any given moment to fulfill
other needs (like the need to trust ourselves and not to subject too many of our assets to risk) are either
ignored or dismissed. We feel powerless to act in any other way than to satisfy the addiction. An
addiction to random rewards is particularly troublesome for traders, because it is another source of
resistance to creating the kind of mental structure that produces consistency.

As far as I am concerned, this is the best book on trading ever written. Yes, because it provides with an explanation for doing what I could not do by myself: losing my addiction and having the right approach. The edge and everything else you can easily do by yourself. This is the hardest part, and this book solves the hardest problem for you.

It gives you an understanding of what is keeping traders from being profitable after trying for many years, because that's the problem Douglas himself had. If anyone has had a problem of still being unprofitable after making efforts and trying for several years, this book will solve his problem.

It teaches you the concept of risk: of accepting risk: of applying the stoploss basically. And it tells about yoru enemies within yourself: addiction to random rewards. That's basically all there is to it. I don't see any other obstacles on the road to profitability. Thanks, Mark.

This video is very good at explaining the same things I wrote (it's a review of Douglas' books):

 

[Yamato]

This guy seems like an emotional trader. I feel close to him. I think he needs to start a journal like me:

The difference between the guy above and the guy below is very striking. I would bet that the guy below is profitable and the guy above is unprofitable, but who knows.

 

[Yamato]

Here's another emotional trader:

 

[Yamato]

Well, these are not traders, but it's related to stress: