SPLURGE!

As first alluded to in This post, "Fear Of The Futures" and, most recently, categorically confirmed in "Trading Without A Compass- Revisiting Past Posts." , I fear the loss of accrued "gains" (success, progress, money etc) and so tend to self-destruct by changing the very mechanism that got me the success in the first place in a futile attempt to exert control on the situation.

It always ends in the same way.

So, as proposed in the above and various posts over the last few years (Yikes! It's been that long?!), I've "locked in the success"/"reset the account" etc by withdrawing last weeks' profits and squandering spending them on a bunch of DVDs that I've been meaning to get to add to our collection.

Here are a few of the 18 titles;

My intention is to use any potential profits as a supplement to my current income and/or grow my account (the latter would be a challenge due to my difficulty in building on past successes- any solutions would likely be documented here in a future post) not to be used as pocket money, as is the case with this week.

 I felt this kind of purchase was necessary to highlight the fact that it was made using the fruits of my work in the markets. Those profits will be "secure" in a very visible way here at home which will leave me free to repeat the process with an account that has been "reset". In a cognitively-biased way of course!

Sandcastles- Shifting Thoughts And Supports

"sand·cas·tle  

n.

1. A castle-like structure built of wet sand, as by children at a beach.

2. Something that lacks substance or significance."

Trying to out-think your own logic is stupid on so many levels. 

Firstly, you can't collect any meaningful data about your interaction with the market if you are a neurotic, strategy-changing mess. So stop doing everything and start doing something consistently! Secondly, how can we learn to trust ourselves if we can't define what we are by what we do if we don't actually do any one thing?? 

Slave to a combination of Outcome Bias and Loss Aversion, we have the urge to circumnavigate our own strategies (!!!) in an attempt to avoid inevitable losses- or at least exert some control (there's that word again!) over when they do or do not occur...all we really do is miss the real chance to learn something about our long-term relationship with the market.

If, by your analysis, a pattern/setup was "strong" or "supposed to work", shouldn't that then offer a very profitable trade in the opposite direction of the failed pattern/setup especially if there is some sign of rejection on the other side of the stop zone...??

If it doesn't, then you're likely building on sand, at least on this occasion. The crucial thing is to let the market tell you that with a "failed trade" (Not necessarily an unprofitable trade...) rather than doubting your own train of thought...a sure sign of lack of trust and/or need for control. You can't modify what doesn't exist in the first place.

Incidentally, I'm back on the live account with half-size which has made all the difference. If one is having difficulty bringing practice performance into the live arena, I'd highly recommend trying to trade a part of whatever size was used in SIM forward-testing when attempting to go live.

Feels like SIM...but with tangible benefits :).

You And Your Edge.

First off, let me say that I strongly believe most traders (all?) have an Analytical Edge in the market to some degree...the problem is, that's not nearly enough.

For me, Real-World Edge= Analytical Edge + Emotional Variance.

The EV is always negative, unless you're a robot...then it can be as high as zero. Cue shitty paint drawing for explanation:

Dampen your own mood swings and keep your edge's heart beating!

Everything in the world revolves around cycles and waves. I see the working of an edge as a wave not unlike those you find in the sea or on an ECG. Even the spinning of the Earth can be tied into the Sine Wave. In short, if it's pulsing, it's good. If it's flat, it's dead!

So most/all of us have some degree of AE in the beginning similar to the first green , semi-sine, wave in the above doodle. Then we get in the way with our huge EV, crashing into our AE.... neutralizing it with much the same effect as those anti-noise earphones people use on planes.

The result is a dead edge.

It's my opinion that the easier (much easier!) path to trading success is to try to get that red line as close to flat as possible rather than look to find/create a sharper edge in the market.

Reduction = Greater Efficiency + Focus

I just recently read a fantastic post by TraderRach and it got me thinking....

Years ago, I was a Chef in some of London's best establishments.

We had a lot to do in relatively little time... and it had to be done to a certain standard. The pressure to perform led to some great revelations. Suddenly, I found myself studying things which may have seemed irrelevant to some but really improved the bottom-line in terms of performance, freeing up time and energy which could then be spent in more productive ways.

Wasted trips to the walk-in fridge, to the rubbish bins...unnecessary movements to get to things which could be stored in a more accessible way etc etc. I soon found myself implementing various techniques- strategies if you will- in order to streamline the task at hand.

I later realized that my approach in a commercial kitchen was the main reason for my initial success in the markets.

It's not so much what you are doing as it is how you are doing it. It's all too easy to brush off certain procedures as being unimportant to the point where some people don't even consider them. But those are likely the very things you should be focusing on. Strive to do simple in military fashion rather than fancy done in anything less than.

Jiro is a fine example of this concept.

Reduce. Fewer markets, fewer indicators (which has never been an issue for me personally)

I used to have alarms until I realized that they, well, alarmed me and made me feel as if I had to act straight away or, strangely, should wait for confirmation. I used to have a sound for an order filled until I realized that it heightened my sense of doom (for stops) or attachment to a position (for entries). The same for trendlines and the "position indicator" on IB's TWS. They all encourage you to focus on where you are in relation to the market or what you think the market's doing rather than keeping you inline with what is actually happening.

Fewer moving parts with more attention to detail given to each piece is the way forward for me.

Rejection Therapy + Christmas Eve Review.

Rejection Therapy and Video Review (24/12/12)

Celebratory Video Review(s)!

We're not dead (yay!).....

Friday 21st December 2012

.....so I'm taking a leap of faith and posting one (or two) of the "diaryvids" that I record as part of my personal record keeping.

As mentioned in the above video's description, they aren't made for public consumption. The audience is usually limited to me and my girlfriend (poor thing!) and, as such, they are rough around the edges...but I'm sharing anyway...

EDIT: Second part of the week's review:-

Week Review (Wc 16th December 2012)Pt2

What I've Learned- Month And Dataset Review.

 First thing to note is that there is an edge, as the pip-count, after spread (half of the costs incurred when trading at this size), is very much positive. Unfortunately those pips haven't quite covered commissions hence the negative result. This has pretty much been the case with my trading for the last three years.

In September's "Trading Without A Compass" post I referenced an idea that has plagued my trading for a long time- The "Profit Ceiling". I am lucky/skilled/aware enough to know when it has been reached but, despite that knowledge, this is how the four weeks panned out:

I know exactly why I traded past the ceiling on every occasion. First off, I refuse to accept that it exists (more on that in the 3rd and final reason). Secondly, I want/expect to be able to trade my method continuously. After all, if it worked to the ceiling, it should work past it right?

Wrong.

Integral to the method is my discretion. So, when I feel as if the ceiling has been hit- it has. Even if it is a self-fulfilling prophecy, it can't be ignored.

The other reason is not easy to write here, but I'm going to say it anyway.

I'm addicted to trading.

Somewhere along the journey, it stopped being about profit and became more about the challenge. Going up against the market is ALWAYS a bad idea. If I had simply stopped trading when I felt like I had bumped into this "Profit Ceiling", I'd have found myself up some $550 on the month, even with the >4R loss that occurred due to a gap against me.

This idea of going up against the market is ludicrous. Most people learn how to create an edge for themselves within a couple weeks/months of careful study of a chart. After that, it's an exercise in self control and a desire for long term results over short term thrill.

A bit disappointed in the lack of participation in this blog (not one vote on the last poll!!!) so may cut back drastically/stop as it's a waste of my time otherwise. I already keep detailed data in the form of spreadsheets (as seen here) and video diaries so only really here to ignite discussion on the real challenge that is trading...

....it's NEVER the market's fault. Long-term results are all our own doing. :)

Day's Anatomy- 16th November 2012...Readers' Poll 2!

Notice the direction of ALL the trades.

I suddenly started thinking about this post that I made years ago. 2) & 4) in particular.

It (No 4 from the above link) was the same when I started this blog. That is likely why I deliberately started avoiding tracking day-to-day progress in the first place.

Do you see the obvious clues?

In the above equity chart:

Light Green
   = Paper Trading.
Dark Green
   = Live Trading.
Blue
    = Daily Blogging.
So I'm giving myself at least a month of trades without a single blog post (I'll continue updating my records though..spreadsheet, videos etc). Then I'll probably be back to report on any changes.

So I've either succumbed to the pressure of real-money trading or, coincidentally, what I'm doing stopped working when I made the switch. Or maybe it's just a draw down in an otherwise profitable approach.

What do you think?? (see poll on the right of the blog)

Back in a month!

Day's Anatomy- 15th November 2012

Knew this type of day was round the corner...

I've seen this pattern in my trading many times. Too many almost-successes (several trades that were good for target, close-to-execution trades that easily returned target-making pip amounts etc etc). Then you just let go....like sellers giving up at the beginning of a break out.

Luckily, I use stops, both trade and daily.

Was one step behind PA today. Would have been a losing day anyway.

Day's Anatomy- 14th November 2012

Pretty good day it terms of behaviour. No knee-jerk reactions.

Still struggling with the discretion involved...had I have taken every potential trade candidate, I would have had lots of opportunity for winning trades of varying degree, along with 2-3 extra losers. Statistically that is the thing to do..goes without saying.

Psychologically it isn't. At least not for where I am with my trading. Taking trades, win, lose or draw, uses up emotional capital, of which I have little! Managing trades is my stronger suit. So I'm aiming to do more with less...

Day's Anatomy- 13th November 2012- Changing Your "Reality".

Today, 5 of the 6 trades taken were good, well thought out trade. 3 losers of varying size and a couple decent winners. The bad one was the third loser/4th trade.

Missed the xxx24 @ the high of day by a hair. That would've got me to my target for the day. Took the next trade long, a loser. No problem. Then, rather than go with the other side of the trade- despite the 1 min wicks against my prior long ZoA i.e S becomes R- I tried to almost bully the market to go my way by moving the trendline (ZoA) slightly lower down to allow me to take the long again..."just in case I was off the first time".

I'd say the market beat me but the truth is (and always will be) that I beat myself.


That was my momentary loss of control/calm today. I attribute it to the near miss and the fear of losing in the direction that was supposed to have brought me to target. Irrational, illogical....and completely human.

Came back with a fresh logical approach and reversed the damage for basically a scratch day.

It's not that there is any one way to read the market, but you certainly can't modify reality of your strategy to try to escape losses, maintain control or whatever it is that motivates you to mess with what works. You have to know that you will take losses (the "good" ones) but, moreover, you have to want to take losses as part of a profitable trading routine.

Avoiding those losses means you are no longer trading your system, which means random trading. Random trading means losses equal to trading costs over the long term.

Day's Anatomy- 12th November 2012

I tried, but can't find an unforced error in my trading today. Yippee!

The eagle-eyed may notice a bunch of other trade markers on the chart other than the ones I've marked up. Those aren't my trades ;) More about that in a future post!

As Scalpy says,  

"There are four types of trades. Good winners, bad winners, good losers and bad losers."

Today, I only have the good variety of winners and losers on my chart so, as such, can't really add much in terms of commentary here.

What I can say is that the three days since switching back to SIM have, magically, been net positive overall. I guess I should be happy...*sigh*

As I've said before, the passing grade is now higher than before. I hope this will be enough to bolster my confidence to the extent that there is little/no difference between my SIM discretion and Live account discretion.

It's funny, as a youngster, I always used to wonder why sports people sometimes had such difficulty bridging the gap between practice performance and match performance. Confidence and Faith...

Thoughts

Here are a few of the thoughts I wrote down after deciding to return to SIM earlier this week.

Instant Gratification & Sugar-

If you eat too many foods with a high Glycemic Index, you end up increasing your blood sugar levels too quickly which causes the release of an emergency release of Insulin. Your body then stores that excess sugar in your body as fat- where it is relatively dormant/harmless- rather than allow it to remain in the circulatory system where it can do more harm.

What does this have to do with trading? Well, simply put, if you look for instant gratification there, you are going to be disappointed. You are likely to cut your winners short in order to "win". You are more likely to trade just to get the high of trading. This ties in to the "avoiding discomfort" piece below...

Control- We do all kinds of things to try to maintain control. Stay in the market for shorter periods of time, tighten stops, loosen stops, change systems etc etc. I believe that we have to give up a degree of control in order to profit. If you can't embrace uncertainty you will forever be slave to control (i.e trying to eliminate "gaps", which I have referenced many times in the blog)

Confidence- I asked myself that question because I often suffer from lack of confidence within a trading day let alone over a large number of trades. The lower the expectancy, the more consistent you have to be to reap the potential rewards from it. So, if I second guess the method after only a few trades, I don't have a hope in hell of stitching together enough trades (10's of them), without error, to harness the edge.

Exits: TA or Stats??- My own studies suggest that, like stops, there is no advantage in using TA over MFE based targets. It's hard to let go of old ideas but seeing, say, 80% of your trades go 0.7R in favour before stopping you out because you were waiting for a certain TA marker (prior high, moving average etc) can get tiring (hypothetical example...not my case).

Minding "The Gap"- This is where my focus is now. Giving up the control we all want to exert on our lives (otherwise we wouldn't be trying to make money from trading in the first place) for the long-term good...avoiding the sugar!

It might be giving up control between stop and target. Or, perhaps, between entry and X minutes. Maybe allowing yourself to feel a certain level of discomfort before intervening with order-altering action...

Here's a link to an article that mentions the fact that we are mostly empty space. 

"Matter is mostly empty space. If you took away the empty space between atoms, pushed them together until they were touching, the human body would be compressed to about the size of a pencil eraser. Or to put it another way, the human body is 99.996% empty space. But since atoms are also mostly empty space, you could push them together until the nuclei were touching. If you did, the human body would be too small to see." 

We need those gaps! 

 

Day's Anatomy- 9th November 2012

Yesterday saw me up 28 pips within the first three trades which I then drew back to 10.2 pips by the end of the session (as always, the numbers are before costs). I traded past my daily tgt just to prove to myself whether it was still necessary. It is. The quality of my decisions after moving too far away from zero- in either direction- decreases dramatically. Hence the need for daily stops/targets.

Today was the kind of day I enjoy...as much as anyone can enjoy a flat day at least. Even though the end tally doesn't match the hypothetical one, it offered all kinds of lessons to anyone who was listening. Seeing exactly where you went wrong is half of the battle.

Day's Anatomy- 7th November 2012

Done with live trading, and possibly with this regular blogging effort, for the foreseeable future. As much as I was looking forward to getting back to trading the live account, I'd much rather have something to work with when I'm back than piss it all away fighting with myself.

Need more confidence and that's only going to come by trading the method profitably in consistent fashion.

It's going to hurt when I return to and pass equity highs knowing that the largest draw down within the equity curve is the only part traded with real cash, but that will only serve to confirm what the problem is... should that scenario happen.