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Gamera reacted to mitsubishi in 11 Problems For Beginners You've Never Seen Before
In preparing to become a trader I would compare the early days to a man attempting to perfect the butterfly stroke but then giving a good rendition of a man flailing about in the water as he's being dragged under by a big shark. Pathetic really.
But I think the big clue that I would find myself in this scenario is my experience on the simulator with 10k.
‘This Is pointless..’
I thought, just trade like you intend to trade for real. That lasted about 2 weeks. I had a much better idea. Let's see how fast I can turn this into 1 million. So... after half a dozen attempts I got it up to about 900k before saying, OK, let's stop screwing around, this is pointless..
..Or was it?
One thing it taught me was that if you had sufficient funds (preferably someone else's) and you traded with real balls, full on, all the time, you can in theory make a lot of money really fast (if it was real money) And you can do that with very little real trading knowledge- that's one key point. (Trading experience and knowledge takes a lot longer to accumulate than the ability to make big returns in this (unrealistic for most guys) paradigm).
The key point though is that this is the mental aspect that’s at play here. When using real money the tendency might be to want to trade defensively rather than aggressively.-I don’t mean aggressively as in recklessly- but ‘real money’ should not be the main focus should it? The market and the correct strategy should be the focus.
Putting this into a real world trading context it could be argued that;
Defensive – at the right time is an appropriate strategy for today/this week
Defensive- at the wrong time leads to under-performance. For example, pyramiding into a position could be an appropriate strategy, which would better illustrate what I mean by ‘aggressive’
Bottom line on this particular point. The market rewards your correct decisions. So if your decision is to be cautious because you’re a beginner and not because it’s the right thing to do right now, then that will contribute to under-performance. Losing money is not the only issue for any trader, under-performing is an issue that doesn’t seem to get discussed on forums very much.
So, in your next trade are you playing defensively for the right reason or are you trading ‘scared money’ due to inexperience/lack of funds?
‘risk control..risk control’
Now, I know that while reading this, your mind is screaming risk control,, risk control. Consider this, risk control doesn’t go out the window at any time, but there’s always a danger that when one is overly focused on one aspect of the trading plan another aspect is being neglected.
Under-performance is like an empty hotel room. I can potentially fill the vacancy tomorrow, but the lost opportunity is the issue. You may think that pyramiding is difficult for a day trader.. Pyramiding is not the issue, attempting to do the right thing at the right time is the issue. Maximising the opportunities the market offers is the issue.
As I said earlier, I was focused on turning negatives into positives. Screwing around on a simulator was not a wasted exercise since it lead to useful lessons and conclusions. Making the best use of those lessons took a long time though. But that’s pretty much true for most people.
Your experience in terms of lessons and conclusions will vary from mine. I would just suggest that you may find useful lessons in places you’re not expecting to find them. I’m willing to bet that, right now, there’s something staring you right in the face that is a big clue to who you are as a trader.
So from the first post- 1-You Don't Know Anything
You probably know things right now that are more useful to you than you realise or appreciate..
In the next post I'll talk about how this was a problem for me and how I solved it.
Gamera reacted to mitsubishi in 11 Problems For Beginners You've Never Seen Before
I wanted a simple trading plan to follow. I thought I had one. The problem was It didn’t work as well as it should., Leaving aside the patience/discipline type issues what are we left with? Too much, that’s what we’re left with.
At some point I began to realise that there were several useful character traits that I was not only failing to utilize, I was actively suppressing them. Does suppressing something, anything, sound like healthy activity to you?
“try not to ‘fix’ it”
I’m going to shock a few guys here. I have to tell you that after all these years I still don’t have a system that compels me to enter here, exit there. Did you notice the key word in that sentence?
That’s because I’m not a rule based trader. I’m a trader. The rules are there to help me, not get in my way.
OK, so now more experienced readers know (or think they know) where this is going- Discretionary Trading. A no go area for many. A big scary taboo subject that a lot of vested interests would like you to stay the hell away from.
The scarecrows of the vendor industry prefer empty cliché’s like ‘Plan your trade, trade your plan’ Well, you’re going to find that difficult for a long time. The thing about scarecrows is they’re rooted to the spot. And the danger is you might get rooted there as well.
The scarecrows have got a song they like to sing. In fact they’ve only got one song, it’s called The Gospel- A Traders Bible. And every line in that song is every cliché you ever heard. And the chorus goes like this:
90% of traders lose.
I know most of you are hell bent on dotting all the eyes and crossing all the tees in your trading plan and a rule for every eventuality. The whole industry just loves it when you do that., you know why? because they can package something to cater for that desire. Next time you miss your entry by 1 tic and price takes off without you.. try not to ’fix’ it.
Let’s call your trading plan -a sword, and the market -the battle. If every time your sword gets blunted in battle you feel compelled to go back to the drawing board and sharpen it, be aware that there’s a point beyond that process. What I’m saying is, there comes a time when the sword gets sharper in battle than it can ever be made on the drawing board.
What do you do when you break one of your trading rules (yet again) and you lose money?
1- Put a little note on your trading screen: “Must remember to follow the rules no matter what”
2-’Improve’ the rules.
3- Take a closer look at someone else’s rules.
4- Take a closer look inside your head.
You’ll probably have to work through that list in chronological order and get to number 4 before you can even put yourself in thinking outside the box mode.
How do you know when you’re ready to go beyond?
When you can swim, there’s not much point in staying in the shallow end. I was ready when I realised my discretionary decision making was working better than going back to the drawing board. My learning curve had taken longer because I thought I was being disciplined by not making discretionary decisions, when in fact, that belief was holding me back.
The Key Point Here
Not every trader should be making discretionary decisions, certainly not a new trader. You won’t have anywhere near enough experience to do it. But if it takes you 2 years to realise that it might become part of your trading plan, then that’s 2 years where you could have been working towards it.
Here’s the biggest reason why ‘discretionary’ might be a no go area for you. You designed your trading plan with the express intent of ruling yourself as a trader out of the equation. You decided from the very start to be the passenger instead of the pilot.
The key reason why discretionary worked for me was that I realised that my trading strategies were very compatible with me being the pilot…. or co-pilot if you like.
A happy coincidence you might think. But I suspect that it was no coincidence. I suspect it might have something to do with having a certain personality trait- resistance to rigidly imposed, inflexible rules. If an aircraft is in trouble, who’s got the best chance of safely landing the plane, the passenger or the pilot?
See 4 above- Take a closer look inside your head. Then take a look at trading 101. Don’t wait 2 years to realise you got it the wrong way round.
Discretionary Trading isn’t anything like you think it is.
Actually, you and a lot of others who won’t admit it are doing it too.
The biggest traders in the world make discretionary decisions.
Today, as a usefool mental exercise I'll be counting from 649 backwards to the number 2.