Why do so few succeed?

[TheBramble]

I'll give you a concrete example. A couple years ago, I was trading a discretionary methodology. Initially, I was consistently losing with it. However, I stayed with it, turned the corner, and in a period of 4 months, increased my account by 100%. Shortly thereafter, trading the same methodology, I began losing consistently and eventually lost all my gains. Now, given that the methodology increased my account by 100%, I don't think it could be argued that it was crap. But, I started losing and eventually quit using that methodology. Wouldn't you say that the problem was emotional/psychological as opposed to the system being junk?

Sorry mate, this really isn't personal. And I mean that both ways. Your phrase 'stayed with it' sounds more like brute force and willpower than any rational business decision. And trading is a business. And you only get to make rational decisions when you've considered all the data, and all the risks and formulated a business plan, and tested it. You run it, without emotion and you monitor the performance. It either works - or it doesn't. If it's simply a case of a tweak to keep it on track, you tweak it. If it's clear it's a dog, you ditch it. No loyalty. No emotion. Water under the bridge.

The case you mention doesn't sound like a consistently successful strategy. I could invent a discretionary method from scratch today and it might exactly mirror your performance back then. I could invent a fully automated system today that might exactly mirror your performance back then.

My point is if you 'decide' it's all psychological, then you'll spend time 'working' on that aspect thinking that's going to do it for you. It wont if the basic business case (trading methodology) is weak. That's why I suggested you become an expert in a tried-and-tested trading strategy and work with that, on paper to start. If you can't show consistent success with that (channel BO for instance) then you need to work on you.

 

[pboi]

May I ask what you do as your day job Soc..you spend a lot of time on the forums, so I am thinking maybe self employed trader, regularlly taking showers in money.

If so..what news resource do you read to 'hear murmuring ' of systems so advanced they will take over the world.

 

[new_trader]

But, determining whether a pattern is correct or present or not requires the exercise of discretion. I don't think a computer could effectively trade that way. That is an example of what I mean by discretionary.

How can one be confident wich such a system? This involves forward testing with REAL trades. Once you back test a system/methodology, it is mechanical, pure and simple.

 

[SOCRATES]

Among my trading screens I have one dedicated to amusement which I use to surf the net when there is nothing of interest going on.

I don't listen to any news at all and I don't bother to read any newspapers either, nor do I subscribe to any magazines but I occasionally look in newsgroups to see what news there is but again, infrequently, unless there is something going on of specific interest.

But this discussion about the implications of fully automated trading is rife, particularly in the US.

I personally do not agree with the idea of artificial intelligence being able to take over trading and investing, but with the rapid development of IT, it is viewed as a threat to the established order of things, worldwide, so I am aware of that, and that is why I mention it.

 

[Chicken Curry]

Among my trading screens I have one dedicated to amusement which I use to surf the net when there is nothing of interest going on.

This would be your exclusive T2W screen would it Soc ?

 

[SOCRATES]

This would be your exclusive T2W screen would it Soc ?

It is not exclusive to T2W, no.

 

[pboi]

thaks for your reply Soc. interesting you pay no heed to world activities.

 

[SOCRATES]

thaks for your reply Soc. interesting you pay no heed to world activities.

Not necessary. The world does what it does and the markets do what they like.

 

[pboi]

well we have someting in common - though mine through laziness/ignorance, yours through choice !


arent there some RL affairs, like interest rate change day, that are very certain to affect the markets?

 

[new_trader]

Don't worry, you will eventually succeed, but only if you approach all of this in the correct way.

My methods are exclusively discretionary.

I can't quite grasp how anyone can claim to be a discretionary trader. Surely the decisions to trade are based on experience and knowledge? You can choose whether you bet on the outcome of a coin flip, but you know the odds of winning are 50%. How is this different to a ‘Mechanical’ trader?

 

[Trader333]

I can't quite grasp how anyone can claim to be a discretionary trader.

The circumstances surrounding each trade are never exactly the same and for that reason alone trading by discretion will always be more beneficial for those who are able to trade in this manner.


Paul

 

[SOCRATES]

well we have someting in common - though mine through laziness/ignorance, yours through choice !


arent there some RL affairs, like interest rate change day, that are very certain to affect the markets?

Yes, that is true, there are affairs that are very certain to affect the market, but the outcomes are not always in line with those which are rationally expected.

 

[chump]

"I can't quite grasp how anyone can claim to be a discretionary trader. Surely the decisions to trade are based on experience and knowledge? You can choose whether you bet on the outcome of a coin flip, but you know the odds of winning are 50%. How is this different to a ‘Mechanical’ trader? " ...context is your answer..

For example ...you could mechanically trade breakouts , but a discretionary trader would argue that not all breakouts are created equal ..it's a question of context.

Hope that helps.

 

[SOCRATES]

I can't quite grasp how anyone can claim to be a discretionary trader. Surely the decisions to trade are based on experience and knowledge? You can choose whether you bet on the outcome of a coin flip, but you know the odds of winning are 50%. How is this different to a ‘Mechanical’ trader?

Mechanical trading is dependent upon algorithms and rule sets for example, in which are encapsulated moving averages, ratios, indicators, signals and triggers.These mechanical trading examples are wholly dependent upon technical analysis and the use of charts.

Discretionary trading is very nearly the opposite and dependent upon long experience and know how and total familiarity with the market.

They are very different ways of going about things.

 

[SOCRATES]

You have taken the words out of my mouth, Chumpy. You beat me to it by seconds. LOL.

 

[new_trader]

The circumstances surrounding each trade are never exactly the same and for that reason alone trading by discretion will always be more beneficial for those who are able to trade in this manner.


Paul

This is perhaps why I will never be a good discretionary trader. If I trade in the direction I expect, the market moves in the opposite direction. So, next time, I trade the opposite to what I expect and guess what….?

 

[new_trader]

"I can't quite grasp how anyone can claim to be a discretionary trader. Surely the decisions to trade are based on experience and knowledge? You can choose whether you bet on the outcome of a coin flip, but you know the odds of winning are 50%. How is this different to a ‘Mechanical’ trader? " ...context is your answer..

For example ...you could mechanically trade breakouts , but a discretionary trader would argue that not all breakouts are created equal ..it's a question of context.

Hope that helps.

I agree. All you are doing is adding more conditions to a mechanical system.

 

[new_trader]

Discretionary trading is very nearly the opposite and dependent upon long experience and know how and total familiarity with the market.

They are very different ways of going about things.

Soc, perhaps due to your experience you can assess the market conditions within seconds and make a profitable trade, but this human algorithm can be replicated with software. Unexpected events (like terrorism) would be difficult to incorporate, but there aren't many other things that unexpectedly move a market.

 

[SOCRATES]

This is perhaps why I will never be a good discretionary trader. If I trade in the direction I expect, the market moves in the opposite direction. So, next time, I trade the opposite to what I expect and guess what….?

You must not get disheartened but carry on with what you have if it works.

If it does not work you cannot force it to work, or persist pointlessly and just change.

No one can force anything.

We must not behave like the mud beetle.

The mud beetle stores its food in a mud ball, roughly about the size of a golfball.

You see them in a muddy trench at the edge of a field pushing a ball until it gets so big that they have to give up and start another one. It would be more efficient for the beetle to roll many smaller balls as this would be less effort, and faster, and store more food.

If I were a mud beetle, that is what I would do myself and not roll big balls just because everyone else is doing the same.

 

[Glenn]

This is perhaps why I will never be a good discretionary trader. If I trade in the direction I expect, the market moves in the opposite direction. So, next time, I trade the opposite to what I expect and guess what….?

imho:-
Expectation is no use.
It displaces/overcomes/confuses awareness.
It destroys your ability to trade.

The market will do as it likes, no matter what anyone expects, and no matter what kind of method they use.
Once you have opened a position, Anything Can Happen !
The price is controlled by others behaviour after you commit the trade.
Never forget that.
Glenn