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TheNegotiator

Are You Ready for the Truth?

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You know as well as I do that traders read and read in their attempts to find that magic formula or secret ingredient that'll change them from being an "also ran" to a "champion trader". I like trading books and genuinely new ideas and ways of thinking in the market. I think it's important to challenge yourself and constantly evolve. But my thoughts are more about inexperienced traders and their lack of direction or understanding of what might truly make the difference to their trading. I have seen so many books dismissed as rubbish or out of touch with today's markets and again, many which people believe to be great which I think "Hmm, I didn't think that was such a great book. Maybe it's me?"

 

Do some people have an innate ability to understand which path they need to tread? Do some people just strike lucky? Or does a trader need to come full circle before deeply understanding the benefits which they might personally glean from a certain text?

Edited by TheNegotiator

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I'm not sure what exactly you're trying to say with your post.. but I have an idea because I

can relate.

 

Having been a successful poker player, I can pretty easily weed out the good advice from the bad. And let me tell you, 90% of poker advice is bad. 90% of poker instructional books are crap written by losing players who wouldn't stand a chance in a game with real professionals. And the people with the firmest opinions are usually in those 90%. I think trading is probably similar.

 

So as I attempt to learn trading, I am constantly filtering through books, posts, and other material trying to find some solid ground to base a foundation on. So far, I've yet to find anything that I feel is really useful. Now, as you're saying, maybe I'm not 'ready' to understand some books and missing the point, but I don't think so. Ultimately I need to follow the path that I think and feel is appropriate. I haven't found that path yet in the markets. I just don't think many people have a clue (just as with poker). The closest thing that has grabbed my attn is dbphoenix's price/volume stuff spread across this site, t2w, and et. But even that doesn't fully satisfy me. I reckon most people are just gambling in the markets with no real edge. I don't want to waste my time doing that. I've spoken with one prop trader through email who I believe actually knows what he's doing, but the communication is sparse, i think because he doesn't want to give anything away.

 

So despite my being a newbie in the markets, I feel fairly confident with my answers below.

 

 

Do some people have an innate ability to understand which path they need to tread?

 

Some might, most probably don't. Like I mentioned above I think that I do, but its not because I'm special, but rather just because of my background in similar fields.

 

Do some people just strike lucky?

 

Yes, but its unlikely the luck will last as things change. That is of course, unless they hit and run and get out before reality strikes.

 

Or does a trader need to come full circle before deeply understanding the benefits which they might personally glean from a certain text?

 

Usually this will be the case.

Edited by mikew

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There is no truth only a multitude of possibilities.

If you want answers then you are asking the wrong questions.

 

(dedicated as a tribute to Zdo)

 

most texts are 90% rubbish and could probably be summarised in 6 pages, but who wants to read the latest novel "the Titanic"

 

ship hits iceberg, ships sinks, many people die. the end.

 

If its all a journey then maybe thats part of the appeal of searching for the truth.....people like the search rather than the results.

 

"Do some people have an innate ability to understand which path they need to tread?"

Do some people just strike lucky? Or does a trader need to come full circle before deeply understanding the benefits which they might personally glean from a certain text?"

 

could all this be summarised as???

......some people get lucky, or have an innate ability to get from A to Z without the time others take.

 

Personally I like re-reading things, and at different times gleam different things, as I am not the same person I was when I was 20, and dont expect to be the same person I am now when I hit 60. Yet your point is for inexperienced traders, and yet too many dismiss the simple things that are often repeated time and time and time again.....so it does not matter what you tell them.

 

Trading rule 1.

you are likely to loose money.....great where do I sign up? WTF......

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...

 

"Do some people have an innate ability to understand which path they need to tread?"

Do some people just strike lucky? Or does a trader need to come full circle before deeply understanding the benefits which they might personally glean from a certain text?"

 

...

 

Personally I like re-reading things, and at different times gleam different things, as I am not the same person I was when I was 20, and dont expect to be the same person I am now when I hit 60. Yet your point is for inexperienced traders, and yet too many dismiss the simple things that are often repeated time and time and time again.....so it does not matter what you tell them.

 

 

 

Yes, I think the questions above refer to people who have not yet found the right path.

 

The fact, that you like to re-read things is a different thing. You re-read them (I guess) not because you did not understand them or their importance, but it's quite the opposite. You re-read them because you know that this is how it works and you want to ingrain it into your brain or look at it again from a different angle.

 

And nobody said that the right path has to be complex ;) In fact, I believe that the right path in most aspects of life is simple. Some very intelligent people often don't get it, as they tend to overcomplicate things. And that's for sure not the right path... (some things ARE, of course, complex... but too much intelligence, or better, intelligence without pragmatism can hurt... :crap:)

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Yes, I think the questions above refer to people who have not yet found the right path.

 

The fact, that you like to re-read things is a different thing. You re-read them (I guess) not because you did not understand them or their importance, but it's quite the opposite. You re-read them because you know that this is how it works and you want to ingrain it into your brain or look at it again from a different angle.

 

And nobody said that the right path has to be complex ;) In fact, I believe that the right path in most aspects of life is simple. Some very intelligent people often don't get it, as they tend to overcomplicate things. And that's for sure not the right path... (some things ARE, of course, complex... but too much intelligence, or better, intelligence without pragmatism can hurt... :crap:)

 

The goal is to train your mind not to freak based on emotions (fear and greed). I am looking for books which are helpful with training my mind not to freak.

Systems and strategies are dime and dozens. It is not that hard to find an entry and profitable exit or to learn someone's trading methodology. None of these will work though, until I am an emotional mess. If I don't learn to be present I will pass on all the luck and the trading set ups along the way. For me the luckiest traders are the ones who somehow figured (with books or personal nature or instinct) to keep at bay their emotions and stay focused on the market.

 

Yes, the right path is super simple but hard as hell.

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The goal is to train your mind not to freak based on emotions (fear and greed). I am looking for books which are helpful with training my mind not to freak.

Systems and strategies are dime and dozens. It is not that hard to find an entry and profitable exit or to learn someone's trading methodology. None of these will work though, until I am an emotional mess. If I don't learn to be present I will pass on all the luck and the trading set ups along the way. For me the luckiest traders are the ones who somehow figured (with books or personal nature or instinct) to keep at bay their emotions and stay focused on the market.

 

Yes, the right path is super simple but hard as hell.

 

 

The discussion here might be interesting to you (but you saw it already, I guess):

 

http://www.traderslaboratory.com/forums/psychology/12958-illusion-control-first-step-emotional-sobriety.html

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...Some very intelligent people often don't get it, as they tend to overcomplicate things. And that's for sure not the right path... (some things ARE, of course, complex... but too much intelligence, or better, intelligence without pragmatism can hurt... :crap:)

 

that is right...if you are not a disciplined-strong willed person, your iq can't save you

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I Second Mike.

 

Each, needs to follow the method, he/she is comfortable with. I myself am a price action fan ... whereas a more successful trader friend of mine has his screen full of indicators, and yet makes more money then i do.

 

The only way i could make any sense out of it is, to "Assume", that such successful traders have spent enough time with their respective methods , to have made it a habit of recognizing their trading signals, patterns, etc... the subconscious mind has been trained to filter out the bad trades from the good trades, to such a extent that they do not realize that its more then the trading signal or indicators working , they have unconsciously picked up subtle hints of those danger signs. This maybe the edge.

 

And i have realized, i can't get a edge, unless i spend more time - on screen, in front of my setups and doing actual trading. It's a long painfull journey , but have read enough books and posts now ... i aint getting any holy grail, i need to make one myself.

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The discussion here might be interesting to you (but you saw it already, I guess):

 

http://www.traderslaboratory.com/forums/psychology/12958-illusion-control-first-step-emotional-sobriety.html

 

The other thread stresses on psychology - this thread is more practical wants to find the answer!!!

 

From my experience the answer is unique for each trader - the holly grail (the answer) is within each of us and is different for each of us. Reading books about systems, strategies, methodologies, money management, psychology is an effort from outside to figure what is inside. Over time I learned what kind markets, trading styles, money management etc. keep you in the comfort zone = calm and present. And, yes, I tried and failed with many systems, indicators, methodologies, money management and so on.

 

The big question for me is - am I aware of my emotions? My emotions are intuitive reflection of what the market is doing. If I am bored most likely the market is not giving me what I am waiting for. Am I going to trade when bored? When I am afraid most likely I don't understand what's going on - would I be willing to bet money before I learn what's going on?

 

And, yes, there are those perfect conditions (according to my trading style) which I wouldn't be able to notice and exploit if I was busy being bored or afraid or willing to see things which are not there. So, my goal is to learn how to stay calm and focused so I can observe the market for what it really is. Simple but hard.

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I'm not sure what exactly you're trying to say with your post.. but I have an idea because I

can relate.

 

Having been a successful poker player, I can pretty easily weed out the good advice from the bad. And let me tell you, 90% of poker advice is bad. 90% of poker instructional books are crap written by losing players who wouldn't stand a chance in a game with real professionals. And the people with the firmest opinions are usually in those 90%. I think trading is probably similar.

 

So as I attempt to learn trading, I am constantly filtering through books, posts, and other material trying to find some solid ground to base a foundation on. So far, I've yet to find anything that I feel is really useful. Now, as you're saying, maybe I'm not 'ready' to understand some books and missing the point, but I don't think so. Ultimately I need to follow the path that I think and feel is appropriate. I haven't found that path yet in the markets. I just don't think many people have a clue (just as with poker). The closest thing that has grabbed my attn is dbphoenix's price/volume stuff spread across this site, t2w, and et. But even that doesn't fully satisfy me. I reckon most people are just gambling in the markets with no real edge. I don't want to waste my time doing that. I've spoken with one prop trader through email who I believe actually knows what he's doing, but the communication is sparse, i think because he doesn't want to give anything away.

........

 

The scarcity model of economics has gripped many people, including myself sometimes. But all anyone has to offer you is their story. The truth that most traders are looking for is usually right in front of them. We are so trained to seek recognition and approval from peers/others, it's amazing. The irony of the whole thing is that you must test for yourself anyway any method or strategy to see if it will work for you. There is a shortcut to this testing that I will summarize: figure out what's true about the market first....then you can do what you want.

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Having been a successful poker player, I can pretty easily weed out the good advice from the bad. And let me tell you, 90% of poker advice is bad. 90% of poker instructional books are crap written by losing players who wouldn't stand a chance in a game with real professionals. And the people with the firmest opinions are usually in those 90%. I think trading is probably similar.

 

 

Poker is a zero sum game and nearly identical to trading. If you can, on balance, take money from poker tables, then you'll do well trading once you stop trying to find the holy grail.

 

A major difference is the odds. In poker there will be times when you know you have the nuts. Then it is a matter of making sure that you get other players to commit as much money as possible in the hand. There is no such time in trading. Traders will convey that they "feel" they have the nuts, but that's just not the case. However, you will experience situations where other traders continue to commit funds to your winning trade. You need to learn to identify those situations and remain in the trade when that is occurring.

 

A major similarity between poker and trading is that in each I do not gain an edge at the table or the market until I can understanding who I playing or trading against. In poker it is easy to figure out the odds of hitting a hand. The real art is learning how each player is going to play. What, if any, their physical tells are, if they are tight or conservative, if poker is a narcotic, if they know how to play, the size of their stack, if they won that stack or brought it there, etc. Some players I can play rags against and win and other players I know the best thing to do is fold unless i have the nuts. I learn who i can get money from and who I can't. No player can beat every player and I am not a player that can beat everyone I play and I know it

 

Similarly in trading, you need to trade against people who you know you can get money from. If you enter a trade, say, short, who do you expect to pay you in order for you to make money? Are they present? Can you take money from other short term highly capitalized traders if you are trading against them? Do you want to take a trade against a long term trader who sees the S&P as units of 100 points? Do you want to be on the same side as a long term trader if other traders who attempt to prey on long term traders are present?

 

We are trading traders. The traders who are trading at the same time as you will completely impact the pretty chart pattern that has formed. Just like in poker, you will do infinitely better if you learn how to play the players at your table.

 

I will be in Vegas from Tuesday to Friday for 3 solid nights of poker. It is how I relax.

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Poker is a zero sum game and nearly identical to trading. If you can, on balance, take money from poker tables, then you'll do well trading once you stop trying to find the holy grail.

 

...

 

 

 

Hm... I would say "very similar", instead of "nearly identical"... The major difference is - and that's why I would not sign the second sentence above - in trading, the rules of the game are not clear. In poker you have clearly defined rules how the game works (52 cards, ranks of winning hands, etc.). Hence, you have many good books about poker strategy (mike has a different view on this). The game is already explored. Of course, it's application is not easy as you have to adapt to the players at your table. But this you learn with experience.

 

Trading in contrast is far more complex. There are no rules defined. And to make it more complex, everyone has to find the rules which work for him or her. That takes some intelligence and hard work to figure out.

 

The good thing though is, once figured out "how trading works", the edge can be much much bigger than in poker.

 

 

 

A major similarity between poker and trading is that in each I do not gain an edge at the table or the market until I can understanding who I playing or trading against.

 

...

 

Similarly in trading, you need to trade against people who you know you can get money from. If you enter a trade, say, short, who do you expect to pay you in order for you to make money? Are they present? Can you take money from other short term highly capitalized traders if you are trading against them? Do you want to take a trade against a long term trader who sees the S&P as units of 100 points? Do you want to be on the same side as a long term trader if other traders who attempt to prey on long term traders are present?

 

We are trading traders. The traders who are trading at the same time as you will completely impact the pretty chart pattern that has formed. Just like in poker, you will do infinitely better if you learn how to play the players at your table.

 

 

I agree that we trade traders. But you cannot identify individual players in the trading game ("fund XYZ is covering its shorts now"). However, I agree that these are important questions to ask yourself and at least think about groups of opponents, e.g. the locals, hedge funds and how they approach the market in general. But you cannot explore individual strategies of them. It's just general concepts you have to be aware of.

 

In fact, that's a big difference to poker in my opinion. In trading, you are very much limited to choose your opponents. You are more or less forced to trade against professionals. In poker, you can choose the table you sit at or the hands you play against certain players.

 

Otherwise, I would be interested in how you do it in trading :) Or are you trading individual stocks? There it might be possible, seeing who is bidding, etc. I am trading only ES. That might explain our different viewpoints here.

 

 

 

 

I will be in Vegas from Tuesday to Friday for 3 solid nights of poker. It is how I relax.

 

 

 

That's cool. I like the game too, but it's not relaxing for me, as I want to make money... it's hard work. Poker is - for me - harder than trading. You have to stay alert and watch and think about the other players for such long periods of time. It's very exhausting for me.

 

In trading I just wait for my setups to occur and I then take a trade. No need to sit in front of the computer nonstop for 10 hours a day with my methodology. A lot easier... :)

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Hm... I would say "very similar", instead of "nearly identical"... The major difference is - and that's why I would not sign the second sentence above - in trading, the rules of the game are not clear. In poker you have clearly defined rules how the game works (52 cards, ranks of winning hands, etc.). Hence, you have many good books about poker strategy (mike has a different view on this). The game is already explored. Of course, it's application is not easy as you have to adapt to the players at your table. But this you learn with experience.

 

Trading in contrast is far more complex. There are no rules defined. And to make it more complex, everyone has to find the rules which work for him or her. That takes some intelligence and hard work to figure out.

 

The good thing though is, once figured out "how trading works", the edge can be much much bigger than in poker.

 

 

 

 

I agree that we trade traders. But you cannot identify individual players in the trading game ("fund XYZ is covering its shorts now"). However, I agree that these are important questions to ask yourself and at least think about groups of opponents, e.g. the locals, hedge funds and how they approach the market in general. But you cannot explore individual strategies of them. It's just general concepts you have to be aware of.

 

In fact, that's a big difference to poker in my opinion. In trading, you are very much limited to choose your opponents. You are more or less forced to trade against professionals. In poker, you can choose the table you sit at or the hands you play against certain players.

 

Otherwise, I would be interested in how you do it in trading :) Or are you trading individual stocks? There it might be possible, seeing who is bidding, etc. I am trading only ES. That might explain our different viewpoints here.

 

 

 

 

 

That's cool. I like the game too, but it's not relaxing for me, as I want to make money... it's hard work. Poker is - for me - harder than trading. You have to stay alert and watch and think about the other players for such long periods of time. It's very exhausting for me.

 

In trading I just wait for my setups to occur and I then take a trade. No need to sit in front of the computer nonstop for 10 hours a day with my methodology. A lot easier... :)

 

When I say "who" I do not mean specific traders. I identify who by size and strategy. From that perspective you can identify who is in the market. They leave track marks. Learn to read the track marks. It is art and not science. As in poker, there are times that I will simply not take a trade in a market because I am confident that I cannot win because of who I suspect is present. So, 10-20 "set ups" can occur, and I will stubbornly wait on the sidelines. I have a good idea of who I shouldn't try to slug it out with and I have a good idea of when they are there. Other times I will take many trades and losers, because I do know there is a good chance for me to get paid. I am not suggesting it is easy and I am not suggesting that I am right all the time.

 

I am sure that most will agree that certain traders are attracted to certain types of market activity and other traders are not. To win at trading we need to catch people trading in places where they should not be trading and we need to avoid trading in placed where we should not be trading.

 

I enjoy marathon poker. I do it a few times a year. Its nice to get away from everything and spend some alone time with the most important person on earth. I will bet that my blood pressure is lower when I am playing than when I am not.

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Good discussion, I'm definitely on the same page as you guys

 

 

Similarly in trading, you need to trade against people who you know you can get money from. If you enter a trade, say, short, who do you expect to pay you in order for you to make money? Are they present? Can you take money from other short term highly capitalized traders if you are trading against them? Do you want to take a trade against a long term trader who sees the S&P as units of 100 points? Do you want to be on the same side as a long term trader if other traders who attempt to prey on long term traders are present?

 

Yes, and these questions are very very difficult to answer for me. Are there people that can answer these? Is it even possible? Or is everyone in the markets just gambling?

 

Playing the players seems infinitely harder in trading because you can never know who is on the other side of your trade. Instead of playing against one person, you are playing against the collective.

 

The major difference is - in trading, the rules of the game are not clear. In poker you have clearly defined rules how the game works

 

Trading in contrast is far more complex. There are no rules defined.

 

exactly.. So how does one go about figuring out "how trading works" ?

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MikeW : Not sure what you are seeking ..... In my personal opinion, you disservice yourself if you treat trading as "You vs Them" battle.

 

A short term trend for me (im a day trader) , would be a pullback for some other trader. This difference in perspective is what creates market (buyers and sellers). I can only hope to "assume" what the current market leaning is -- and latch onto it. Today is reality, tomorrow is but a dream.

 

The reason i mention this is, i stopped guessing who is on the other side of the table. Maybe, its because of the time frame i trade in which is in minutes.

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exactly.. So how does one go about figuring out "how trading works" ?

 

A good book on market micro structure. I rather like Larry Harris 'Trading and Exchanges: Market Microstructure for Practitioners'. From what others have said to me you might find it heavy going, I really enjoyed it. Perhaps check it out in a library before shelling out or there used to be a couple of free chapters from an early draught on the interwebz too.

 

This is not a how to trade book its a pretty dry textbook. It really does lay out who the (surprisingly numerous) types of players are and how they operate.

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exactly.. So how does one go about figuring out "how trading works" ?

 

The market is composed by millions of living and breathing entities with different ideas and emotions. The total sum of all activities on the market is the 'market workings". Who is able to know the sum of all at any given moment!!!?! Learning how the market works is never ending and not fully practical because the players and the conditions are always changing. At best it will stunt you realizing how complex the game is.

 

The task should be - how applying of what I know about the market will bring me money according to my life style, trading style and financial state?

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The market is composed by millions of living and breathing entities with different ideas and emotions.

 

Having said that a lot of participants can be placed in categories that have pretty similar objectives (or 'ideas'). Interestingly quite a few of these are not motivated by profit in a purely speculative sense. These participants will have similar modus operandi as other participants of the same category (though different to other categories).

 

It is mind boggling (to me) that people start trading without having a rudimentary understanding of how the exchange they trade on works let alone a 'market'.

 

I agree that the game is pretty complex but if you break it down into chunks (by participant objective is just one way) it need not be that daunting. Of course understanding how things work and profiting from that knowledge are quite distinct things :)

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...

 

exactly.. So how does one go about figuring out "how trading works" ?

 

 

 

For me, it meant reading tons of books but also a lot of trial and error.

 

All the info you need is out there. Unfortunately, it is not in one book but scattered over many many books. And sometimes you have to also be able to "read between the lines". And as I said, what works for me will not necessarily work for you. You have to be able to put the pieces of the puzzle together for yourself.

 

Start to build some hypotheses about the markets. How you understand them and how it makes sense to you. There are many different viewpoints available which can help as a start. Find those to which you can relate. But start to think further about it. I haven't found one approach which did not have any flaws, at least from my point of view. So, be critical in everything you read and think for yourself.

 

Hence, I did not copy any method 100%. I've took only the parts which made sense to me and combined them with other aspects from somewhere else which made also sense to me. Of course, you have to be careful that the overall combination still makes sense. By the way, when I talk about methodology I am not only talking about entry and exit "signals" but also risk parameters and money management. It is all one interrelated system that must fit your personality.

 

At the end I've came up with a methodology which works for me, but about which I've never read anywhere else. However, the individual components of this methodology are not new, but "stolen" from here and there. Their combination and application is unique and fits my personality.

 

That's what I had in mind when I said, it takes some intelligence (but more common sense) and hard work to figure out. But that's where your edge is...

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For me, it meant reading tons of books but also a lot of trial and error.

 

...

 

 

 

What comes also to my mind is, if you put in so much effort to understand yourself and develop a customized method based on your own beliefs then you also don't have any problems with emotions causing you to do stupid things in your trading. There are no conflicts within you as "the final product" came out of yourself.

 

This came to my mind, as we have this interesting discussion regarding emotions in this thread:

 

http://www.traderslaboratory.com/forums/psychology/12958-illusion-control-first-step-emotional-sobriety.html

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What comes also to my mind is, if you put in so much effort to understand yourself and develop a customized method based on your own beliefs then you also don't have any problems with emotions causing you to do stupid things in your trading. There are no conflicts within you as "the final product" came out of yourself.

 

This came to my mind, as we have this interesting discussion regarding emotions in this thread:

 

http://www.traderslaboratory.com/forums/psychology/12958-illusion-control-first-step-emotional-sobriety.html

 

I did stupid things during the first few years of my trading even though I developed my own methods.

Reading and learning part is of course a must but living in it changes many things..At least it did for me...

Trading is like many profession...what you learn at school is just a beginning...

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...

 

Reading and learning part is of course a must but living in it changes many things

 

...

 

Trading is like many profession...what you learn at school is just a beginning...

 

 

You are right. Maybe the difference is that I did practice my learnings immediately in the markets although they were not yet fully developed. It was very costly though and I would not recommend it to anyone unless you have a lot of money to lose... But due to my approach I think I've developed it pretty fast... I paid the price for that, of course...

 

Good analogy with the school!

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A good book on market micro structure. I rather like Larry Harris 'Trading and Exchanges: Market Microstructure for Practitioners'. From what others have said to me you might find it heavy going, I really enjoyed it. Perhaps check it out in a library before shelling out or there used to be a couple of free chapters from an early draught on the interwebz too.

 

Yeah thanks, already started reading this. Really good

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    • Date : 23rd January 2020. How To Improve Your Trading Mindset 23rd January 2020.Our Head Market Analyst, Stuart, explains how to improve your Trading Mindset. Understand the importance of emotional control and discipline through an unmissable Q&A session.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Bitcoin: Upcoming Halving And What To Expect Bitcoin’s upcoming halving will be one of the most followed crypto-related occasions in the year 2020. Thousands of cryptocurrency enthusiasts will be observing the markets eagerly to witness what effect this year’s halving will have on the cryptocurrency. Many believe that the occasion would have a positive effect on BTC’s price as has been observed in the past. On the other hand, some are expecting the price to drop dramatically after the occasion. Whatever the result may be, it is apparent that this occasion will be a defining juncture for Bitcoin. In this review, we breakdown what the Bitcoin halving is all about, some effects of this occasion, historic occurrences, and what to anticipate from this year’s halving occurrence. Bitcoin was built on a system that mandates regular halving (also known as Halvenings) to sustain its value. The halvings are programmed to happen every 4 years. Already, Bitcoin has witnessed two halving processes, the first in 2012, and the other in 2016. The next halving process is scheduled for the 20th of May 2020. Bitcoin’s Value Preserving Strategy Bitcoin runs on a deflationary economic model which ensures that over time, lesser and lesser Bitcoin tokens will be created until finally, the creation of new Bitcoin tokens will end. BTC’s total supply is capped at 21 million, meaning that it is impossible to have more than that exact number of Bitcoin token in circulation at any point in time. It has been estimated that the very last Bitcoin token will be mined in the year 2140. Bitcoin’s deflationary model predisposes it to scarcity which increases in demand, thereby causing its value to increase as well. This model is different from traditional fiat which is based on an inflationary model, this means that banks can instruct for the printing of more banknotes at will. This is not an ideal practice per se as a boost in the volume of banknotes in circulation could result in the devaluation of that currency. Bitcoin’s “Block Reward” System New Bitcoin tokens are pumped into the market through a popular process known as cryptocurrency “mining”. Bitcoin miners get rewarded with a Bitcoin “block” allotment every time they successfully solve transactions. The blocks are allotted by the Bitcoin algorithm. The block rewarding process happens every ten minutes. So in fact, ten minutes from this moment, new Bitcoin tokens will be created. Mining is not an easy process. It requires a certain level of expertise, specific hardware, and a serious quantity of electricity. After the inception of Bitcoin, the first mining reward was fifty Bitcoin. This meant that every ten minutes, a Bitcoin miner received fifty Bitcoin tokens for solving transactions. That number has since been halved, twice, and is now at 12.5 Bitcoin token per block reward. By May this year, the halving will bring that figure down to 6.25 Bitcoin token per block reward. This feature has been pre-programmed into Bitcoin’s system. What This Could Mean for Mining Lesser block rewards are not the only reason Bitcoin is scarce. It has gotten significantly harder to mine Bitcoin and receive rewards. This is because mining is now more difficult as more miners are entering the system thereby increasing competition. Consequently, an increase in competition means miners require more sophisticated tools to solve cryptographic Algos. Over the years, miners have created what is known as “mining pools” to better handle the rising competition of mining. Mining pools are a network of miners, collectively working towards achieving block rewards. Block rewards in mining pools are distributed according to the percentage of effort put into earning a block. Improved Stock-To-Flow Ratio Halvings have several profitable impacts on Bitcoin. One such effect is that it boosts the Stock-To-Flow ratio of Bitcoin. A commodity’s STF ratio is calculated by dividing the quantity of the asset held in reserves, by the quantity manufactured in a year. The greater the STF ratio, the lesser the annual inflation on that asset. Commodities like gold possess a very impressive STF ratio as its available quantity is limited. Presently, Bitcoin has a significantly lesser STF ratio, unlike gold. Regardless, more halving occasions will boost the Bitcoin’s STF ratio. It is even believed that someday, Bitcoin will surpass gold in the STF ratio rating and will be an even better store of value. This is probably why Bitcoin is dubbed “digital gold”. After-Effects of Previous Halvenings 2012’s Halving The first Bitcoin halving happened on the 28th of November. On that day, the cryptocurrency recorded a 6.5% trade range. Regardless, to the surprise of many, the price remained at a consolidated state months after the occasion. This was partly because Bitcoin was still in its infancy and so, not many people were engaged with it. Also, media coverage at the time was not what it is today, which means many people were not informed of what was going on. Based on the information on Bitcoin’s BNC Liquid Index, the price of BTC attained a high of about $32 on the 8th of June 2011. The price of BTC never broke above the $32 mark until the 28th of February 2013 (4 months later), where price witnessed a climb to $260 after which a drop was experienced and the price stayed below that level for several months. Fast forward to the 30th of November 2013 (close to a year after the 2012 halving), Bitcoin rallied dramatically and peaked at $1,167, which was a whopping 9,686% increase from the initial price of $11 on halving. 2016’s Halving On the 9th of July 2016, the second halving, the price peaked at $664 but did not maintain that uptrend instead fell to $626 on the same day. Subsequently, the price continued on that downward trajectory for about three months. However, things started looking up for Bitcoin from the 27th of October 2016 when price closed above the previous halving’s high of $664. Bitcoin later proceeded to smash its last all-time high of $1,167 on the 23rd of February 2017. This spike started the famous bull rally of 2017 through 2018, which witnessed a peak at $20,000 sometime in December 2017. 2016’s halving shot Bitcoin’s price from $664 to $20,000 which was a growth of 2,912%. Possible Outcomes of this Year’s Halving? In the crypto sector, the Bitcoin halving is undoubtedly among the most talked-about and anticipated occasions of the year. Presently, there are mixed expectations as to what the outcome of the 2020 halving may be. Many in the crypto sector are very optimistic and believe that, just as in the past, the price will soar dramatically either before or after the occasion. Creator of Kraken, Jesse Powell expects the price of Bitcoin to rise close to $100k or 1 million after the halving. The CTO of Morgan Creek Digital Assets also shares the belief of Jesse and expects Bitcoin to reach the $100,000 mark by 2021. He says that scarcity is a driving force for the demand of any commodity. He explains that the 2020 halving will cause Bitcoin to be more scarce. Other crypto players believe that this year’s occasion will not have a similar trajectory with past occasions and would, instead, mar the price of Bitcoin. Another possible scenario that has been observed over time is the “buy and dump” case. This scenario usually plays out when there is a highly anticipated occurrence. It works exceptionally well when the upcoming occasion is sure to have a quantifiable effect on supply and demand dynamics. The price of the asset in question experiences a huge spike just days or a few weeks to the main event. This transpires because investors stock up on the asset towards the event. After the event, however, the price of the said asset drops significantly. This kind of activity has transpired frequently in the cryptocurrency space. One such occasion was the Bitcoin futures trading releases for the CBOE and CME. Just a few days to the CME’s release, the price of Bitcoin rallied from $6,400 and peaked close to its all-time high of $20,000 in a day. Not surprisingly, the price dropped considerably in the period that followed those releases. Furthermore, some cryptocurrency experts believe that the aftermath of the halving has already been priced in. It has been observed that demand is “missing” in the Bitcoin market, this could be a clear indication that the halving has been priced in. Usually, months before a halving, a boost in demand and price of Bitcoin is always noticeable. This time, however, no increase can be observed in neither of the stated areas. In this case, it could lead to a lateral trading period which might be a good thing for traders. At the moment, Bitcoin is still struggling to break above the $7,200 mark and there are no signs of a reversal happening soon. Whatever the result may be one thing is for sure, the price of Bitcoin is set to experience drastic changes this year.   Source: https://learn2.trade 
    • Your All-Round Guide To Security Token Offerings Security token offerings (STOs) are one of the most revered investment options in the crypto space at the moment. It has even been termed the “future of fundraising”. But what exactly are STOs and what is the rave all about? This article aims to break down STOs, what it is all about, and how it can be beneficial to you. What Exactly is a Security Token Offering? STOs, simply put, provide a means of tokenizing fungible financial assets such as stocks, bonds, and REITs, and introduces the tokens to the public through regulated channels. STOs are a lot like ICOs as they generally involve the same processes. However, the differentiating factor between STOs and ICOs is in the tokens being sold. With ICOs, the tokens are usually non-descriptive and could range from anything digital currencies to utility tokens. With STOs however, the token is a “security”, meaning that it is exchangeable and possesses a set monetary value. Breakdown of Security Tokens Security tokens function as digital versions of the assets they represent. Here’s a list of some popular security token representations: 1- Capital markets: Firms can convert their shares into tokens, allowing investors to own parts of the firm. In some cases, owners of tokens receive dividends and can execute votes on the affairs of the firm. 2- Equity funds: Equity funds can also tokenize their shares for sale. 3- Commodities: Commodities like gold, natural gas, coffee can be tokenized. 4- Real estate: The equity of this asset class can be tokenized, much like how REITs function. STOs do not change the underlying securities, instead, it makes these assets more readily accessible on a digital platform. Unlike other digital assets, security tokens can only be traded on certain regulated exchanges. Some exchanges require interested investors to meet some set qualifications. Advantages of STOs STOs are formulated with regulatory-compliance in mind, unlike ordinary token sales. Security tokens provide its owners with several legally binding rights. Some security tokens even bestow its owners with rights to dividends or other defined streams of income. Security tokens are also beneficial to their issuers. From the onset, the entities issuing the tokens are aware that their tokens are being purchased by accredited and verified investors and so, they don’t have to worry about the credibility of their investors. Other advantages of STOs include: 1- It is adequately regulated: Entities issuing security tokens must operate under the guidance of designated regulatory agencies in the region like SECs and FTCs. 2- You can rest assured that STOs won’t falter in the future: Unlike ICOs that cannot be guaranteed, STOs are sure to always deliver because it is properly regulated. 3- STOs offer great convenience: Procuring security tokens is easy, straightforward, and stress-free. All you need to do is to adhere to the STO requirement in your jurisdiction and you’re good to go. 4- It can be programmed: Security tokens are programmable and can be facilitated by smart contracts. 5- Automated dividend disbursement and voting: Some security tokens are structured to send dividends automatically through smart contracts. Also, some security tokens provide the bearer with exclusive voting rights in the affairs of the entity offering the tokens. 6- It is a globally accessible investment vehicle: Investors across the globe can procure security tokens regardless of their location. 7- It is not susceptible to manipulation: Considering the mode of operation STOs are run by, big players cannot manipulate its movements. 8- STOs are very liquid: It is a very promising investment option as it has an impressive liquidity quality and can be traded easily. With benefits like these, STOs are for sure transforming the fundamentals of the financial sphere. Disadvantages of STOs As with every other form of investment, security tokens has its limitations and shortcomings. Some of these limits are: 1- It is considerably more costly than utility tokens: STOs, unlike ICOs, hosts many organizations in their fundraising campaigns. Also, regulatory fees are not cheap which makes it more capital-intensive to host STOs. 2- Investor Qualifications: Countries like the US have certain qualifications an investor has to scale before becoming eligible to engage STOs. According to the SEC to be an “Accredited investor”, you must have an annual income rate of $200k and above or a minimum of $1 million in the bank. 3- Specific trading conditions: STOs can only be traded on certain designated exchanges. Also, these tokens are time-bound meaning that you are allowed to trade these tokens between investors for a set period after the STO. The Howey Test Usually, tokens are said to be securities, by law, when they pass certain thresholds. One such way to identify a security instrument is by applying the “Howey Test”. But first, let’s look at a piece of quick background information on how the Howey test came to be. In 1944, a citrus plantation called the Howey company of Florida leased out a large portion of its land to several investors in a bid to raise funds for much-needed developments. The buyers of the land were not skilled or versed in citrus farming in any way and decided instead to just be “speculators” and let the experts do their jobs. The lease was made on the premise that profits would be generated for the investors by the lessor. Not long after the business transaction the Howey company was sanctioned and accused by the United States SEC of failing to register the sale with the authority. The SEC maintained that the company was dealing with unregistered security. Howey denied the claims however, assuring that what it offered wasn’t a security. After much debate, the case ended up in the Supreme Court, which later ruled in favor of the SEC that Howey’s land leasing were undoubtedly securities. It remarked that investors were purchasing land mainly because they saw an opportunity to make a profit off the deal. Howey was then ordered to register the sale. This was the story of the enactment of the Howey test. Today, per the Howey test, anything is deemed to be a security if it satisfies the following criteria: 1- The investment included money. 2- The investment was made on an enterprise. 3- Profit will be made from the efforts of the providers of the investment. The Howey test has become a stronghold name in the crypto space. In 2017 and 2018 (during the “Heydey boom”), many ICO providers were completely consumed with scaling the Howey test as it was a major determinant used in ascertaining the legality of an ICO by the SEC. Failure to pass the test meant the offering was illegal and was sanctioned by the authorities. Some ICOs even advertised their tokens as investment instruments that had no value, describing their tokens as “utilities” used only for interactions on the platform. The Inception of STOs The very first STO was released by Blockchain Capital on the 10th of April 2017. The release pooled about $10 million in one day. Several STOs have been released following the first event including tZero, Sharespost, Aspen Coin, Quadrant Biosciences, and many more. STOs have since gained widespread acceptance and relevance in today’s market. Understanding the Distinction Between Security Tokens and Tokenized Security Confusing security token for tokenized securities is a common trap that people fall into. The main distinction between the two is that the former is usually a recently issued token that functions on a distributed ledger system while the latter is just a digital manifestation of pre-existing financial instruments. Apart from similarities in appearance and nomenclature, security tokens have absolutely nothing in common with tokenized securities. What Entities are Involved in an STO Issuance? Assuming a business entity plans on issuing security tokens as an embodiment of equity in its establishment, the next necessary step for that business would be to involve certain players and follow certain directives. It has to formally contact an issuance platform to serve as a medium for issuing the tokens. Popular issuance platforms include Polymath and Harbor, which consist of service providers like custodians, broker-dealers, and legal entities to carry out secure processes. Who Can Invest in STOs? STOs are available to the general public for the taking, regardless of location. However, as mentioned previously, the US has certain rules guiding STO investments. In the US, it is mandatory to be an “accredited investor” before you can invest in this instrument. An accredited investor is an individual with an annual cash flow of $200k and above for at least 2 years or a net worth of $1 million and above. More nations are starting to adopt the United States’ classification method and have begun restricting certain classes from investing in STOs. It is advisable to always research on the STO rules and regulations of the jurisdiction you’re planning on investing with. Final Word STOs provide businesses with the prospect of raising funds in an easy and regulated setting. It gives both investors and issuers a good deal of benefits, while also ensuring insurances against fraudulent or malicious practices, unlike ICOs. Issuers are not limited to any industry, they can vary from several sectors including real estate, VC firms, and small and medium enterprises. Moving forward, we will likely witness prominent firms venture into the STOs.   Source: https://learn2.trade 
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    • Good news is my posts no longer seem to need moderator approval! Beginning tomorrow, I will be day-trading two currency pairs: EUR/JPY and GBP/USD. I'll trade during the morning and afternoon hours, New York time.  I'll be using an Oanda "core pricing + commission" account. I plan to trade a "practice account" through the end of January, then a small "live" account beginning February. I've set my charts up to closely resemble the format popular in the RCRT thread (NinjaTrader + MetaTrader). My trading style will primarily consist of what I've learned from that thread. I'll track my performance in terms of R-multiples.  The purpose of this thread is just for a little fun with some bonus accountability. I've got nothing to sell/teach, and I will probably lose money! 😁
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