@LoneWolf, nice humor you have got made me laugh recalling my similar experiences...
BTW, I don't think Madan is saying one should not analyze smart money, I believe they are really important as they only have the deep pockets to move the prices and make our trades profitable. However one should not just take position becoz smart money is buying/selling as we never know the reason why they are buying/selling. Hence volume spread analysis should be used along with our core system as a means for confirmation and give us additional confidence. VSA should not be used as a primary criteria for taking any position. Madan, please correct if my understanding is wrong.
Regarding getting Aa-ha moments, even I had suffered from this phenomenon... whenever we read a new book, learn about new indicator or strategy we keep getting Aa-ha moments, but we should be careful in selecting the right Ah-ha moments for us. One may ask how to identify which is the right Ah-ha moment for me, to answer that one should first develop strong belief in one core system that you trade regularly even if the results are not up to your expectation but that is the best you have got. Now whenever you come across a new idea/indicator and get your Ah-ha moment, first try to see if it is consistent with your core system and blends seamlessly and improve its performance. If it improves then you are in the right path and you can start integrating the concepts into your core system. However if it conflicts with your core system then it's better to give it a pass or else you will end up system hopping and will never be able to build expertise on you core system..and there will be many Aa-ahh-Ouch moments..
BTW, I don't think Madan is saying one should not analyze smart money, I believe they are really important as they only have the deep pockets to move the prices and make our trades profitable. However one should not just take position becoz smart money is buying/selling as we never know the reason why they are buying/selling. Hence volume spread analysis should be used along with our core system as a means for confirmation and give us additional confidence. VSA should not be used as a primary criteria for taking any position. Madan, please correct if my understanding is wrong.
Regarding getting Aa-ha moments, even I had suffered from this phenomenon... whenever we read a new book, learn about new indicator or strategy we keep getting Aa-ha moments, but we should be careful in selecting the right Ah-ha moments for us. One may ask how to identify which is the right Ah-ha moment for me, to answer that one should first develop strong belief in one core system that you trade regularly even if the results are not up to your expectation but that is the best you have got. Now whenever you come across a new idea/indicator and get your Ah-ha moment, first try to see if it is consistent with your core system and blends seamlessly and improve its performance. If it improves then you are in the right path and you can start integrating the concepts into your core system. However if it conflicts with your core system then it's better to give it a pass or else you will end up system hopping and will never be able to build expertise on you core system..and there will be many Aa-ahh-Ouch moments..
2. Run everything through your robust system first - before implementing i(if at all). There will be thousands of ideas going down the drain - w.r.t our system and our mindset. Here two schools of thoughts can arise
a) if we start implementing ideas we see in a public domain/book or elsewhere, does it not amount to system jumping? If not, then what is system jumping?
b) What is wrong in improving my profit factor/win ratio or other parameters (if i can)?
If we look deeply into point # 2a, we will understand that there is no definite answer for this dilemma. The answer lies in the belief we have about trading. As we have heard enough about 'not jumping like a monkey from 1 tree to another', we would have ingrained 'system hopping' is bad. And it is. On top of that, system sellers also keep advertising that 'they have the magical system' to make money in stock markets. When we are bombarded with these kind of information, it would be natural to think that the system we have (40 pct winning system with 1:2.5 RR) is the reason behind not making money in the markets. Nothing could be further from the truth. Think about it for a second.
If we look at point 2b, it is actually a valid thought. After all, we constantly endeavor to drive a better car, live in a better house, wear better clothes, eat better food. So, why not having something better than what we already have? Why trading system should be an exception? But here is the real question - when do you stop? When we hit 90% winning system? or when we start making money? Traders do system jumping as they strongly believe that 'poor system' is the reason for them to not make money in the markets. So, once we start to make money in our system (real money ..not backtested excel money) - that thought should dissipate slowly. Loitering on other people systems (available online and in forums) does not help the cause as well.
Unless we live in an isolated environment(without family/friends), this backtesting system and improving system idea should stop somewhere. This leads us to the basic question- why did we come for this trading profession? It might serve well now to revisit that thought. Please respond back with your thoughts for this pointer. Lets do some 'cleansing' of thoughts now.
In my opinion, the improvement should happen in the trading size, it should happen in the execution. There is not much difference between a system with 50% winratio and a system with 40% winratio (assuming RR is equal and system makes money in the long run). Once we settle down, money management can fill the gap between these two systems nicely and over a period of 10 years, both these systems could have given a small fortune to a trader who respects risk.
Please sit on this post/thought for a while. This will make lot of sense once we understand the mental framework behind this phenomenon.