M6 - Man, Mind, Money, Markets, Method & Madness

[Tlahuicole]

Will take it with a pinch of salt. You talk about taking entry when S/R levels are at a certain distance, when in the current trend nifty crossed 6350-6415, every other past indicator(S/R is nothing but looking at history) screamed about a short, as every other time it has given close to 1:5 rr by playing short except this one time. So basing on past and judging RR is a probability play and not entirely predictable

I beg to differ, S/R levels will vary based on person's perspective, I day trade mostly in BNF and swing trade in hourly charts in a few stock futures. According to me nothing is predictable in trading it is just something has higher chance of happening. I use swing high and low as pivot support and resistance while others may use VWAP bands, camrilla pivots, weekly price high and low and so on.

 

[Tlahuicole]

While the discussion is going on regarding the trades of people like paulson/paul tudor jones/jim rogers.....people must remember that most of their famous bets are based on fundamental and macro data and not on technical analysis. Macro data involves fundamental, economic, geo political analysis etc and i believe very few people in the world can put all this data together and envision the future and then bet heavily on that. In fact jim rogers does not believe technical analysis can make anyone rich.

Exactly quinox in one of videos of Jack Schwager He says about two traders, one is a fundamentalist(Jim Rogers) who says "I have never seen a rich technical trader" I was dumb struck on this speech hearing this next there was another trader who is a technicalist(Martin Schwarts) who says "I was losing when I used fundamental analysis but became rich when I used technical analysis".

I am a technicalist, hence I view Martin Schwarts as a legend, likewise Ed seykota, Paul Tudor Jones.

So I think whatever the way we trade , there must be odds stacked up in our decision as ST says. We need to accept that both Jim and Martin were highly intellectuals in this field. So, I am still not sure which is the correct path but I guess all are correct paths, and it is all on perspective of a trader to choose his weapon as per his strengths and weakness.

 

[Option.Trader]

Option.Trader,

My 2C on what I understood Tlahuicole has posted.

* The trade is in direction of the trend.
* SL would be break of close/near support.
* Breakout would be a blue sky, risk known and limited, reward not quantified, but surely higher than 1:1.
* It sure helps to know the probable RR when entering a trade, and for sure it cannot be considered in any way predictable - because if it were, every trader would be a walking ATM.

On a new high, it's uncharted if you talk about S/R, about predictability, there was this documentary on BBC on traders, there was this guy who used to trade only once a year during a specific time and make tons of money, that's predictability for you, rare but possible, anyway what's life without an impossible dream to chase

 

[Option.Trader]

When does the diff matter? If for eg I'm earning 1L per month in some job and then there is a system which gives me a way to trade and earn the same amount, then it is a matter of which profession I'm more fed up to leave, it's not a life changing decision. But instead if I have a way to make enough not to earn for my money, i would call that life changing. I think there lies different between predictability and probability. It's like enlightenment, there is no need after that.. there have been a few masters as in the forum too, but it's an elusive thing for rest of us

 

[DSM]

Should You speculate? - Carl Futia

http://carlfutia.blogspot.in/2005/04/should-you-speculate.html

Excerpt :

Speculation is what economists would call a constant sum game. There is a single "pie" out there that is the compensation to speculators. The more people who compete for that pie the smaller is the average piece any one individual can reasonably expect to get. And it is so easy to become a speculator that this average piece is very small, so close to nothing at all that you won't be able to tell the difference. But the situation is worse than that. First of all, trading costs in the form of commissions and bid-ask spreads have to be paid in order to speculate. In other words, brokers and government get their slice of the speculative pie before anyone else does.

Moreover, we all know that there are hugely successful speculators out there in the investment world. Their success might be due to merely to luck but this is irrelevant. What is relevant is that they "eat" almost all of the remaining pie, leaving only "negative" pieces for everyone else. So when you speculate it is almost certain that you will reduce your net worth in the process of "feeding" brokers and the successful big speculators.

WHAT'S YOUR EDGE?
"Wait a minute", you might interject, " I'm quite a bit smarter that the average person. Why won't this allow me to succeed as a speculator, at least if I am willing to pay the reasonable cost in time and money of a normal apprenticeship. After all, I have been very successful in my current profession...... Sad to say, intelligence has little to do with success in speculation. Indeed, my observation is that the biggest losers in the speculative game are people of above average intelligence. It is their intelligence that helps them make the money outside trading that they then proceed to lose to the "street smart" speculators at the top of the food chain. And it is their intelligence that misleads them into thinking that markets behave according to the logic of the business world in which they have been so successful.

What is really needed for successful speculation is not intelligence but what speculators call an "edge". An edge is a piece of knowledge or a reliable instinct which predicts the direction of market prices and that is not shared by too many other speculators. You can't get an edge by reading the finance or technical analysis books you bought on Amazon or at Barnes and Noble. The information they contain is fine as far as it goes, but the trouble is that it is information that everone else has too! It can't give you an edge on other speculators. For the same reason you can't get an edge by attending a seminar that promises to reveal market secrets which will lead you to wealth.

Successful speculation requires that you outguess other speculators who are probably at least as smart and experienced as you are. Why do you think you can do this? What special knowledge do you have that few other people have? What's your edge? If you think about this question honestly you will probably conclude that you don't have an edge. And if you don't have an edge you must not speculate till you have it.

SKILL IN SPECULATION
Many people (including most economists) believe that there is no such thing as skill in speculation. More precisely they think that most investment and speculative success is indistinguishable from the result of blind luck. The more dogmatic ones say that Warren Buffet is just lucky, not good. I think that successful speculators have a tangible skill, although it is not a skill that can be taught. Their skill is the ability to sense the direction in which the crowd ("flock" and "herd" are perhaps more informative images) of other speculators is about to turn, just at the point this turn is starting.

 

[amitrandive]

WHAT'S YOUR EDGE?
"Wait a minute", you might interject, " I'm quite a bit smarter that the average person. Why won't this allow me to succeed as a speculator, at least if I am willing to pay the reasonable cost in time and money of a normal apprenticeship. After all, I have been very successful in my current profession...... Sad to say, intelligence has little to do with success in speculation. Indeed, my observation is that the biggest losers in the speculative game are people of above average intelligence. It is their intelligence that helps them make the money outside trading that they then proceed to lose to the "street smart" speculators at the top of the food chain. And it is their intelligence that misleads them into thinking that markets behave according to the logic of the business world in which they have been so successful.

What is really needed for successful speculation is not intelligence but what speculators call an "edge". An edge is a piece of knowledge or a reliable instinct which predicts the direction of market prices and that is not shared by too many other speculators. You can't get an edge by reading the finance or technical analysis books you bought on Amazon or at Barnes and Noble. The information they contain is fine as far as it goes, but the trouble is that it is information that everone else has too! It can't give you an edge on other speculators. For the same reason you can't get an edge by attending a seminar that promises to reveal market secrets which will lead you to wealth.

Successful speculation requires that you outguess other speculators who are probably at least as smart and experienced as you are. Why do you think you can do this? What special knowledge do you have that few other people have? What's your edge? If you think about this question honestly you will probably conclude that you don't have an edge. And if you don't have an edge you must not speculate till you have it.

SKILL IN SPECULATION
Many people (including most economists) believe that there is no such thing as skill in speculation. More precisely they think that most investment and speculative success is indistinguishable from the result of blind luck. The more dogmatic ones say that Warren Buffet is just lucky, not good. I think that successful speculators have a tangible skill, although it is not a skill that can be taught. Their skill is the ability to sense the direction in which the crowd ("flock" and "herd" are perhaps more informative images) of other speculators is about to turn, just at the point this turn is starting.

DSM

This is very true.I have heard a very big trader say this that you do not need any greater than 7th grade Mathematics to understand and play the markets.

Too much knowledge creates confusion.This was demonstrated by the famous Ralph Vince experiment on Money management.
http://schmertzler.blogspot.in/2007/09/financial-math.html.

Also trading can be taught to anybody, and you can actually "Create an edge".This was demonstrated by Richard Dennis by his famous Turtle experiment.
http://www.investopedia.com/articles/trading/08/turtle-trading.asp

 

[DSM]

Some impressive quotes from traders, collected over time.

Many times I am up M2M with 50k-60k, while my TSL locks only 20k, I am ready to give back my 30-40k to the markets and wait for my stop loss to be hit. And many times, this 50-60k M2m reaches to 80k-100k M2M and my TSL moves up and locks up 50k, and then further M2M reaches 140k , My TSL locks up 100k. How many of us can do it comfortably. If we can do this and ready to give some paper profit back to market, we can win this market over long run. That's why I said its not the system, its the winning over the emotions of greed and fear - unknown

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance. – Jesse Livermore

Perfect patterns carry the greatest risk for failure - Unknown

Once you are in the money, stay in the trade for the long haul. You are playing with risk free money - Paul Rotter

Do not go looking for trades, wait for them to jump out . This may seem like a weird way to trade, but it is precisely how you can take so many profitable trades. So waits and watch, and when the market gives an opportunity to jump in to a good situation, enter the trade - Unknown

I believe that the bigger the time frame on which you trade, the better it is for your health and ledger. To filter all the short term noise, I use the hourly charts - unknown

 

[Snake.Head]

Advice:- refine your skills before you make the jump into market.

 

[Snake.Head]

One of the advice that i got When i was talking to my friend about market.
Trade in the time frame which suits you,not according to others trade in.
I did't get what he meant by that.What do you guys think about it ?

 

[DSM]

My understanding :

Every person has his/her own individuality, and can perform best when executing skills in a manner that suits him/her. An example would be Dravid cannot be Sehwag, or Yuvraj a Sachin, even though they will be successful in the manner and the role they play as per what suits them naturally. Similarly, a trader can function at an optimal level when he is comfortable in understanding and executing his strategy, his money and risk management and the timeframe. If a trader is trading in a manner that is not in alignment with either of these, it will be difficult for him to trade, as it goes against his natural instincts. Specifically regards timeframe, a positional trader may like to take an entry for a few weeks or month/s, a scalper will be in and out in a few minutes or hours, a day trader will close his position EOD. Different traders, different personalities and different styles. So you need to find what timeframe and associated risk and rewards most appropriate to you. My 2C.

One of the advice that i got When i was talking to my friend about market.
Trade in the time frame which suits you,not according to others trade in.
I did't get what he meant by that.What do you guys think about it ?