-Never play macho man with the market. Never over-trade relative to the equity in your account
-his first mentor has “steel hard emotional control”
-always liquidate half his position below new highs or lows
-after having 60-70% draw-down, he was so depressed he nearly quit. “Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?”
-he then first decided to learn discipline and money management. Become disciplined and business-like about trading
-“Now I spend my day trying to make myself as happy and relaxed as I can be. If I have positions going against me, I get right out; if they are going for me, I keep them”
-Be quicker and more defensive. Always think about losing money as opposed to making money. He always has a mental stop. If it hits that number, he is out no matter what
-“Risk control is the most important thing in trading” Stop out at near 10% monthly draw-down. He never wants to lose 10% in a month
Archives of “February 14, 2019” day
rssGreece :Ruinous Picture
Paul Ciana, New Frontiers in Technical Analysis (Book Review )
The six chapters in this book are written by six different authors: “Evidence of the Most Popular Technical Indicators” (Paul Ciana), “Everything Is Relative Strength Is Everything” (Julius de Kempenaer), “Applying Seasonality and Erlanger Studies” (Philip B. Erlanger), “Kase StatWare and Studies” (Cynthia A. Kase), “Rules-Based Trading and Market Analysis Using Simplified Market Profile” (Andrew Kezeli), and “Advanced Trading Methods” (Rick Knox).
Ciana provides some fascinating data about the preferences of those who use the Bloomberg Professional Service. For instance, Europe opts for log charts 47% of the time and Asia only 9% of the time. Asia prefers candlestick charts, the Americas bar charts. Worldwide the most popular technical indicators (excluding moving averages) are RSI, MACD, Bollinger bands (BOLL), stochastics (STO), directional movement index (DMI), Ichimoku (GOC), and volume at time (VAT). RSI is the clear winner, with a 44.4% worldwide preference; MACD comes in second at 22%. Some indicators have geographical ties. GOC has a 10.8% popularity rating in Asia as opposed to 2.5% in the Americas and 2.8% in Europe. VAT has a 5.3% rating in the Americas and only 1.8% in Europe and 1.6% in Asia.
VAT, for those who are unfamiliar with it, is something of a seasonal indicator. For instance, “from a historical perspective, VAT considers the volume that has occurred on that day over the past X years to create the average for that day. … From an intraday perspective, VAT creates an average of volume from the actual volume that occurred during that time-slice for the past X days. In both applications VAT can be projected into the future to get an idea of expected volume.” (p. 37)
Day Trading Lessons..
To use a life insurance analogy, most people who become involved in the stock market don’t know the difference between a 20 year old and an 80 year old. Investing in the market without knowing what stage it is in is like selling life insurance to 20 year olds and 80 year olds at the same premium.
You can’t listen to the news. You have to go with the facts. You need to use a logical approach and have the discipline to apply it. You must be able to control your emotions.
The Worst of the Worst in 2014
There's nothing you can do
You might be at a stage of feeling very frustrated with yourself.I know what this feels like – you begin to marvel at your own lack of discipline and ability to do what you know. It’s like “Arrgh! Why can’t I just WAIT for the damn setup?! Why am I such a screw up at this?!”
Speaking from experience, it’s frustrating because you just want to get on. You have plans and goals and now you see that your own idiocy is preventing you from making any progress towards them. All I can say is that there’s nothing you can do about this period except keep going and wait for it to pass… It’s deeply ingrained. You have to trade through it; six months, a year, two years… Grit your teeth and plow on.
In a way, you have to relax into your own ability to seemingly pick every wrong move in the market. Just accept it. Providing you are not losing big money, you CAN relax into it. The good news is you are in fact building up a tolerance to taking losses during this period – you ARE actually developing a skill. It’s called “risk tolerance.”
If you’re still in that “God dammit!” phase then do this: just keep losing and losing, but begin to try to take the losses without any emotional reaction what so ever and move immediately to the next trade.
Once you can do this, you then move on to learning to let go of your need to have success NOW. This combines with learning to do nothing in the market – learning to wait. Why not wait, you’re gonna lose anyway right? So you might as well wait…
Now you’re building up patience. This is a foundation that leads to a little magic further down the track, when you get to the point where you see that you could take any system and trade it properly to discover its true potential. All those millions of methods you tried for 3 days and abandoned in disgust now sit there like a pile of spare parts in the bike shed. You become interested in them again – there could actually be a few decent ideas amongst that lot.
So learn to lose.
Then learn to wait to lose.
You will be building risk tollerance and patience. There are more steps after that, but there is no way to skip this process, it has to be gone through by all.
10 Trading Thoughts
1. You only have three choices when you are in a bad position, and it is not hard to figure out what to do:
(1) Get out
(2) Double up, or
(3) Spread it off.
I have always found getting out to be the best of all three choices.
- No opinion on the market or you are doubtful about market direction? Then stay out. Remember, when in doubt, stay out.
- Don’t ever let anyone know how big your wallet is, and don’t ever let anyone know how small it is either.
- If you snooze, you lose. Know your markets, when they trade, and what reports will affect the market price.
- The markets will always let you in on the losers; the market’s job is to keep you out of winners. Dump the dogs and ride the winning tide.
- Stops are not for sissies.
- Plan your trade, then trade your plan. He who fails to plan, plans to fail.
- Buy the rumor and sell the fact. Watch for volatility in these situations; it usually marks tops or bottoms in the markets.
- Buy low, sell high. Or buy it when nobody wants it, and sell it when everybody has to have it!
- It’s okay to lose your shirt, just don’t lose your pants; that is where your wallet is.
One last thought to leave with you. It applies not only to every-day life but to trading the markets as well:
Success is measured not so much by the wealth or position you have gained, but rather by the obstacles you have overcome to succeed!
The Forbes 400 appears to have 2 trend followers on the list
#85 Bruce Kovner (trained by Michael Marcus who was trained by Ed Seykota)
Net Worth: $4.3 billion As of September 2012
Hedge fund legend Kovner, who had generated more than $12 billion in net gains for investors since he founded Caxton Associates in 1983, called it a career in September 2011. The reins to his $10 billion firm were officially handed to former chief investment officer Andrew Law on January 1, 2012. Kovner addressed the transition in a letter to investors saying he will miss the adrenalin rush of confronting markets every day. The son of a trade unionist, Kovner abandoned his Harvard Ph.D. in economics after a fit of writer’s block. He moved on to driving taxis, writing and studying harpsichord at Julliard. At 31, he turned $3,000 he borrowed on his credit card into $45,000 trading soybeans and soon watched as that value halved. It was a seminal lesson in risk management. The chairman of Julliard, Kovner has donated 140 scores and sketches by Bach, Beethoven and Brahms to the school; he also gave $20 million to Julliard in January to endow a graduate-level program in historical performance.
#311 John W. Henry (profiled in Trend Following)
Net Worth: $1.5 billion As of September 2012
Boston Red Sox owner John Henry hasn’t enjoyed watching his expensive team fall apart in 2012, missing the playoffs for the third straight season. He bought the Red Sox in 2002 after building his fortune through his hedge fund J.W. Henry & Company. Henry broke the “Curse of the Bambino” by winning two World Series championships in 2004 and 2007. His Fenway Sports Group now owns the Liverpool F.C. soccer team, 80% of the New England Sports Network (NESN), and 50% of Roush Fenway Racing. In his free time, Henry enjoys playing iRacing, the online racing simulator game he owns. In 2009, he married his second wife on his private yacht (now for sale) and held the reception at Fenway Park in Boston. (more…)
Six Insights for Disciplined Trading
1) Trading is a probability game. You can’t be a perfectionist and expect to be a great trader. Your losses (that you hope will return to breakeven) will kill you.
2) Jumping in too soon or getting in too late. These mistakes come from traders not having a well-defined plan of how they will enter the market. This positions the trader as a reactive trader instead of a proactive trader, which increase the level of emotion the trader will feel in reacting to market movements. A written plan helps make a trader more systematic and objective, and reduces the risk that emotions will cause the trader to deviate from his plan.
3) Not taking profits on winners and letting winners turn to losers. Again this is a function of not having a properly thought-out plan. Entries are easy but exits are hard. You must have a plan for how you will exit the market, both on your winners and your losers. Then your job as a trader becomes to execute your plan precisely.
4) Great traders don’t place their own expectations on to the market’s behavior. Poor traders expect the market to give them something. When conditions change, a smart trader will recognize that, and take what the market gives.
5) Emotional pain comes from expectations not being realized. When you expect something, and it doesn’t deliver as expected, what occurs? Disappointment. By not having expectations of the market, you are not setting yourself up for this inner turmoil. Douglas states that the market doesn’t generate pain or pleasure inherently; the market only generates upticks and downticks. It is how we perceive and respond to these upticks and downticks that determine how we feel. This perception and feeling is a function of our beliefs. If you’re still feeling pain when taking a loss according to your plan, you are still experiencing a belief that your loss is somehow a negative reflection on you personally.
6) The Four Major Fears – fear of losing money, being wrong, missing out, leaving money on the table. All of these fears result from thinking you know what will happen next. Your trading plan must approach trading as a probabilities game, where you know in advance you will win some and lose some, but that the odds will be in your favor over time. If you approach trading thinking that you can’t take a loss, then take three losses in a row (which is to be expected in most trading methods), you will be emotionally devastated and will give up on your plan.
10 things you have to give up right now
1. Give up caring what other people think of you. I know it seems counter intuitive as we humans are primal pack animals that don’t want to be cast from the village; but spending time worrying what others think, is a waste of energy. You’ll never please everyone and it’s none of your business what others think of you.
2. Give up trying to please everyone. Unless you’re living life to the beat of your own drum, your tribe won’t be able to find you. Be the best version of YOU you can be, and you’ll naturally attract in the people that are supposed to surround you.
3. Give up participating in gossip. 100% of the time, those sharing gossip with you will gossip about you. Believing gossip is like gambling everything on a horse sight unseen. It’s naive.
4. Quit worrying. Where thoughts go, energy flows. Worry is investing time and energy in something you don’t want to have happen. Learn to let go and trust.
5. Let go of insecurity. When we take ourselves too seriously, we think everyone else does too. There is one version of you on the planet. Be it, own it and quit worrying about it. No one really cares or watches you that closely. (more…)