[forrestang]

Originally Posted by thalestrader

While not every breakout is a reversal, every reversal can be traded as a breakout.

Originally Posted by Gabe

I don't understand the above. Could you elaborate a little?

Originally Posted by thalestrader

I could, but where would the fun be in that? See if you or someone else can post a chart demonstrating what I mean first.

......................... ................?

I took this trade a while back, and actually figured this was a big picture reversal, because I shorted the breakdown, I held this for a nice clip down towards the bottom of that range.

[Dinerotrader]

Originally Posted by Gabe2004 »

Thanks for the kind words Thales.
This is just further proof for me that the nut is about to be cracked.
The other day a friend of mine said that he is impressed with my conviction that I will master trading.
FALURE IS NOT AN OPTION.
Gabe

I am of the same mindset. Failure isn't an option. Luckily I am naturally a patient person. That, combined with the fact that I spend all my free time studying, practicing and thinking about trading leads me to believe I will suceed at some point. I am really enjoying the Market Wizard books. They always leave me with very positive thoughts of success before going to bed. The contributions of Thales, Brownsfan, DBphoenix, Bathrobe and many others have really helped me progress in the short time I have been fully engaged in this business.

Good to hear things are really progressing for you Gabe.

[thalestrader]

Now wasn't this a fun little run?

Originally Posted by thalestrader »

While not every breakout is a reversal, every reversal can be traded as a breakout.

Originally Posted by Gabe2004 »

I don't understand the above. Could you elaborate a little?

Originally Posted by thalestrader »

I could, but where would the fun be in that? See if you or someone else can post a chart demonstrating what I mean first.

Originally Posted by Dinerotrader »

I was thinking about my post about deciding between breakouts and reversals and I realized that you, Thales, trade reversals quite frequently when S/R holds and price reverses. Here is an example from this thread a while back. Once I realized this I came back and you had posted what I quoted above. It just hadn't clicked yet. Thanks for your patience.

Originally Posted by forrestang »

......................... ................?

I took this trade a while back, and actually figured this was a big picture reversal, because I shorted the breakdown, I held this for a nice clip down towards the bottom of that range.

Now that is how a forum should work.


Best Wishes,

Thales

[Kiwi]

TheRealThing, aka Leonardo, wrote a paper:

THE HOLY GRAIL!- Learning to Handle Variance in Returns


It should probably be mandatory reading once traders have a certain amount of blood on their hands. Emotions are inevitable when money, rightness, or risk are involved. There are games we play (don't trade for 30min after a loss to let unperceived emotions drop, stop trading after two losers, etc etc) to move past the impact of variance in our returns.

The biggy though is that we don't really accept losers as being "ok". And we haven't truly internalized the old system traders adage: you will experience a drawdown bigger than anything in historical testing.

The "ok" bit is interesting. I am mainly system trading now and I find it is easy to watch the system lose. By contrast, if I am in a discretionary trade and I lose, then I feel pain for being wrong or being stupid or doing x when I could have done y. So as well as losing money I was "wrong," "stupid," or in some other way emotionally much more impacted.

I trade with a friend while my system trades and see in him those same things that used to be so strong in me. And those things had the same effect on me that thales described above.

Somehow a trader needs to divorce his or her trading actions from their emotions and perceptions. They need to accept a loss as really truly ok. They need to believe in their system, accept that a 1.5x drawdown is coming and not be driven to incorrect action when it happens.





.
FWIW I have been thinking that the way to train newbies is to get a pretty poor strategy (pf=1.4, win ratio a little under 50%) and train them to trade it and really accept it. The first version should trade at most once an hour (to reduce emotional entrainment) and they should have a trading platform that doesn't form the next bar (or permit a new trade or adjustment) until the period from 5mins before the hour until 5 mins after the hour. The aim is to introduce a slowish, not overly great, system that will get them through the pain and acceptance phases without building to many bad habits. It would also help them get past holy grail searches (like paranoid micro-interpretations of volume and activity to find out what the "smart money" is doing). What do you think (oops, if this actually stimulates debate it will need a new thread)?

[Gabe2004]

Originally Posted by Kiwi »

TheRealThing, aka Leonardo, wrote a paper:

THE HOLY GRAIL!- Learning to Handle Variance in Returns

Could not find any posts by the above 2 names.
Were they here in TL?

Thanks

Gabe

[Kiwi]

No.

His blog is Infiniteyield Forex but if you can't find the article there then Google the second part of the title

[forrestang]

Originally Posted by Kiwi »

No.

His blog is Infiniteyield Forex but if you can't find the article there then Google the second part of the title

-----------------------------------

[thalestrader]

Originally Posted by Kiwi »

FWIW I have been thinking that the way to train newbies is to get a pretty poor strategy (pf=1.4, win ratio a little under 50%) and train them to trade it and really accept it.

If I were to train a new trader, I would do it very much as I taught my daughter. While it wasn't formalized before we started, this is more or less the path we took:

I. Psychology & Emotions

No Trading.

No Charts.

We read and discussed Nicolas Darvas's How I made 2,000,000 in the Stock Market & Edwin LeFevre's Reminiscences of a Stock Operator (I had her read excerpts, but I would recommend the entire book).

II. Reading Price - Theory

No Trading

We read and discussed Stikky Stock Charts, and How Charts Can Help You in the Stock Market by WIlliam Jiler.

We read, studied, and discussed the price action/chart reading section(s) of William J O'Neil's How to Make Money in Stocks

Identifying Support & Resistance: I printed out select charts of various markets and time frames where I had drawn S/R for her to study. I also printed out charts with no markings, trend lines, annotations, and she learned to draw in S/R using a pencil and a ruler.

III Reading Price Live

No Trading

She sat with me and watched my charts live and observed as I took trades, and explained why and how I placed my entry, initial stop, and profit targets

IV Live Trading

She traded along side me, but now it was she who would explain her entry, initial stop loss, and profit targets.

V Psychology and Emotions (on-going throughout Steps II-IV)

I had her read various articles, writings, blog entries, etc. that I have found useful over the years (including a lengthy post from Leonardo from another forum years ago).

I'd rather teach someone an approach that I know is sound, while emphasizing the need for emotional discipline the whole time, rather than having some learn to trade a flawed system simply to force them to accept losses.

She managed to run her first live account from $25 to just under $1K in about three months. She and I are trading a second live account together. We started it with less that $200 about a month ago, and as of today we are sitting on $1210 closed trade equity.

It took me a long time to learn to do this right and a long time to unlearn bad habits. I thought it better that she skipped all the Holy Grail chasing and emotional melt downs and just learn to do it right from the beginning. I started her trading education in May, and she took her first trade in June. She has accomplished in six months what it took me the better part of a decade to accomplish.

While I will likely formalize the training a bit more for her sister and brother when they are ready, it will basically follow the course I outlined above. After all, I cannot argue with the result.

Best Wishes,

Thales