Achilles' heel...!

#1
An Achilles’ heel is a deadly weakness in spite of overall strength, that can actually or potentially lead to downfall.

In Greek mythology, when Achilles was a baby, it was foretold that he would die in battle from an arrow in the foot. To prevent his death, his mother Thetis took Achilles to the River Styx which was supposed to offer powers of invincibility and dipped his body into the water. But as Thetis held Achilles by the heel, his heel was not washed over by the water of the magical river. Achilles grew up to be a man of war who survived many great battles. But one day, a poisonous arrow shot at him was lodged in his heel, killing him shortly after. Still, Achilles is remembered as one of the greatest fighters who ever lived.

"I know as many people who have been successful in other ventures as trading, but i havent met as many people who have quit in disgust in other ventures as i have trading..."

This one line from a highly respected fx trader on another forum is the centre of discussion on this thread. Why traders fail to make consistent profit from the market? Sure, we can have a winning trade here and there but winning consistently has very little to do with the system or methodology we follow as a trader.

Inability to accept the randomness of the market is THE Achilles' heel every trader.
 
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trader.trends

Well-Known Member
#2
The only truth about the market is its randomness and that definitely is the most difficult to accept. The whole battle is trying to tame randomness instead of accepting that and building winning trades around it.
While on one hand we accept randomness after years in the market, it does not mean there is no way to put on a profitable trade. There are enough systems and more (even here on TJ) that have an edge within the randomness of the market. Our weakness is not in finding profitable trades, it is in putting on random trades.
While we are following one system (tested by us) and waiting for an entry, we spot an 'opportunity' under another system (untested) and take the trade. More often than not resulting in a loss. Just before putting on the trade, we can fully rationalize and justify to ourselves why we need to put on that trade. If it is winner, we feel vindicated while it is actually profiting from a wrong trade, the beginning of the downfall. If it turns into a loss, we are kicking ourselves for taking that trade. But nothing much changes after two days of penance. We are ready to put on a wrong trade all over again.

Recently I had decided that I will not take any trades home as I hate to get up on the middle of the night to check Dow. Inspite of a strong resolution, I took a call option home on Thursday as I saw a huge discount in May and June futures towards the mkt close. The 'rational' was "spot at 4512 and June NF at 4495. Surely there is going to be a gap up open tomorrow". At the time of taking the trade not a minute pause to consider that I was violating my rules. The rational for the random trade seemed stronger than my resolution. And as expected, got up in the middle of the night to watch Dow and felt happy and relieved to see it up. The trade resulted in profit but I kicked myself thoroughly.

Next day that did not stop me from breaking another rule. I called the market top of the rally at 5458 and expected it to go to ATP of 5445 and wanted to profit that 13/-. Paid with the SL hit.

Here is my list of weakness of traders that I constantly battle to overcome

1. Putting on a random trade under an untested system
2. Calling the mkt top/bottom even in intraday (This has resulted in countless losses. As the trade is against the trend)
3. Increase the risk per trade as 'something tells me' this is a winner
4. Taking a position home to profit from expected gap next day under estimating the risk in the bargain.
5. The need to be in trade at any given point of time
6. Increasing the risk per trade after a profitable trade.

Those are some of them. I have overcome quite a few. Many more needs ironing out. The biggest of them all is to add my randomness to market's randomness and blowing the account.
 
#3
Mark dauglas has laid 5 fundamental truths about trading...

1. Anything can happen.

2. You don't need to know what is going to happen next in order to make money.

3. There is a random distribution between wins and losses for any given set of variables that define an edge.

4. An edge is nothing more than an indication of a higher profitability of one thing happening over another.

5. Every moment in the market is unique.
 

anuragmunjal

Well-Known Member
#4
'Why traders fail to make consistent profit from the market'
frm childhood we are taught that being right is 'right'..therefore we cannot accept being wrong. while trading it is imperitive that we understand that we can be wrong 10 times in a row..and still be right.
human memory is short..a perfect example of this wd be a political party which is voted out of power because of various reasons is brought back with much fanfare 5 yrs later by the same people who voted them out..hence, the result of last few outcomes (read trades) carries more weight in our mind and if the result of past few trades has not been favorable we tend to tamper our system.
the reason for this probably is that we are not conditioned to take pain.the normal reaction if we touch somthing hot is to withdraw our hands immidiately. but this otherwise normal rection does not help us while trading.Imho, one who is pcychlogically strong enough to take that pain and still stick to his beliefs,would survive as a trader, others wd perish....

regards
 
#5
anurag... you are my one of fav people to have a discussion with.

My dad used to say that there are only two ways of making money. Buy low and sell high or sell high and buy low.

Now the definition of high / low varies from person to person based on their view on the same market. When we take a break-out trade, we are buying high with the hope of selling higher. This makes it a high risk - high reward trade. If i am buying at 5400 with the hope of selling it at 5450, there has to be sufficient buyers at 5450 who will buy it with the hope of selling it yet higher. If there are very few buyers above the 5400 mark, then all we get is a single spike due to a series of stoploss getting hit and some more morons like myself who got the same buy signal from their trading setup and price comes back to find new buyers who are sitting at below my entry price. Now i can go into the hope mode, wait for a change in market sentiments but in all probability hope mode is when most of my sl gets hit.

Identifying a high probability setup only assures me that over a series of well executed trades ( special focus light on "Well executed" ), my system has a edge of churning out more winners than losers. It doesnt assure me that the very next trade is going to be a winner. or the one after that.

Accepting the randomness and the fact that anything can happen and my edge is proper execution of a trading pattern that i believe has a produced good results in the past. It does not assure me that same pattern will be profitable on the next trade. Just that over a series of trades, i will stand to gain on a larger collection of trading samples.
 

MurAtt

Well-Known Member
#6
hmm ..

Another Kolkatan ... Welcome to TJ :clap:

And sorry to disturb the flow of the thread .... BUT another Kolkata .. I just could not resist !!!!
 
#7
hmm ..

Another Kolkatan ... Welcome to TJ :clap:

And sorry to disturb the flow of the thread .... BUT another Kolkata .. I just could not resist !!!!
Kolkata is known for its great thinkers. "simple living high thinking" was the principle of our grand papa and the papa of the grand papa. Maybe one of the reasons why we never progressed as other cities. We thought too much and never did anything...:D

Times are changing. Like the market, kolkata is in a up trend now after hitting rock bottom.

Amma in the south... didi on the east... bhenji on the centre... me on TJ... :lol: its a women's country now...!
 

anuragmunjal

Well-Known Member
#9
anurag... you are my one of fav people to have a discussion with.

My dad used to say that there are only two ways of making money. Buy low and sell high or sell high and buy low.

Now the definition of high / low varies from person to person based on their view on the same market. When we take a break-out trade, we are buying high with the hope of selling higher. This makes it a high risk - high reward trade. If i am buying at 5400 with the hope of selling it at 5450, there has to be sufficient buyers at 5450 who will buy it with the hope of selling it yet higher. If there are very few buyers above the 5400 mark, then all we get is a single spike due to a series of stoploss getting hit and some more morons like myself who got the same buy signal from their trading setup and price comes back to find new buyers who are sitting at below my entry price. Now i can go into the hope mode, wait for a change in market sentiments but in all probability hope mode is when most of my sl gets hit.

Identifying a high probability setup only assures me that over a series of well executed trades ( special focus light on "Well executed" ), my system has a edge of churning out more winners than losers. It doesnt assure me that the very next trade is going to be a winner. or the one after that.

Accepting the randomness and the fact that anything can happen and my edge is proper execution of a trading pattern that i believe has a produced good results in the past. It does not assure me that same pattern will be profitable on the next trade. Just that over a series of trades, i will stand to gain on a larger collection of trading samples.
hi Somanjana

thnx.....I enjoy these discussions too.
ur father is absolutely correct when he says that only way of making money is to buy low n sell high or vice versa.
but how do u define a high or a low..
let us take an eg. a person goes to the supermkt. on monday and finds a box of chocolates priced at Rs.100. he goes to the mkt.again on wednesday and finds the same box priced @ 150. if he is asked on wednesday whether the box is 'expensive' 2day or cheap, instinctively his reply wd be that it is expensive.now he goes 2 the mkt again on Saturday and he finds the same box priced at 225 and if he is asked whether the box was cheap or expensive on wednesday, he wd probably say that it was cheap then..now he is contradicting himself..therefore, I believe that past prices do not decide whether 2day is cheap or expensiv....future prices do..which implies that I am not scared of buying at new highs..take the eg. of Himachal fut. in the tech boom, it rose frm 25rs..to 200, it became expensive..when it fell from 2100 to 1500, it became cheap..now it becomes very difficult to comprehend that how can sumthing that was expensive at 200 be cheap @ 1500....
now to carry this discussion furthar, let us assume that a trader who generally trades in a quantity '3x' and always buys on breakouts becos he knows that what is looking expensive 2day may look cheap 2morrow...(not the obvious chart based breakouts..which are watched by many). he maintains a consistencey every time he buys or sells, that is he always works on the same parameters so that he can minimize his emotions coming in way of his trading..he puts on 1x position first. now as u had mentioned,there wd be days when u have a spike and the prices retrace immidiately, he gets out..he looses on 1/3 of his position..on the other hand if the mkt. proves him to be correct, ie. the mkt does not retrace in x time periods after he puts on his position, he adds 1x more.
and if the mkt goes in the desired direction, he adds 1x more on the first meaningful retracement..even if has a 30% strike rate, I am sure that he wd come out a winner after a reasonable number of trades..now to safeguard himself against an eventuality where he may just get 10 loosing trades in a row, all he has 2 do is to follow proper money management..

regards
 

SavantGarde

Well-Known Member
#10
Women... Still jump with joy when their deeds meet with male approval.... :)

SG

Kolkata is known for its great thinkers. "simple living high thinking" was the principle of our grand papa and the papa of the grand papa. Maybe one of the reasons why we never progressed as other cities. We thought too much and never did anything...:D

Times are changing. Like the market, kolkata is in a up trend now after hitting rock bottom.

Amma in the south... didi on the east... bhenji on the centre... me on TJ... :lol: its a women's country now...!
 

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