M6 - Man, Mind, Money, Markets, Method & Madness
- Thread starter DSM
- Start date
Happy, A bit long, but my 2C.
I think 99.99% of the traders don't have written rules. (Even myself, have started writing down the same since about a week) So when something's not written down, its all subjective - as it happened to me with Asian Paint CE. There was an analysis, but no written code or instruction what I must do.... So when at the open, the start was small but -ve MTM of Rs. 500, the guideline to give a 'wriggle room' did not exist. Hence had to deal with the fact that the MTM could get bigger, so 'thought' it prudent to exit.
The question here is that if we do not have a written plan, or guideline, how do we know that we are following the plans or the rules? How do we know the times we have deviated from the system - even if for a good reason? The problem is that we don't.
The good part of having a written code, is that if we find something that's not a part of the system, we can add that to make our system more robust. Having a rule based criteria for entry, exit, SL, TSL, MM, RM, Exposure, will help us to be clear and practical in our approach to trading, and avoid impulsive trades.
Re. changing the rules, and how often to do that : As many times as required, but ofcourse, this has to be done after adequate reflection only. So if we did something that we ‘felt’ or ‘thought’ was appropriate, the question to ask is What was the reason for the same? What thoughts were there in the mind and what chart patterns prompted the decision. Was it as per rules? If not, why not? Should the rules be amended to factor that in? So a decision or a trade taken which is not as per rules, has to be updated as ‘learnings’ and incorporated into the system.
Re. your point - emotions involved in the last few trades are extreme. Question to ask yourself : Are you trading with heavy leverage? Why? Are you over-exposing yourself to big risk? If a small change in the stock/index is having a large impact on your P&L, you will need to consider that you may be over extending yourself. Leverage is o.k if you know the risk of downside and are comfortable accepting it. However while trading with leverage, it is important to protect your capital first and you should be ready to exit the leveraged position immediately and without second thought if the move is adverse and against you.
This is the paradox of trading : That while it is important for a trader to trade as per his comfort zone - the fact is that trading when uncomfortable, will provide the biggest reward. Buying high to sell higher, selling low to sell lower, or buying when there is a sell off, or selling at the peak are what we are not normally attuned to do, but these are the market turning points which provide the best rewards to those who can trade it. And it is this time that our emotions will come into play. But to take advantage of different trading styles or methodology, it is important to define the criteria for taking these trades and their SL’s as per MM and RM rules.
All said and done, while it is important to have a strategy and written plan as well, I think we need to give some time to reflect on the 'philosophy of trading' Really. I mean it. And in my view it is this - which I had posted in this thread earlier. To give an analogy of cricket, How are centuries scored? No doubt the memorable ones, which stand out will have many 4's and 6's (but will not reveal the fact how many batsmen perished while trying to hit big) If we analyze, most centuries will have only a few 6's and many 4's. But a major part of the century scored, will be scored in 1's and 2's and 3's...... It is these 1's and 2's and 3's that give the freedom and the opportunity to the batsmen to go for a big hit. So too in trading, making consistent money, day after day, in small amounts is important... this will provide the base to hit big. Surely and without a doubt and over time. But if day after day, or in weeks or months, small profits cannot be accumulated (traders over leveraging and going to make big hit) there will be no opportunity for the trader to exist in the market. So we need to start with the right philosophy, followed by strategy, rules and stuff….. cheers.
I think 99.99% of the traders don't have written rules. (Even myself, have started writing down the same since about a week) So when something's not written down, its all subjective - as it happened to me with Asian Paint CE. There was an analysis, but no written code or instruction what I must do.... So when at the open, the start was small but -ve MTM of Rs. 500, the guideline to give a 'wriggle room' did not exist. Hence had to deal with the fact that the MTM could get bigger, so 'thought' it prudent to exit.
The question here is that if we do not have a written plan, or guideline, how do we know that we are following the plans or the rules? How do we know the times we have deviated from the system - even if for a good reason? The problem is that we don't.
The good part of having a written code, is that if we find something that's not a part of the system, we can add that to make our system more robust. Having a rule based criteria for entry, exit, SL, TSL, MM, RM, Exposure, will help us to be clear and practical in our approach to trading, and avoid impulsive trades. Re. changing the rules, and how often to do that : As many times as required, but ofcourse, this has to be done after adequate reflection only. So if we did something that we ‘felt’ or ‘thought’ was appropriate, the question to ask is What was the reason for the same? What thoughts were there in the mind and what chart patterns prompted the decision. Was it as per rules? If not, why not? Should the rules be amended to factor that in? So a decision or a trade taken which is not as per rules, has to be updated as ‘learnings’ and incorporated into the system.
Re. your point - emotions involved in the last few trades are extreme. Question to ask yourself : Are you trading with heavy leverage? Why? Are you over-exposing yourself to big risk? If a small change in the stock/index is having a large impact on your P&L, you will need to consider that you may be over extending yourself. Leverage is o.k if you know the risk of downside and are comfortable accepting it. However while trading with leverage, it is important to protect your capital first and you should be ready to exit the leveraged position immediately and without second thought if the move is adverse and against you.
This is the paradox of trading : That while it is important for a trader to trade as per his comfort zone - the fact is that trading when uncomfortable, will provide the biggest reward. Buying high to sell higher, selling low to sell lower, or buying when there is a sell off, or selling at the peak are what we are not normally attuned to do, but these are the market turning points which provide the best rewards to those who can trade it. And it is this time that our emotions will come into play. But to take advantage of different trading styles or methodology, it is important to define the criteria for taking these trades and their SL’s as per MM and RM rules.
All said and done, while it is important to have a strategy and written plan as well, I think we need to give some time to reflect on the 'philosophy of trading' Really. I mean it. And in my view it is this - which I had posted in this thread earlier. To give an analogy of cricket, How are centuries scored? No doubt the memorable ones, which stand out will have many 4's and 6's (but will not reveal the fact how many batsmen perished while trying to hit big) If we analyze, most centuries will have only a few 6's and many 4's. But a major part of the century scored, will be scored in 1's and 2's and 3's...... It is these 1's and 2's and 3's that give the freedom and the opportunity to the batsmen to go for a big hit. So too in trading, making consistent money, day after day, in small amounts is important... this will provide the base to hit big. Surely and without a doubt and over time. But if day after day, or in weeks or months, small profits cannot be accumulated (traders over leveraging and going to make big hit) there will be no opportunity for the trader to exist in the market. So we need to start with the right philosophy, followed by strategy, rules and stuff….. cheers.
One more thing to ponder upon . . .
How frequently should you allow the rules to be changed . . .?
What burden of proof do you impose upon yourself, before you do that?
The emotions involved in the last few trades are v extreme,
and the force/impulse to change coming out of them is too strong . . .
One of the fallacies is that normally the current ongoing experience is given far too much of importance over the overall statistically derived results . . .
Cheers
Happy
How frequently should you allow the rules to be changed . . .?
What burden of proof do you impose upon yourself, before you do that?
The emotions involved in the last few trades are v extreme,
and the force/impulse to change coming out of them is too strong . . .
One of the fallacies is that normally the current ongoing experience is given far too much of importance over the overall statistically derived results . . .
Cheers
Happy
Thanks Toocool.... I know TradeTiger is accessable on mobile... will need it in due course....
no way
i am saying that while in market hours i am visiting forums less and after market i access forum on mobile .
its possible to trade on mobile but not possible to see proper charts .now has mobile application and so does nest trader by zerodha
even my galaxy Note 2 is not enough for charts
i am saying that while in market hours i am visiting forums less and after market i access forum on mobile .
its possible to trade on mobile but not possible to see proper charts .now has mobile application and so does nest trader by zerodha
even my galaxy Note 2 is not enough for charts
Looking at charts in a higher TF than the one we are trading can provide clarity, but not necessary must.
Here some adds from over here: Agree with the made statement with little adds, but not with the shown chart to this statement. No guarantee that we will have a breakout to the upside on such a chart picture. Market also could fall down like a stone.
maybe will get it next year , if made some monies
http://www.traderji.com/trading-dia...technical-analysis-toocool-23.html#post952823
And according to this post I still have a lot to catch up yet
http://www.traderji.com/showthread.php?p=953593
http://www.traderji.com/showthread.php?p=953593
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