| “Life is nothing more than a series of bets and bets are really nothing more than questions and their answers. There is no real difference between, ’should I take another hit on this Blackjack hand?’ and ‘Should I get out of the way of that speeding and wildly careening bus?’ Each shares two universal truths: a set of probabilities of potential outcomes and the singular outcome that takes place. Everyday we place hundreds if not thousands of bets – large and small, some seemingly well considered and others made without a second thought. The vast majority of the latter, life’s little gambles made without any thought, might certainly be trivial. ‘Should I tie my shoes?’ Seems to offer no big risk, nor any big reward. While others, such as the aforementioned ’speeding and wildly careening bus’ would seem to have greater impact on our lives. However, if deciding not to tie your shoes that morning causes you to trip and fall down in the middle of the road when you finally decide to fold your hand and give that careening bus plenty of leeway, well then, in hindsight the trivial has suddenly become paramount.” Larry Hite, Trader |
Archives of “leeway” tag
rssSome Suggestions for Traders
Have you written down your trading rules? Do you have rules for entry and for exit with a profit and with a loss? Do you have a rule telling you whether a market is trending and what the trend is? Do you have rules stating when the market is in a trading range and what that range is? Do you have rules saying what markets you will trade and what has to happen to trade them?
Or do you simply shoot from the hip and call it artistry or intuition? Does this work for you?
Do you follow your rules rigidly without flexibility or discretion? Does this serve you over time?
Do you abandon your rules in the heat of trading, only to regret it? Do you stubbornly go against your rules thinking this time you know better? What would happen if you didn’t do this?
Some people don’t like rules. They don’t want to be told what to do even if it’s themselves telling themselves what to do. They even more don’t like following rules that came with a system for which they paid good (any or excessive) money. They have a polarity response to direction even after it becomes apparent that they’d be more profitable simply following the rules.
Others like to be told what to do, but somehow their rules are conflicting, obscure, or so bound up with discretion as to be meaningless. These traders may not even be aware that in essence they have no rules.
Whatever your situation turns out to be, it may be helpful to think in terms of commandments or suggestions. You may think in terms of absolute rules or simple guidelines.
Do you like clear directions as to what to do? In this case you can think in terms of commandments. For example, when The Ten Commandments says, “Thou shalt not kill,” it doesn’t leave much discretion. Reword your rules as commandments that are precise and clear and easy to follow.
Do you resist being dictated to and bossed around by outside forces? In this case, reformulate your rules as guidelines or suggestions. Give yourself some leeway in certain situations. Reword it so that when you read it, it sounds like a good idea and not a demand.
However, be certain in advance that whether you choose a suggestion or command, the results will be profitable if followed consistently or even most of the time. There’s nothing worse than a bad idea or a rule that doesn’t work. Remember the basics: Find out what works. Verify that it works. And do it.
COMMANDMENTS For Traders
Have you written down your trading rules? Do you have rules for entry and for exit with a profit and with a loss? Do you have a rule telling you whether a market is trending and what the trend is? Do you have rules stating when the market is in a trading range and what that range is? Do you have rules saying what markets you will trade and what has to happen to trade them?
Or do you simply shoot from the hip and call it artistry or intuition? Does this work for you?
Do you follow your rules rigidly without flexibility or discretion? Does this serve you over time?
Do you abandon your rules in the heat of trading, only to regret it? Do you stubbornly go against your rules thinking this time you know better? What would happen if you didn’t do this? (more…)
BETS
There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future. You can also lose a good bet, but if you keep placing good bets, over time, the law of averages will be working for you.”
“Life is nothing more than a series of bets and bets are really nothing more than questions and their answers. There is no real difference between, ’should I take another hit on this Blackjack hand?’ and ‘Should I get out of the way of that speeding and wildly careening bus?’ Each shares two universal truths: a set of probabilities of potential outcomes and the singular outcome that takes place. Everyday we place hundreds if not thousands of bets – large and small, some seemingly well considered and others made without a second thought. The vast majority of the latter, life’s little gambles made without any thought, might certainly be trivial. ‘Should I tie my shoes?’ Seems to offer no big risk, nor any big reward. While others, such as the aforementioned ’speeding and wildly careening bus’ would seem to have greater impact on our lives. However, if deciding not to tie your shoes that morning causes you to trip and fall down in the middle of the road when you finally decide to fold your hand and give that careening bus plenty of leeway, well then, in hindsight the trivial has suddenly become paramount.”
Few suggestions
1) Forget about performance and results numbers (i.e. P/L, Wins vs. Losses). These numbers only blur the plan and increase the anxiety on not losing on next trade. This aggravates the proper mindset to prepare to trade properly. Perfectionists will not execute well and will try to focus on buying low (bargain hunting to win) when the entry is not right.
2) Create the trading plan and write it into details to avoid ambiguity. This helps prevent loosely interpreted actions and end with too much leeway and perfect execution won’t be successful.
3) Focus on the charts and work toward identifying and preparing the entry and exits. Having these numbers in mind will keep the focus on the executing at the right prices.
4) Focus on the Risk:Reward ratio in mind. Having this ratio will keep the execution precise because any miscue will change the ratio in negative way. If the ratio is set, chances of the making the perfect entry and exits are higher. (more…)
"SUGGESTIONS OR COMMANDMENTS"
Have you written down your trading rules? Do you have rules for entry and for exit with a profit and with a loss? Do you have a rule telling you whether a market is trending and what the trend is? Do you have rules stating when the market is in a trading range and what that range is? Do you have rules saying what markets you will trade and what has to happen to trade them?
Or do you simply shoot from the hip and call it artistry or intuition? Does this work for you?
Do you follow your rules rigidly without flexibility or discretion? Does this serve you over time?
Do you abandon your rules in the heat of trading, only to regret it? Do you stubbornly go against your rules thinking this time you know better? What would happen if you didn’t do this?
Some people don’t like rules. They don’t want to be told what to do even if it’s themselves telling themselves what to do. They even more don’t like following rules that came with a system for which they paid good (any or excessive) money. They have a polarity response to direction even after it becomes apparent that they’d be more profitable simply following the rules.
Others like to be told what to do, but somehow their rules are conflicting, obscure, or so bound up with discretion as to be meaningless. These traders may not even be aware that in essence they have no rules.
Whatever your situation turns out to be, it may be helpful to think in terms of commandments or suggestions. You may think in terms of absolute rules or simple guidelines.
Do you like clear directions as to what to do? In this case you can think in terms of commandments. For example, when The Ten Commandments says, “Thou shalt not kill,” it doesn’t leave much discretion. Reword your rules as commandments that are precise and clear and easy to follow.
Do you resist being dictated to and bossed around by outside forces? In this case, reformulate your rules as guidelines or suggestions. Give yourself some leeway in certain situations. Reword it so that when you read it, it sounds like a good idea and not a demand.
However, be certain in advance that whether you choose a suggestion or command, the results will be profitable if followed consistently or even most of the time. There’s nothing worse than a bad idea or a rule that doesn’t work. Remember the basics: Find out what works. Verify that it works. And do it.
My Personal Trading Rules
Turn off the news.If you’re not feeling well for whatever reason, take the day off.
Feeling overly confident? Decrease your size.
Waffling on a trade? Pull the trigger! The hardest ones are usually winners.
Resist the urge to take off half when a trade is going your way.
Have a target in mind for every trade. Exit when price approaches that level.
Support, resistance and targets are ‘areas’, not specific prices. Give them some leeway.
Trade in the direction of the Cumulative TICK.
Unusually strong/weak Cumulative TICK? Increase your size.
Use mental stops. Adjust your stops based on the current volatility.
Establish a total maximum loss you’ll take in one day and stop trading if that’s hit.
Be conscious of your self-talk. Maintain a positive inner dialogue with yourself.
Turn off the news.No Risk Management=Your losses
“There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future. You can also lose a good bet, but if you keep placing good bets, over time, the law of averages will be working for you.”
–Larry Hite, Trader
Continuing:
“Life is nothing more than a series of bets and bets are really nothing more than questions and their answers. There is no real difference between, ’should I take another hit on this Blackjack hand?’ and ‘Should I get out of the way of that speeding and wildly careening bus?’ Each shares two universal truths: a set of probabilities of potential outcomes and the singular outcome that takes place. Everyday we place hundreds if not thousands of bets – large and small, some seemingly well considered and others made without a second thought. The vast majority of the latter, life’s little gambles made without any thought, might certainly be trivial. ‘Should I tie my shoes?’ Seems to offer no big risk, nor any big reward. While others, such as the aforementioned ’speeding and wildly careening bus’ would seem to have greater impact on our lives. However, if deciding not to tie your shoes that morning causes you to trip and fall down in the middle of the road when you finally decide to fold your hand and give that careening bus plenty of leeway, well then, in hindsight the trivial has suddenly become paramount.”
–Larry Hite, Trader
Continuing:
“Ancient man had no risk management. Everything was left to ‘fate’ and the whims of the gods. Because ancient man felt that he was merely a victim of circumstance he did not see a need to plan for the future. Therefore, he had no future. In his book Against The Gods: The Remarkable Story Of Risk, Peter Bernstein plots out the history of man’s discovery of the law of probabilities and risk management. Suffice it to say, economic progress seems to run parallel with man’s ability to discover, quantify, and manage risk. Risk and reward are two sides of the same coin. One is not present without the other. You cannot receive the reward unless you are willing to take the risk and you cannot expect to keep that reward unless you learn to mange that risk. It is imperative to master both subjects if you expect to be successful in any endeavor, especially the arena of investing/trading.”
–Source: Pearce Financial LLC
The only thing you can control as you face the markets each day? Your losses.
TRADING COMMANDMENTS
Have you written down your trading rules? Do you have rules for entry and for exit with a profit and with a loss? Do you have a rule telling you whether a market is trending and what the trend is? Do you have rules stating when the market is in a trading range and what that range is? Do you have rules saying what markets you will trade and what has to happen to trade them?
Or do you simply shoot from the hip and call it artistry or intuition? Does this work for you?
Do you follow your rules rigidly without flexibility or discretion? Does this serve you over time?
Do you abandon your rules in the heat of trading, only to regret it? Do you stubbornly go against your rules thinking this time you know better? What would happen if you didn’t do this?
Some people don’t like rules. They don’t want to be told what to do even if it’s themselves telling themselves what to do. They even more don’t like following rules that came with a system for which they paid good (any or excessive) money. They have a polarity response to direction even after it becomes apparent that they’d be more profitable simply following the rules.
Others like to be told what to do, but somehow their rules are conflicting, obscure, or so bound up with discretion as to be meaningless. These traders may not even be aware that in essence they have no rules.
Whatever your situation turns out to be, it may be helpful to think in terms of commandments or suggestions. You may think in terms of absolute rules or simple guidelines.
Do you like clear directions as to what to do? In this case you can think in terms of commandments. For example, when The Ten Commandments says, “Thou shalt not kill,” it doesn’t leave much discretion. Reword your rules as commandments that are precise and clear and easy to follow.
Do you resist being dictated to and bossed around by outside forces? In this case, reformulate your rules as guidelines or suggestions. Give yourself some leeway in certain situations. Reword it so that when you read it, it sounds like a good idea and not a demand.
However, be certain in advance that whether you choose a suggestion or command, the results will be profitable if followed consistently or even most of the time. There’s nothing worse than a bad idea or a rule that doesn’t work. Remember the basics: Find out what works. Verify that it works. And do it.