Thoughts on "The A to Z of trading career - musings of a professional trader !!"

[madank]

@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..

1. Many folks i have met give undue importance to the FII/DII numbers that come out every evening. @ncube pointed out really well that we never know the reason for their buy/sell and we will never have their buying power. But if it suits a trader/investor well in their trading/investment goal, thats fantastic. That pointer was just on a lighter note.

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.

 

[madank]

Next comes mentor ,a mentor could be a family member, a friend, a past or current professor, co-worker, or any individual that has a fundamental understanding of the trading and having a successful story. A good mentor is willing to answer questions, provide help, recommend useful resources, and keep spirits up when the market gets tough. All successful traders of the past and present have had mentors during their early days.Forums can be another source for question and answer any person who can clear traders doubt is a mentor for me ,thanks to traderji for starting this wonderful platform which is helping traders. many are there in the forum who helped me ..off course still not able to move in swing trading as planned due to my own mistakes ,but working on it( psychological drill )and will move on with full qty from April 2018 once it is finished successfully

@XRAY27 - Nice. Do you know to mind-read people? Thats coming up in the next few topics. Forums can serve as e-mentoring platforms (not a strict mentor-mentee relationship) but can serve the purpose to an extent.

This would be quite an interesting one.

 

[copypasteaee]

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)?

Well i have hopped quite a bit around many systems and definitely its not good for our ledgers. I am strict follower of my system from past 3-4 years. But it is not bad either to improve your system. There should not be disruptive change in the system i.e. you discard the system altogether and bring a new system, rather it should be incremental. I got some idea, i checked it along with my system and if my system shows considerable improvement then i keep it else i discard the idea(even if there is minor improvement i discard the new idea). Believe me very soon you will find that it is hard to improve the system (saturation point) because you can not take more from markets what it gave to us.

 

[XRAY27]

1. Many folks i have met give undue importance to the FII/DII numbers that come out every evening. @ncube pointed out really well that we never know the reason for their buy/sell and we will never have their buying power. But if it suits a trader/investor well in their trading/investment goal, thats fantastic. That pointer was just on a lighter note.

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.

i Agree with this point " improvement should be with respect to size "!!! screwed my existing system in swing in quest for improvement which ended in pit hole

,realizing this ,i returned to my previous method in swing !!!

"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."

 

[XRAY27]

@XRAY27 - Nice. Do you know to mind-read people? Thats coming up in the next few topics. Forums can serve as e-mentoring platforms (not a strict mentor-mentee relationship) but can serve the purpose to an extent.

This would be quite an interesting one.

No sir !! i don't know mind reading,very much interested to know about this topic,plz present your view on mechanical system !!!

 

[ncube]

@madan, I am trying to speak from the shoes of a new trader with no family background or access to mentor, In this case do I need to go through the usual beginner cycle where I will spend hours experimenting with different strategies,indicators etc? if yes then when to stop and conclude the system I have developed is acceptable? Is there any quicker/easier way? Can you please share your thoughts.

Actually I went through all these phases and spent countless hours of screen time before realizing that I just need a simple clean price action chart with no indicators to distract me. But I feel those number of hours I had spent analyzing the charts were not wasted and made me what I am today. But there are traders who get stuck in the viscous cycle of system hopping as they are not able to give enough time to any one system. I think it has to do with psychology & self confidence as they expect someone trustworthy to confirm to them as to which system they have to follow..just like we grew up with parents taking decisions for us.

 

[travi]

No sir !! i don't know mind reading,very much interested to know about this topic,plz present your view on mechanical system !!!

XRay ji just trying to be modest he's probably learnt from every mistake in the book

 

[XRAY27]

XRay ji just trying to be modest he's probably learnt from every mistake in the book

Travi bhai !!! Learnt a lot ,still committed mistakes in recent time

, i don't know this concept of mind reading

 

[travi]

Travi bhai !!! Learnt a lot ,still committed mistakes in recent time

, i don't know this concept of mind reading

I was just going to Quote the previous post of @ncube and he probably sums everything in it. Speculation unlike other Technical Profs (for lack of a better word) does not have a set standard, it can only be justified in hindsight and say its priced.
From books like Market Wizards etc one learns that losing Trades are part of every system and therefore one can conclude that there will always be "fresh or repeated" mistakes in a Trading Career. All one can do is to stay on top of them with the Mgmt Techniques of RM, MM, Pysch and the rest.

 

[XRAY27]

I was just going to Quote the previous post of @ncube and he probably sums everything in it. Speculation unlike other Technical Profs (for lack of a better word) does not have a set standard, it can only be justified in hindsight and say its priced.
From books like Market Wizards etc one learns that losing Trades are part of every system and therefore one can conclude that there will always be "fresh or repeated" mistakes in a Trading Career. All one can do is to stay on top of them with the Mgmt Techniques of RM, MM, Pysch and the rest.

There is perfect standard for a trader which is objective personality,which i neglect( 6 th point ),since this psy drill is started, i'm pretty much confident that i will regain this character .Mark Douglas, author of The Disciplined Trader states there are seven characteristics of an objective person. Here they are so you can recognize it when you’ve achieved it:

1) You feel no pressure to do anything.


2) You have no feeling of fear.


3) You feel no sense of rejection.


4) There is no right or wrong.


5) You recognize that this is what the market is telling me, this is what I do.


6) You can observe the market from the perspective as if you were not in a position, even where you are.


7) You are not focused on money, but on the structure of the market.


If you can see any of the above qualities in yourself, you’re on the right road. Again, you need to release yourself from the need to be right. If you constantly need to be right, you are unfortunately in the wrong business. To be a successful trader, you don’t always need to be right, but you always need to be objective.