by eric-pal » Fri Oct 13, 2023 6:21 pm
Part of this comes back to personality and flex. Some personalities are more rigid and inflexible than others. But there are trade offs everywhere. However, human's natural bias is risk avoidance (feeling secure), and so trading actually directly opposes man's natural instincts.
There is risk, reward, and probability. Obvious. However, what individual's want, especially beginning, is low risk, high reward, and high probability. Maybe that happens 1:1000. Individual's still want it though, and when one has to wait for the 1:1000. . . well, WHAT AM I SUPPOSED TO DO WHILE WAITING?!!!! Well, that IS THE JOB!!!
In LEARNING though, it is much easier to learn, WHAT THE HECK AM I LOOKING FOR?!!! with high probability than low probability. Low probability exposes the flaws of the whole Turtle Trading experiment. That system had a 35% accuracy rate (or lower). What does that say about any trade? - - - -Going to work? WHO THE HECK KNOWS?!!! But you have to take it because you do not know which will succeed. And when they do - - - MASSIVE RETURNS (it was a trend following system). One had to TRUST THE SYSTEM w/o knowing whether the system had an edge or not! Lol - also if a 35% system goes bad, it takes a lot longer to determine!!
But this contrasts with swing trading and scalping. Scalping -> higher probability, smaller targets. Swing trading -> lower probability, larger targets. Between the two there is a balance, and one can do both (scalp + runner). The first objective though is to understand enough about probability and expectancy to understand "what am I reading"? Most just want to win $$$$$. That is a byproduct of skill though.
So, especially in the beginning, man's natural instincts are going to be opposite of what is required to succeed. Have a trading plan -> no (because that would be able to help measure how we are doing and man, in the beginning, it is going to be bad -> not going to feel good). Risk management - - -well what the heck is that? I'm just going to win (risk management can determine whether a system wins or loses by the way).
When do people feel comfortable taking the trade ------> IN BARB WIRE! When all of the supposed risk is gone (and the probability is 50/50!!!). So, yeah. It is a big deal finding a system to be able to first -> understand what one is doing, and then second to practice to become familiar with being uncomfortable.
Over time, with experience, and objectivity, it may become more comfortable. . . or it may never perhaps (personality based). If one can stick with one's plan, it doesn't matter.
Van Tharp correctly pointed out that one is not trading a market, but one's beliefs of a market. This is actually true (until one actually is seeing the market without fear). He used trading as a reflection and vehicle for life. In working with fears, and working through them, there can be a lot of truth in that. But in the beginning, I'll simply use Mr. T's prediction from Rocky III:
Reporter: Clubber - what is your prediction for the fight?
Clubber Lang: Looking dead eyed into the camera. "My prediction?!!! . . . PAIN!"
A little Friday fun but hopefully insightful. Good trades to you!
I wanted to add a little bit more about the training process. Once one is able to see what makes an edge, the objective becomes being able to visualize and see it on the printed / static page, in its variety of forms, and also in a live market, realtime. Having seen how the market moves then, and learning about it, one then works to improve recognition as well as seeing how flexible in recognizing biasing one can become. In this way, we begin with very high probability, to gain familiarity, and then can potentially work to use lower probability. 70% probability exists much more often than 80%+ probability. It also loses a bit more, so the flexibility to recognize and be able to adapt.
Part of this comes back to personality and flex. Some personalities are more rigid and inflexible than others. But there are trade offs everywhere. However, human's natural bias is risk avoidance (feeling secure), and so trading actually directly opposes man's natural instincts.
There is risk, reward, and probability. Obvious. However, what individual's want, especially beginning, is low risk, high reward, and high probability. Maybe that happens 1:1000. Individual's still want it though, and when one has to wait for the 1:1000. . . well, WHAT AM I SUPPOSED TO DO WHILE WAITING?!!!! Well, that IS THE JOB!!!
In LEARNING though, it is much easier to learn, WHAT THE HECK AM I LOOKING FOR?!!! with high probability than low probability. Low probability exposes the flaws of the whole Turtle Trading experiment. That system had a 35% accuracy rate (or lower). What does that say about any trade? - - - -Going to work? WHO THE HECK KNOWS?!!! But you have to take it because you do not know which will succeed. And when they do - - - MASSIVE RETURNS (it was a trend following system). One had to TRUST THE SYSTEM w/o knowing whether the system had an edge or not! Lol - also if a 35% system goes bad, it takes a lot longer to determine!!
But this contrasts with swing trading and scalping. Scalping -> higher probability, smaller targets. Swing trading -> lower probability, larger targets. Between the two there is a balance, and one can do both (scalp + runner). The first objective though is to understand enough about probability and expectancy to understand "what am I reading"? Most just want to win $$$$$. That is a byproduct of skill though.
So, especially in the beginning, man's natural instincts are going to be opposite of what is required to succeed. Have a trading plan -> no (because that would be able to help measure how we are doing and man, in the beginning, it is going to be bad -> not going to feel good). Risk management - - -well what the heck is that? I'm just going to win (risk management can determine whether a system wins or loses by the way).
When do people feel comfortable taking the trade ------> IN BARB WIRE! When all of the supposed risk is gone (and the probability is 50/50!!!). So, yeah. It is a big deal finding a system to be able to first -> understand what one is doing, and then second to practice to become familiar with being uncomfortable.
Over time, with experience, and objectivity, it may become more comfortable. . . or it may never perhaps (personality based). If one can stick with one's plan, it doesn't matter.
Van Tharp correctly pointed out that one is not trading a market, but one's beliefs of a market. This is actually true (until one actually is seeing the market without fear). He used trading as a reflection and vehicle for life. In working with fears, and working through them, there can be a lot of truth in that. But in the beginning, I'll simply use Mr. T's prediction from Rocky III:
Reporter: Clubber - what is your prediction for the fight?
Clubber Lang: Looking dead eyed into the camera. "My prediction?!!! . . . PAIN!"
A little Friday fun but hopefully insightful. Good trades to you!
I wanted to add a little bit more about the training process. Once one is able to see what makes an edge, the objective becomes being able to visualize and see it on the printed / static page, in its variety of forms, and also in a live market, realtime. Having seen how the market moves then, and learning about it, one then works to improve recognition as well as seeing how flexible in recognizing biasing one can become. In this way, we begin with very high probability, to gain familiarity, and then can potentially work to use lower probability. 70% probability exists much more often than 80%+ probability. It also loses a bit more, so the flexibility to recognize and be able to adapt.
