Article The Woodchuck and the Possum

T2W Bot

Staff member
1,454 54
In the Forex market, sometimes you get the fruit and sometimes you get trapped and shot. Why?
A friend of mine volunteers on a regular basis to rid his neighborhood of rodents and animal riff-raff: the woodchucks, groundhogs, and possums that eat up gardens, attack family pets, and so on. He sets a trap with ripe fruit or tuna fish. The animal enters the trap for the food. If the animal can?t find its way out, it is eventually shot and buried.
Possums are relatively easy to catch. They go for the fruit, they get caught, and then, when the trapper approaches the trap, the possum simply plays dead. It plays dead because that?s the best defense mechanism that it has.
A woodchuck is tougher to trap. A big one might enter the trap, eat the fruit, and then rip the trap apart, exit, and wander off looking for more food. Or it might roll the trap along the ground, set it off, and then eat the fruit from the outside.
There is a fundamental characteristic of unsuccessful forex traders...
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jmreeve

Well-known member
432 13
“Do what you love and the money will follow.” ?
I thought it was, "Follow the money and you will love what you do.”

Quite a well written article and agree with the general content.
Not sure about all the references to fauna and have no idea what a woodchuck is.
 

jmreeve

Well-known member
432 13
Here they are for those unfamiliar with these non-native species.
The red handed squirrel is the one that makes all the money.

The badger and the rabbit would have been better for the UK.
 

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Charlton

Experienced member
1,501 325
Is there a correlation between tool used and instrument traded ?

T2W Bot said:
This is a forum thread for discussing the Knowledge Lab Article, "The Woodchuck and the Possum".
OK - the thing that strikes me about this article and other threads devoted to forex is summed up in the sentence from the article:

Lots of traders use moving averages – when the moving averages cross each other, they give off buy/sell signals. The might read candlestick patterns, Elliot Waves, or Fibonacci Arcs.

With most other instruments being traded MAs are perhaps considered too simplistic - "old hat". To what extent do they form the basis for the trading strategies for other instruments and to what extent do they form the basis for trading stategies for forex ? If there is any significant difference - why is this ?

The same questions might apply to other tools ? Are fibs, EWs, patterns or any other tools you care to name best suited to one type of instrument rather than another and why ?

PS - Mods - if this is too much off subject feel free to transfer this to another thread

Charlton
 
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geneaux

Newbie
1 0
I am offended by the story of the jerk killing animals, so I didn't bother reading the rest of the article.
 

bracke

Experienced member
1,286 12
I do not trade Forex but found the article interesting. The priciples apply to all manner of trading whether it be Indices, Shares, Commodities etc.

Regards

bracke
 

*JDR*

Active member
183 22
Quote: "If you disobey your principles, and you find that you’re in a big, big losing trade, then look at your trading system: do you really see the market coming back to break-even anytime soon? If not, then get out. If so, then stay in – if you have the usable margin to withstand some heavy losses."

What? Talk about contradicting yourself.

Basically you are saying that if I think I am right I should stay in a trade even if I am losing. From my little knowledge that is a sure way to go broke. Great Advice!
 

PKFFW

Established member
535 140
^^^
I took that to mean one should use ones trading system to decide if one should stay in or get out. As in, rather than blindly panicing and selling out, follow your rules. If the system says "it should be ok and turn around so do not sell yet" then don't sell.

Of course depending on one's trading system one would hope not to be in a "big, big losing trade" to begin with. One would hope to be cutting one's losses rather quickly.

Cheers,
PKFFW
 

*JDR*

Active member
183 22
PKFFW said:
^^^
I took that to mean one should use ones trading system to decide if one should stay in or get out. As in, rather than blindly panicing and selling out, follow your rules. If the system says "it should be ok and turn around so do not sell yet" then don't sell.
Sorry, but I still can't agree. If you have done something silly and are losing then get out of the losing trade... there is no other option.
You can't sit there and think, well my system says it will come back soon.

Ever heard the saying "the market can stay irrational longer than you can stay solvent"

Anyone who advocates staying in a losing trade has ZERO credibility in my eyes. This guy should go trade with Nick Gleeson et. al.

Cheers.
 

dbphoenix

Legendary member
6,952 1,244
*JDR* said:
Sorry, but I still can't agree. If you have done something silly and are losing then get out of the losing trade... there is no other option.
You can't sit there and think, well my system says it will come back soon.

Ever heard the saying "the market can stay irrational longer than you can stay solvent"

Anyone who advocates staying in a losing trade has ZERO credibility in my eyes. This guy should go trade with Nick Gleeson et. al.

Cheers.
The system defines what is a losing trade (and thank you for spelling "losing" correctly). If a particular trade exceeds the maximum amount defined by the system, the trader exits. Otherwise, he lets the system work. Otherwise, the trader is trading emotinally, not rationally.

Of course, if he has no system, or hasn't tested it properly, then he shouldn't be trading at all.
 

PKFFW

Established member
535 140
*JDR* said:
Sorry, but I still can't agree. If you have done something silly and are losing then get out of the losing trade... there is no other option.
You can't sit there and think, well my system says it will come back soon.

Ever heard the saying "the market can stay irrational longer than you can stay solvent"

Anyone who advocates staying in a losing trade has ZERO credibility in my eyes. This guy should go trade with Nick Gleeson et. al.

Cheers.
Yes I have heard the saying.

To make my meaning clear, I simply thought the author did not express himself very well. I don't think anyone should sit there and think "my system says it's going to turn around and come back ". I don't think this is really what the author was trying to say either. The meaning I took from it is that should a position move against the trader, that trader should still follow his/her plan and not emotionally/fearfully/irrationally sell out too soon or hold on too long.

I agree with dbphoenix in that the system should dictate what constitutes a "losing trade". This is the meaning I took from the authors' point, be that what he actually wrote or not.

Cheers,
PKFFW
 

*JDR*

Active member
183 22
dbp - I agree. You shouldn't be exiting if your system has not told you to. If you are in a trade not quite going your way and your stop has not been hit, then exiting would be silly. Your stop should be set to take account of the volatility of a trade (IMHO) and therefore in theory you could be losing at some stage of a trade that may eventually be a winning trade.

However, the author wrote:

"If you disobey your principles, and you find that you’re in a big, big losing trade"

So he has already defined that he is in a trade that is losing big. In fact not just big, but "big, big". I guess in the author’s world repeating the word big means it is bigger than big. Personally I prefer to use “biggity biggity big” :D

I am not sure what he is proposing. Does he suggest I look at my system and just because it still gives me a buy signal (for example) on that trade that I should just sit tight and hope it comes back? What if it falls another 20%? Or do I set a stop loss as though I just entered the trade at the point of the "big, big" loss? Or even worse, what if I do put a stop in, but my system tells me that for this particular trade that a stop of -20% is actually the stop loss point. What then?

In my humble onion, if you have done something wrong and are losing “big, big” then I think it is at this point you would be heavily involved emotionally and it is not the best of times to decide that your system says it will come back. Furthermore, if you do decide to sit and wait for it to come back, I think most people would struggle to execute the stop if the trade went against them by another XX%. Convinced that they are right and their system tells them to hold tight, and they remember reading an article by a guy on T2W who suggests just this strategy, they will end up in a sorry state.

I don’t pretend to know it all, however, I believe in my opinion (above), the proof is on my side. Of course the author may know better and there may be millions of traders who come back from the brink of the abyss, but I doubt it.
 

*JDR*

Active member
183 22
PKFFW said:
I don't think this is really what the author was trying to say either.
PKFFW
Maybe you are right.

Perhaps he could grace us with an explanation?
 

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