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     kruupy
Member
Username: kruupy
Post Number: 40
Registered: 07-2005Rating: N/A
Votes: 0
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| | Thursday, February 15, 2007 - 09:52 pm: |  
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Hi All,
just something that I thought I would post for the other new comers to trading in case they experience the same problem as me.
I have been paper trading on and off for around a year now, without developing a full system that I felt confident in enough to begin trading. Over recent weeks I had felt very depressed as I felt that I am ready to trade, except I dont have a trading system to trade by.
So I spent the past few days straight conducting system back tests in the hopes to find one that has made a lot of profit in the past in which I could then feel confident in to trade now....only to fail and find out that all my back testing returned negative profit results.
So then, after being really upset I asked a trader for a bit of help on how to fix the problem, and he said:
Do you play a Sport?
I said Rugby.
Good,what are the necessary rules in order to win at rugby?
I said to have good team work, passing and the ability to play with controlled aggression.
What do you do when you pick up the ball in rugby?
I run forward.
Even though you're team has lost a game, in the next game what do you do when you pick up the ball?
I run forward.
Does the team change in anyway?
We look at our mistakes from the previous game and make sure we dont repeat them.
he said its the same for trading.....
and then after a few minutes it hit me. After all this time I didnt need to back test any system before I used it. I have to just create any system (and if I get lucky it will be a "natural", talented player or system) and use it to the best I can consistently. and when the system takes a loss, I need to analyse what went wrong and make sure it doesnt happen in the next game!
I know that this has been said and repeated a few times before but I never truly understood it until now, and I can now trade with confidence in my system that it will be profitable in time, I just may need to improve it and take many many losses before it actually does become a winner.
Thanks all,
From Kruupy.
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davkell
Member
Username: davkell
Post Number: 491
Registered: 07-2004
Rating: N/A
Votes: 0
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| | Friday, February 16, 2007 - 12:07 am: |
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It is amazing how many times 'we' hear something that says that the real secret to trading successfully, is the 'easy' approach! Sometimes I think we expect it to be difficult and thus look for the most difficult and complex way to trade.
Van Tharp has proven that with the right money management system, you can make a profit on a coin toss system!!! And arguably trading the market is essentially a 50/50 game. So, with a little foresight, a little bit of system design, one should be able to improve on that 50/50 ratio easily, even if only by a little.
So, essentially, come up with an easy to implement system, that you have found works on good probability and then stick with that system like clockwork! Our major problem I think, is not trusting our 'systems' and looking for too many refinements. Do you try to improve your driving ability? Not really, you clutch, put into first gear and accelerate! Nothing really hard there. Yes, the road ahead may change, but your ability to drive doesn't, accept you may learn the occasional lesson that enhances your driving ability.
Trading is about realising you already know how to drive, just get in and drive for god's sake!!!
"Trade Your Way To Financial Freedom" - Van K Tharp
"Manage the downside; the upside will take care of itself" - Donald Trump
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ohkoolnutz
Member
Username: ohkoolnutz
Post Number: 526
Registered: 10-2005
Rating: 
Votes: 1
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| | Friday, February 16, 2007 - 12:19 am: |
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Taking a loss and making a mistake are not the same thing. Your friend didn't say that removing the mistakes will provide you with a win; it will only provide you with a greater chance to win.
Three of my current positions are a couple ticks away from my stop loss. If they do get activated I will lose a few hundred dollars and I get the chance to play again. If they don't get activated I will make a huge amount of money and I get to play again.
Not adhering to a favourable setup for entry, rushing into trades, over-analyzing, paying market prices, not knowing your stops are mistakes which may or may not pay off in adverse fashion.
Backtesting my method would be difficult. I just look at a chart and I can _feel_ an opportunity. I just see it. The entry and the stop loss shout at me from the graph. The following three things can happen:
1. The buy didn't get triggered and the order is pulled. The trade actually failed by not getting activated. This is great because it cost you nothing.
2. The trade gets filled and your stop loss is not violated ending up in a profit.
3. The trade gets filled and your stop loss is violated ending up with a loss.
You can lose a lot of games but still win the championship.
---
ohk
Lies, Damn Lies and Technical Analysis
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smallworld
Member
Username: smallworld
Post Number: 519
Registered: 01-2004Rating: N/A
Votes: 0
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| | Friday, February 16, 2007 - 10:24 am: |
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Firstly, Thanks Kruppy for starting this thread and sharing your story. Rugby is a game I love, probably more so now that I'm too old to play. I think you can draw a lot of analogy about trading from rugby, as with other sports.
One of the parallel I can draw about trading is tackling. In tackling, once you have decided and initiated a tackle, you have to do so with full commitment and go through the whole sequence completely. there no half tackle. In trading as in other aspect of life, You do what you say you're going to do, you do it the way its meant to be done and you do it completely. Its such a simple principle and yet its one of the most difficult attitude to foster. I know because I fail often, and when I dont, the result are admirable.
I disagree with an earlier poster that trading is easy, trading can be simple, but is never easy. While some might argue its semantics, but to me it puts a big difference in the way we prepare ourselves. Trading is the most competitive game in this world, you can read about what Goldman Sachs (in the price manuipulation thread) does if you think its easy. To illustrate about "thinking its easy" does to you, I recall an interview that Richie McCaw, the current All Blacks captain, gave about the world cup. He said that because the All Blacks has been regarded as the best team in the world for decades, the previous All Blacks had all expected to turn up and win (its easy) but never understood what it meant to win a world cup. Subsequently, they havent for 20 years. I believe its similar in trading, If we believe we can just turn on the computer and make some money, we are unlikely to apprecriate what's meant to take money from the market.
To win - you have to take on being the cause of your own fortune.
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julles
Member
Username: julles
Post Number: 1755
Registered: 01-2003
Rating: N/A
Votes: 0
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| | Saturday, February 17, 2007 - 01:06 am: |
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You got it Kruupy, find something that works and repeat it.
I look for low market cap, volume, supporting chart patterns, I've never back tested and I've never spoken to a broker.
I'm finding it harder to make money at the moment as I believe the smart money are exiting the minors in our exchange. Each day I'm looking for a reason to unload stocks I already own.
To me that's a sure sign that I am at risk, major risk..
Same topic as yours just more emotional .. Julles
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