Confessions and Questions

[Ken]

In my "limited" experience, I found that the best way to retain my gains during the bull run is to sit out and wait for the market to correct and settle. The best way to loose my gains is to try to play the short side of the market, even if your predictions are "in sync" with market actions. Shorting is such a difficult game in that you have to have perfect timing for entry and exit in order to consistently be profitable. This has been proven to me, the hard way, across every major top in the past 3 years. I'm starting to get it but I found that being in cash might be one of the hardest thing to do as a trader. But that is often the best thing to do. As Billy pointed out through his decades of playing the market, the only thing that might be closed to being the "holy grail" in trading is patience. And to do that requires an uncommon discipline over your greed and fear emotions.

[EB]

1. Billy's link made much sense to me. thanks again.

2. I'm trained in social analysis, music and linguistics. Cultural, social, and economic analsys makes sense to me; mathematics and programming are not my strong suits.

3. I'm very sensitive to sound.

Here is an excellent article by Dr. Brett Steenbarger on the subject of dealing with different learning styles. He also links to a brief test (called a VARK Questionnaire) that I found quite helpful years ago. I had assumed I had a single dominant learning style, and it turned out I was nearly equal in all four. Knowing this gave me the confidence to trust intuition that emerged from processing disparate sources and forms of information.

Screen trading would seem to suit the visually learning dominant; however, I've read (no longer have the link) that auditory dominant people tend to have more patience sitting in front of a screen for long periods. Perhaps this has to do with the patience it takes to learn an instrument.

4. I was also, at one time, a highly rated chess player-- no longer to be sure.

This would suggest you are able to memorize (chunk) the thousands of possible opens and evolutions of play. Good news, because this is a key skill with trading, but only comes with a lot of time and experience. What is a bit different in trading is the unfolding of moves over time is never exactly the same, rhyming more than repeating.

I have tested my ideas in paper trading, and my performance is consistently superior to my real-world trading.

I would bet this is nearly universally experienced. Paper trading or trading on a simulator can be useful for getting the mechanics of trading down early on, but the results change dramatically (for the worse) once actual trading commences. It can be useful for gathering statistics on discretionary setups as you perceive them in real time.

I should also note that my results with Think or Swim since last year are literally zero.

If that is your first year, you have done well. According to a recent NFA study, more than half of new futures traders have blown out at an account or had a margin call within the first six months. Of course, this is in the highly leveraged futures world, but I would bet first year results are not rosy for most in any market.

On the other hand, with Vanguard's quiet grandpa technologically inferior interface, I reached over 40% in the first five and a half months of 2011.

I think some of my problem with TOS is that it overwhelms me sensually-- too much information and no real capacity, it appears, to reduce the static/noise.

Perhaps the less visually stimulating platform is the way is for you. Some traders trade with surprisingly little information in front of them. For instance, Al Brooks, a well-known eMini day trader, trades a 5 minute chart with a 20 period EMA. That's it. He builds an entire discretionary system around that one chart, and says anything more is too confusing to any person. I don't think he gives enough weight to what Steenbarger addresses above, but his methodology works for him. [As an aside, I also think that by monitoring the tick by tick development of each 5 minute bar, he has unwittingly internalized a form of tape reading.]



A 747 pilot can monitor this entire instrument panel and fly the plane at the same time. Not every light or dial means something significant at every moment, but each is valuable at certain inflection points. Some traders thrive by monitoring many time series, and through experience are able to discern what is relevant.

So what is relevant? Beginning and intermediate traders spend a lot of time trying to answer that question, often getting suckered by gimmicks. In the end, you have to find what helps you see the market best, particularly being able to anticipate and sense supply and demand. Avoid grail searching.

Of course there are many angles from which to ponder such problems. Knowing I'm at wit's end gives me good reason to turn to a robot. Unfortunately, the robot closed me out of a good trade and told me to sit tight at the low end of a market!

Many discretionary traders turn to systems trading, only to find the same problems they had as a discretionary trader pop up with systems trading. Tweaking after every drawdown, overriding signals etc. If you've mastered discretionary trading, you can probably override a system with success. If not, and you're not following the signals exactly, it's important to realize you are still trading discretionarily.

More good news, though (perhaps). If you're at your wit's end, you might be at the confusing stage that precipitates a breakthrough. I believe you can make that happen if you keep digging.

[ernsttanaka]

Nick,

I liked the books from Steenbarger, when it comes to the softer part of our chosen profession.

Ernst

[ilonaross]

Hmm.... more authors sitting on my bookshelf.

Maybe time to add these to the online book group.

I'll add this to the other thread and figure out how to mobilize this group.

Ernst, while we're at it, is Larry McMillan's book the bible? Or do you have other suggestions?

Ilona