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HOW IMPORTANT IS TRADING PSYCHOLOGY?

Chart Forum » Trading - Psychology » HOW IMPORTANT IS TRADING PSYCHOLOGY?

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vermante
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Username: vermante

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Saturday, February 25, 2006 - 08:02 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



To obtain a degree in most academic disciplines requires a study period of approximately 3 years,with some exceptions like medicine extending to 5 years.

How long should it take to master T/A(including pattern recognition) and identify suitable entry and exit points.

Given that there a many smart people who which to profit from trading , the above task should be achieved within 1-3 years. In addition there are sophisticated software tools that can assist in technical analysis. I think most would agree that T/A is not rocket science , it is a discipline easily learnt .

Yet most fail ! -

One could then conclude quite reasonably that the T/A is not the primary solution to profiting from the markets . The solution to profiting from the markets is hidden and not easily identified .

It has been said that Trading is 60% Psychology , 30% money management , 10% T/A.

In pursuing trading excellence and the road to financial freedom , time and effort spent should be heavily skewed towards mastering trading psychology and money management .

Cheers

Vermante




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ingot54
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Saturday, February 25, 2006 - 09:10 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Indeed complex, Vermante, when it should be simple.

Colin advises here that market risk is 66%, Sector risk is 24% and Stock risk is 10%.

So we can exclude that as a reason for failure. There really is no reason to select poor stocks consistently.

And your source said trading is 60% Psychology, 30% money management, and 10% TA.

That being so, it is now obvious where the educational effort should lie - or is it?

My path has taken me from the acute excitement I experienced when I discovered MACD, to a place where I now do not even look at it. I have made a study of most of the popular indicators, and discarded them.

And I have gone from FA to TA to a blend of both. Today I use just one indicator, and weekly charts.

But my weakness found me out. I received an "F" grade in money management. I was putting 80% of my effort into stock selection, instead of about 10%, and not developing management skills.

There is always the opportunity to re-sit the test!

I believe the expenses have been a decent education.

Maybe a good discussion on risk management should be resurrected. I recall there being a bit on this previously.







Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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spider
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Saturday, February 25, 2006 - 11:25 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



There seems to be a lot of denial when it comes to psychology and trading.

Check out step 22 and 30 on smallword's list.

http://www.incrediblecharts.com/userscripts/forums/show.plx?tpc=11&post=59156#PO ST59156


If you ignore the importance of what is going on inside your head you will inevitably end up by helping me to feed my family, and you would not want to do that , now would you?

spider.



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ingot54
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Sunday, February 26, 2006 - 01:10 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I have committed to memory Number 36 of Smallworld's post, Spider, as picked up by Chart Rider:

36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account continues to grow as we increase our contract size.

Ahhh ... yes! I have arrived.

Now to dash off a quick cheque to my mate Spider - his kids are hungry, and he has a wedding to pay for!


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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vermante
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Sunday, February 26, 2006 - 10:52 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Some interesting comments -

In an effort to "split the atom" re -trading and enhance trading skills

entering into the mysterious world of trading psychology appears to be beneficial .


Do Motherhood statements like -:

I will win

never say die

etc etc

count .They appear to be more motivational quotes than trading psychology. It can apply to achievement in any discipline .

Is Trading Psychology a numerous set of rules /steps ?

Imagine reading through 30-40 set of rules before a trade can be confirmed !

The question then to be asked is -


What is Trading Psychology ?

Can it be easily identified and defined within a paragraph

More importantly- What's it influence/impact on the trading plan?

Cheers

Vermante








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david_louisson
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Sunday, February 26, 2006 - 04:00 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



If I may quote Dean (source: https://forum.incrediblecharts.com/messages/35933/725695.html):

"To me there are just 2 things to consider
1. find a system that makes more money than it loses
2. religiously stick to that system"

I'm impressed by the clarity and simplicity of this approach.

If the system consists of a clearly defined set of rules, then (assuming that one is honest with oneself) it should be readily provable whether any shortcoming in one's trading is due to flaws in the system itself (point 1) or one's implementation (point 2). Psychology is related only to the second point. Provided that one follows the rules religiously (however easy or difficult that might be), then psychology is removed from the equation.

Rather than conduct an in-depth study of the human psyche, as many trading books seem to do, I've been trying to focus on developing a system that I have utter confidence in, through thick and thin, across all market conditions. If I truly believe that my system rules will consistently deliver optimum profit or at least, the very best that the markets will REALISTICALLY allow at any point and I'm aware that any deviation from the rules is more likely than not to undermine that outcome, then there is every incentive for me to religiously follow the rules.

My plan is to remove psychology from the trading equation as much as is reasonably possible in other words, so that it doesn't have to be 60% of the total equation. Here are some ideas for doing so:

1. Shaping my expectation (especially toward losses): I need to somehow test (e.g. historically back-test) my rules across a vast and diverse sample of data, to get a feel for what is likely or unlikely to happen. The larger and more representative the sample, the more statistical confidence in the result. Specifically with regard to losses: what is the largest losing streak? How often does it occur? Under what types of trades, or market conditions, is it most probable? Use this testing to gain a feel for the market. When the losses occur, know what is realistically probable, and what is a "freak" outcome. Analyze the losses: what component aspect(s) of my system are no longer responding to the vagaries of the market? If I were to change this aspect (e.g. set a tighter stoploss), then what effect would this have had on all of the thousands of trades that I previously tested? In other words, I must have statistical validity in order to change any of the rules.

2. Understand WHY I developed each trading rule: For example, why must I always set my stop loss at N points below the last swing low? Because that has been shown statistically to be the optimum point. In the past, that has delivered, on average, X% greater profit than at N1 points below, or N+1 points below. So when I open a position, I have statistical confidence in knowing that I'm doing exactly the right thing, regardless of the eventual outcome of the trade. Low (or preferably, no) ambiguity = less reason to deviate. In any given trade, the price movements may defy the precise nature of my calculation, but the point is that whatever the outcome I will continue to adhere to the rules because I AM CONVINCED in my own mind that they will, on average, deliver the best possible result. Beyond this, the markets are in control, but I have given myself the highest possible statistical advantage.

3. Detachment through low position size: Size positions to make losses utterly trivial, especially when one is starting out, then very gradually and gently increase the stake size as one's confidence grows. Put simply, if there is $20 at risk on a trade, I won't lose any sleep. But if there is $2,000 at risk, then I'm likely to panic the instant the position moves against me.

4. (following on from point 3) Diversify, to avoid emotional involvement in any single position. This also mitigates risk: if capital is spread across multiple (preferably uncorrelated) positions, then if one position spikes against me, the others will offer some degree of shelter.

However, let me repeat myself: the greatest incentive for me to religiously follow the rules is to have total belief in my system, and for me the dissipation of doubt and anxiety can only come from the proof of statistical confidence. That is why I will not start trading seriously until I have reached this point.

Am I making any sense?

David


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ingot54
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Sunday, February 26, 2006 - 04:58 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Psychology ... why don't we use a better expression ... "HUMAN NATURE".

Successful traders understand their own nature, and the nature of others. This allows them to "push the buttons" of other participants.

How?

The bigger traders, Institutions (we love to blame 'em) understand human nature. They understand that when they create a trend (yes, I believe they really do work this way), this will start a move resulting in higher volumes, in the direction of their choosing.

Consider this:

We have a tank in the back yard, and it springs a leak. Human nature makes us plug the leak.

In trading terms, we move to plug the leakage of money from our account ... that could be "sell" or simply allowing pre-set stops to be exercised.

But the market is not like a leaky tank, where plugging the leak solves the problem.

In trading, the leak will stop by itself (for this analogy only), and the "water" will begin to flow back the other way. If the "leak" is plugged (position closed) no money will flow back into our account.

Those who know this, succeed. We all have our "Trigger Point" where we decide that the "leak" will not stop, or that the size of the leak exceeds our tolerance, and we will be forced to succumb to our own nature, and move to stop the flow.

Again, the winner in the scenario, is the biggest fish. (Institutions).

Those with the best understanding of human nature and the deepest pockets do well in the markets.

Institutions can buy or sell into a sector over a period of a year, if necessary, in order to accumulate or liquidate a position. Those who recognise the trends, and the shakeouts that occur within trends, will survive.

I believe the analogy holds for all time frames.


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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ingot54
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Sunday, February 26, 2006 - 05:20 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



The above is just my view, Vermante. In every time frame, there are varying degrees of volatility, but a trend always needs to be identified.

Some traders used to love Newscorp, and others loathed it, simply because of their preferred time frame of trading.

Why? The volatility played into the hands of some traders, but devastated others. This demonstrates the range of psychological responses possible.

It's like having a huge herd moving in an identified direction, but looking closer reveals smaller herds moving in the opposite direction, and still smaller herds again milling around, seemingly directionless.

In time, they are all swept along in the direction of the biggest herd.

David - with respect, I suspect what you seek does not exist, or is hiding in the same place the grail is.

I think if you put a toe in the water within the guidelines of your points (3) and (4) above, you will actually find your trading feet much sooner, and with much more success. (I know you already do conduct a few trades, but not at the level you will once you have your strategy established.)

I say this, because to my way of thinking, you already have a far deeper understanding of the technicals, and probably the Fundamentals required, than many traders on this forum who already trade successfully.

They do not need the depth of knowledge you have. They just trade - they have a street-smart understanding of how it works, and just do it.

Now, I believe we are trying to understand exactly what defines "Street-Smart ... Human Nature... Psychology"


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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david_louisson
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Sunday, February 26, 2006 - 09:13 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ingot

I think I understand where you're coming from, which suggests to me that I didn't explain myself very well in my previous post. So I'll try again with another example.

Let's say I'm back-testing a basket of stocks over a 5-year period, and that one of my setup criteria is ADX(14) > 25. This happens to produce 500 trades of which 260 are winners and 240 losers, with a PF (profit factor) of 1.17

Now I re-test using ADX(14) > 30, which will of course reduce the number of candidate trades. Let's suppose that it eliminates more losers than winners, so that the overall result gives a better PF = 1.26

So obviously I will trade with the value that delivers the statistically better result, i.e. ADX(14) > 30.

I realize that when I start real-life trading that the initial results might be frustrating. A number of profitable opportunities might pass by where ADX(14) is between 25 and 30, and the first trade(s) where ADX(14) > 30 might turn out to be losses. But my point is this if the sample data for my back test was large, diverse and representative enough, it will give me the confidence to stick to the rules, i.e. continue to trade only when ADX(14) > 30.

For me the important point is not whether ADX(14) > 30 will deliver a better result than ADX(14) > 25 every time (which I realize is a grail-like impossibility), but the more positive the PF generated during the back-test, the more confidence I'll have in my system, and therefore it's easier to keep to the rules (whatever they might be), and the less stress caused by a losing streak simply because I (rightly or wrongly) believe that I have some kind of statistical backing.

Of course that example is an over-simplification there would likely be many setup, entry and exit criteria operating together. But a statistical test would hopefully show which criteria, when varied, make the biggest difference to profit, and which have less effect. Thus one gains a "feel", as opposed to a take with absolute certainty (also an impossibility), for what is likely to happen.

Even though price movements defy precise statistical analysis, trends and patterns must exist, otherwise it would be impossible to systematically profit. Although the math might be imprecise, greed and fear are two of the most irresistible emotions, allowing TA to make the assumption that past patterns (e.g. trends, support, resistance) are more likely than not to recur in some shape or form, in the future. I agree that back-testing offers no guarantees, but it reassures me that I have given myself the greatest possible opportunity to profit. I can do no more than that.

For better or worse, that's the way my mind works!

David


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ingot54
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Sunday, February 26, 2006 - 09:49 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks David.

The implication here is trust.

In childhood, we have learned to trust the parent-figures who provided our basic needs. Their consistency earns our trust.

But trust is fragile. As a child matures, gets older, more responsibility is placed on him for meeting some of his own needs.

Does that mean the trust is destroyed? No. The parent-figure is still there to back-up if required, and this actually strengthens trust, and builds confidence.

Participation in the market is similar ... and dissimilar at the same time.

You are striving for a method you can trust, by first making sure it can meet your needs, and standards, profit targets perhaps. Then, as you actually put this method to use, you expect to gain confidence in it.

The expectation (trust) is that is will do what it has shown it has done historically.

But while a child has someone to back-up in times of faltering, the market will not do that. It will dash your hopes just as easily as enrich you - it doesn't care about systems, methods, or whether you trust it or not.

Systems change over time - they may become totally ineffective, and require a re-think.

One of the key words a trader needs to understand, is "Random".

Once this is taken on board, the expectation of what will happen, even statistically, will dissolve.

The trader will sit back, hands clasped behind head, and with a cool smile, tell you : "I don't think. I trade what I see."

To me, if there is any psychology required at all, it is this: Do not attempt to pre-empt what will happen in 2 minutes, 2 days or 2 weeks. Just trade from the right-hand edge of the screen.

This might be in a weekly time frame, or from a five-minute chart. I am not discounting setup, or trader's edge, or any other of the essential strategic actions associated with trading.

I think I do understand where you come from with your approach, but the psychology of "What will you do when the tank leaks?" still needs to be addressed, for every trader.

That's where the rubber hits the road.

My point is that the Institutions have the ability to put a very big hole in our tanks, as well as the ability to overflow our tanks.

Hope that is not too abstract.

To me, trend is gold.


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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ingot54
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Sunday, February 26, 2006 - 10:04 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Another reason just occurred to me, David, why the ideal system can never exist:

The sentiment of human beings, and yes, even the Institutions are subject to sentiment, will affect the outcome over a period of time.

At the moment, we are still in a bull market, albeit with some increasing volatility. Parameters need to be adjusted for STRONG bull runs, such as a commodities sector can experience, and STRONG bear runs, such as a Telecommunications, or Information Technology sector may experience.

The effect on the overall market will depend on whether all of these sectors are currently bullish, or varying, or all bearish.

If the general market is ranging, (technically this is a bear market) then system parameters need finer adjustment to capture moves. But in a strong bull market, parameters could be very coarsely set, to capture only the strongest sector moves.

There is no way, other than hindsight, to determine exactly what phase the market will be in tomorrow morning.

The first of March 2006 may commence what will be the greatest bear market the world has ever seen ... or it could be business as usual.

We simply don't know. Sentiment is elusive, and fickle.

Earlier, moves were afoot in the Biotech and medical stocks. Where are they now - the runs seem to have subsided somewhat. Systems which got you into some of these, might now either have you in the doldrums, or out - whip-sawed by nothing other than sentiment.

Again, that's why I hate to second-guess stock moves - trade what I see, and just look for trends. Nothing else needed.

Finis.


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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vermante
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Monday, February 27, 2006 - 07:21 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



David /Ingot

Thank you for your contributions.

David

If I can sum up your approach-

It appears that you are searching for a successful system that is purly T/A based and does not rely on risk assessment strategies .(I am happy to be corrected )

In my opinion -not all trading instruments or equities carry the same risk . The risk of each trade must be assessed on a case by case basis before an investment/trading strategy can be determined. So the trading approach would vary with each trade bringing into play the psychological and money management factors.

Risk assessment would include market risk, sector risk , stock risk

It's this difference in risk assessment that sort the professionals from the amatures

Cheers

Vermante










(Message edited by vermante on February 27, 2006)


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david_louisson
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Monday, February 27, 2006 - 11:30 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ingot54:

Many thanks for the trouble you've gone to, to answer my points much appreciated. I have reached much the same conclusion as you, and am very aware of "randomness" (see the latter posts in the thread https://forum.incrediblecharts.com/messages/12/667393.html), the difficulties in forecasting from the right hand edge of the chart, the futility of attempting to apply subjective judgement, and agree totally that the trend is pure gold. Trading against the trends is like swimming against the current: one is trying to squeeze profits out of the smaller corrections, rather than simply riding the major waves.

The only query I have is why books I've read talk about "low risk setups" and/or "high probability entries" suggests that certain patterns have a qualitative (statistical?) difference that sets them apart, i.e. there is more to timing entries than simply jumping on the trend (although I'm not suggesting that you're saying that timing is irrelevant).

Vermante:

My formula (still under development) is loosely based around Dr Alex Elder's "three Ms":
1. Method a TA-based system of entries and exits that delivers a proven edge.
2. Money risk management through correct, conservative position sizing.
3. Mind disciplined adherence to the proven method.

The point I was trying to make was that the more confidence one has with one's method, the easier it is to trade with discipline.

Re market (and sector) risk, one can either take only CFD positions that are moving with the market trend, or (preferably in a sideways, or weakly trending) market, hedge by taking long positions with the strongest stocks, and short positions with the weakest (i.e. trending downward) ones. My preference is currently for the former method, even though the latter is, I believe, widely practised, as it makes market direction less critical, thereby reducing market risk.

David


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stevo
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Monday, February 27, 2006 - 01:43 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Against the grain of most people's thoughts - I would say that trading psychology looks after itself once David's first point (find a system that works) is determined.

If you know that the system works then it is easy to stick to it. You will do everything possible to follow the system. Breaking the system rules is travelling into a trading black hole. That is why the system needs to be tradable at a practical level - you end up flogging yourself silly because you are trying to stick to rules that can't easily be followed.

stevo


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snorter
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Monday, February 27, 2006 - 02:50 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



David,
just one question for my benefit, to understand where you're coming from -
how many charts will your trading system monitor? For eg. a couple of indices or 500+ stocks.


"Failure is not an option"

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david_louisson
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Monday, February 27, 2006 - 05:55 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Snorter

Perhaps getting away from the original "Psychology" topic here, but to answer your question:

I'm moving from sector indices back into stocks, specifically the UK top 350. I suspect that stocks trend more cleanly, given that indices are being pulled both ways simultaneously by their variously weighted constituents. The main reason for trying sectors was that CMC's UK stock prices were significantly at variance with reliable market sources. It was difficult to perform reliable TA when CMC's EOD prices were showing intraday spike highs and lows (creating buying and selling candle wicks) that the actual market wasn't, and/or vice versa. However, I'm looking at changing from CMC to VIA Broker (Colin hope it's OK to mention them here, as they're not offering rival charting facilities for Aussie stocks), but have had some teething problems, as their on-line trading software is struggling to talk to my ADSL router.

I've collected 7-8 years worth of EOD OHLCV for the UK 350. Now that I have no other work related distractions, I've started writing my own back-testing software. I want to thoroughly test short term patterns (e.g. trade length = 2 to 5 days). I've done a lot of reading lately on short term EOD trading. I also ran a search (using a charting package whose name I won't mention here) across a few randomly selected UK350 stocks, finding all 2-5 day price rises > 4% (or 3% in less volatile stocks), and then studying the OHLCV patterns immediately preceding the rises. Now I want to back-test all of this more comprehensively, to see which (if any) aspects of the patterns occur significantly more often than others. If these do occur, then I will hopefully have the basis of "high probability" setups. However, if the patterns' distinguishing properties are insignificant, then at least I will know that as long as one follows the trend, accurate timing and attention to other detail is essentially unimportant.

I also want to run further tests by varying optimum entry/exit points, correlation with sector/market trends, and a raft of other parameters. Again the aim is to discover whether there are clearly discernable criteria that lead to higher profit, or whether/which such detail is largely unimportant.

It goes without saying that I'm more than happy to report my findings here, for whatever they might be worth.

Being a computer programmer, I have no problem implementing complex daily scans, if necessary, across a large number of stocks. As we all know, today's technology brings tremendous number-crunching power to our fingertips.

If all this fails, I can always revert to a longer term system, which I expect offers lower-hassle trading. (Indeed I believe that many share this view). But having progressed this far, I would like to first satisfy myself that short term EOD trading is unworkable.

David


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captain_chaza
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Monday, February 27, 2006 - 07:15 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Nice Posts!

I am Amazed Bewildered and Astonished that
No one has mentioned one of the most important attitudes of All
That being of "Courage"

I assume you all think it is an all too pedantic argument to get off to a "Good Start" !!???
This is clearly displayed by you not having a pick of the week!

The Captain thinks he knows why you all act in this way?
He could be wrong!
But SELDOM is?
Even when he is wrong he is right in the long term!

Long live all the Academics doing Nothing!!!!

capn


"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.

"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893

"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897





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ingot54
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Monday, February 27, 2006 - 07:35 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hey - g'day Captain - welcome ashore!

Just begging your pardon, but my pick of the week is STX, which did very well today, I believe.

And regarding courage, check the posts in "Trading Systems - CFD's- Long Term Trades"

The TA of ZFX shows just what a beauty she has been, before her flawless chart was shattered by the scoundrels at Macquarie Investment's "Inner Circle" or whoever spruiks for them these days. Really shattered the dream.

Not too many game to attack weekly charts with such abandon!

Well done in the stock picks, by the way.


Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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davkell
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David L: Can I ask a question of you.... are you trading for real? If not, how long have you been testing your ideas?

I'll essentially wait for your answer before I proceed with my line of thought here.

Cheers.

The other David!


"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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snorter
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Thanks David

My thoughts - if you are going to trade a watchlist of 350 stocks you will need some setups to scan for.
Some backtesting and writing scans will be necessary.

You don't need to run scans with a small watchlist, just eyeball the charts.
The results of your research could still be useful for this. If you find highly useful information you should not post here (apologies to Colin), you should supplement your trading successes by writing a book.

My inexperienced thoughts - many patterns and indicators were presented for the purposes of selling books. A look at a simple price chart of your timeframe and one timeframe larger with some very basic TA gives about as high as a success rate as possible. Difficult to sell books about. Difficult to backtest!
This difficulty makes it hard to have complete trust in a system by backtesting which I appreciate you're trying to do.

And this is where we get back to the psychology thread.
You need to be completely honest with yourself when evaluating what you see.
The real test of your understanding of the psychology of trading comes when you look for exits.
"Backtesting" of your past performance, not selection but past performance sticking to your plan is useful.

You said "If all this fails, I can always revert to a longer term system," - what system will you use then?
Complex systems or simple price charts can apply to any timeframe.

I hasten to add that these are just my "yet to be proven" thoughts and trials and are posting them for you or anyone else to pull apart.

snorter


"Failure is not an option"

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david_louisson
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Hi Davkell

In Nov 2000 I was introduced to a chap called Bob, who had apparently been trading the UK market intermittently as a hobby for around 10 years. Although he was using widely sold charting software (won't mention its name here), he couldn't devise the indicators he wanted to further his system, so I agreed to write some software (using a development tool called Clarion).

This proved more complex that we first thought, and I ended up spending more than a year writing software around his evolving ideas. However, as a result I learned a lot about TA: trends, support, resistance, channels, indicators, etc.

With Bob up and running, I began to develop my "casino type" ideas, at which point he and I parted company methodologically, at least somewhat. We both opened CFD trading accounts with deal4free, and traded independently using our own ideas. My first 7 trades were all losers I lost about NZ$450, and a lot of confidence, because I didn't have a clue why. It is only now that I realize that my plan was poorly defined, and that I had absolutely no idea about trade management.

About this time I also got involved in a small partnership, whose business interests (mainly property) became my primary focus. So, although I continued to download and analyze EOD data on a daily basis, my research into the money markets was relegated to a very secondary exercise. I made some more trades, again lost more than I won, and then gave up when deal4free started charging commissions on stock CFD transactions.

During 2002-3 I made what I (naively) thought was a holy grail type discovery, which I spent months developing further into what I call the "smart channel". Enthused, I wanted to run some back-tests, but got dissuaded by material that I had read. For various reasons I became increasingly confused, frustrated, and came to the realization that price movements were random, and that it was therefore impossible to make money from the markets.

However, I continued to read about others' success stories, and tried to make a comeback in late 2004. I had a chap called Andrew work with me for a while, but he had other business interests, and ended up moving to Europe. During 2004 there were a lot of distractions largely personal stuff, won't go into detail here.

Since October 2005, another friend (Christine) has been working with me, and we have been paper trading CFD sector indices, as realistically as we know how. We got off to a flyer (12% up in 3 weeks), then fell back badly as we experimented with some new ideas (to around 5% down), and have just made it back to parity.

I'm now returning to back-testing stocks, as described in my earlier post.

Without boring you with too much detail, that's pretty much my total experience.

David


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david_louisson
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Hi Snorter

It wouldn't surprise me to find that indicators have been used to sell books. Opinion seems to be fairly divided as to exactly what value indicators add over and above the raw OHLCV data there have been some interesting discussions on this forum.

I'm definitely aware of the need for complete self-honesty. It stands to reason that deceiving oneself can lead only to a downward spiral.

What longer term system would I use? Just for starters, there is plenty of available material on this forum: Weinstein, Snifter, Blind Freddy, etc. Beyond these and other ideas, a simple trend-following system that picks the top performing stocks from sectors that are leading the market. It appears that the longer the time-frame, the less critical accurate timing of entries and exits becomes provided that one is consistent.

Thanks for your insight.

David


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davkell
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Thanks for that David. I was only curious, because your posts within this forum more often than not, are very indepth and appear very logical, well researched and show you to have a high knowledge of all that is TA and then some. I know that you have mentioned previously that you have/are paper trading, and this was my reason for the question. I've had mixed results into my LIVE trading, and I would equate my TA knowledge far below what you appear to understand, and as such could not believe that you may have not bitten the bullet and traded LIVE. But your answer shows you have been there, and are paper trading to some success. Are you considering switching to real trading in the near future? It justs reminds me of a story in the preface of Active Investing by Alan Hull (which I'm half way through) about a member of Alan's trading group by the name of Douglas. I don't know if you've read it or not. But sometimes people can have all the information they need and then some, know everything there is about TA, money management and psychology etc, but still sit frozen in the path of an oncoming Mack truck, unable to make a decision.

I'm not saying this analogy relates directly to you, but more so to all of us at some stage, or many stages. Sometimes you've just got to bite the bullet and make a move, in one direction or another!!!!

Cheers.


"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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histrionix
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Thursday, March 09, 2006 - 07:39 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Reading this thread really floored me!

Every once in a while, someone hears that I have an interest in trading and they are eager to discuss the subject - how to get started, what they need to know, are there any courses? - that sot of thing. My response is always to point them to this forum. I tell them to follow as many links as they care to, down the left hand side, and to explore the forum threads. I point out to them that a considerable amount of what you need to learn is to be found right here on this site.

Naturally I caution them to be aware that not everyone posting here is a guru (beware particularly, I warn, of one who posts under the avatar of Histrionix!)however there are many - and I tend to name a half a dozen or so people whom I believe write sound, rational, well considered advice. These are the people I take particular notice of. I shan't, of course, list the names - except for one: David Louisson. David is always on my list and I have always assumed, David, that you are a very experienced active trader. The fact that you are not does not, in any way, detract from the quality of the information you have posted, it just staggers me that you are sitting on the sidelines.

I think I agree with Davkell. You don't need any more knowledge. I recall posting you a question some while back because I figured you were the guy who could best answer it - and you did, as I had expected.

I have now been actively trading since 21 November and I have increased my stake by a little over 40%. (It was over 50% before this week's silliness!)

This is not a boast. I don't expect to hang on to that sort of RoR over the longer term, but it is an encouraging start. My only purpose in mentioning it is to say "hey look, David, if a bunny like me can do it . . .!"

I don't know, maybe this is not an appropriate post to make - like the Buddhists say - don't try to influence others, let them work out their own karma.

All the best.

H


There is a tide in the affairs of men which, taken at the flood, leads on to fortune.

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tony_m
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Wednesday, March 29, 2006 - 11:46 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I have this simplistic view of trader psychology which essentially breaks down into two components or two basic types, those who are there for the hunt i.e. to find the holy grail of trading and not so much about making money, and those who are there for the kill, i.e. to make money in the stock market and not important how you do it as long as it works and it is practical, legal and ethical.

For those who are there for the kill, there are ample demonstrable ways to make money in the stock market which are already common knowledge, are pretty simple, undeniably do work and can be harnessed almost overnight. As an example, you might have heard of the story of the young struggling trader asking the wily old trader, 'how come you do so well year after year'?. The answer was, 'simple son I just buy dips in uptrends'! Overly simple explanation but with a few rules wrapped around it as a methodology, it works.

I have 3 friends, all former novices who with just a couple of hours of basics have made seriously real money consistently for the last couple of years, no paper trading, no fuss, no research, they just got into it and setup a portfolio by buying dips in uptrends. They follow a set of pretty simple rules and have got better as they learnt on the job.

The alternative, for the hunter trader, is to endlessly search for the holy grail, or some new way to cut and dice the 5 bits of historical data, OHLCV, which is all we have to work with to find a way of predicting the outcome of something that hasn't happened yet. Meanwhile one of the great bull markets of all time has been playing out.

If the reason is that making money is irrelevant, or it is a hobby really, or it is really about advancing the individual or general store of knowledge by treating TA as a research project then I can understand the rationale and I dont have a problem with that.

Meanwhile I continue read about trading as if it is steeped in mystique and deep meaningful stuff but honestly it is really simple and I think the deep meaningful stuff is more about selling books and courses than making people better traders.

I think the difficulty comes with not having a practical working methodology to start with and I am sure that consistently losing money would soon turn anyone into a psychological wreck, me included, and so the next logical step would be the bookstall or a bunch of courses.

It is amazing how well adjusted one feels when making money in the market and that is the real answer to me.

I recall a story about a successful golf pro who as an up and coming golfer went with a teaching pro to a pro tournament and asked the teaching pro to point out who has the best golf swing. When the pro pointed to someone the novice said ok I want you to sell me a swing just like his.

I feel the same way about trading, find something that demonstrably works or someone who is successful and copy it or them if you can and forget about developing your own system until you get established in the market and evolve your own methodology over time from a winning or at least not a losing position. Nothing wrong with training wheels as long as it stops you falling off the bike until you get to figure out how to ride it without help.

Tony_M


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peterloh
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Thursday, March 30, 2006 - 12:52 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Tony, you have my vote.I am not good on the computer and I do not have any complicated charting systems or programme.I only used incredible charts which is all I need.I mainly used support and resistance line. When I read Weinstein's book I like his prices going over the 30weeks MA as a confirmation to buy.

Too much time is spend on research to try to perfect one's system.Nowadays I rather buy and hold with regular add on on dip. If I have my way, I would rather buy everything in one go, but then I try to catch them earlier than usual and is likely to get in too early and it did not work out as expected.But glad to say 80% do work out and because of my earlier than usual entry, it more than compensate for the other less than 20% failure.Anyway, you won't fail if you let your winners run and cut your failures early.Weinstein talks about a lesser success rate and a later entry and you can made it, just letting your winners run and cut your losses early.

A bit of reading about what you wish to invest in or trade, won't hurt. You can have position sizing and mechanical buy or sell. I do not subscribe to it fully for the fact that the capitalisation of the company are too small and easily affected by a fund manager buying or selling or just rebalancing a portfolio.Also, I won't let a general market retracement influence me to sell otherwise, I won't have any shares in my portfolio especially after April or October.As I use leverage and like to use portfolio management/ diversification to reduce risk, it helps when the the current situation of the company and its future prospects confirm with the direction and trend of the share you are trading.I also believe you don't pay the same attention to just buying some peanuts to spending your money on a home.You tend to pay more attention when you are using a bigger capital to trade.

Best Wishes


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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dovetree
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Thursday, March 30, 2006 - 10:47 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I'm Sorry But I have to disagree. Buy Hold strategies or Buying the dips, using 30wk moving averages etc is not trading. This is investing. ANd as you say a bull market has been playing out for some time all long term trend followers will be up (a rising tide floats all ships).

The Mental set of buy and hold or buying 30wk moving average break outs versus trading( day in day out going long or short) is totally different.

If you don't believe it is different then try trading say the futures or bonds on a day to day basis.

Cheers


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spider
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Thursday, March 30, 2006 - 11:02 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi dovetree,
I was with you there for a little while, and I agree that a lot of what gets said here is more about 'investing' than trading, but you lost me when you dis'ed the "break out trades'.

I admit that this trading strategy is boring and looks a lot like 'investing', but it aint!

Where is the difference, I hear you ask?

It's in the exit strategy.

Most investors never consider an exit, traders know exactly what their exit will look like, even before they open the trade.

Trading the long moves is not the only strategy that I employ, but it is far and away the most lucrative.

As you said , it is all in the 'mental set'.

spider.



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smallworld
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Thursday, March 30, 2006 - 11:11 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Trading can be really simple, but is never easy. If you think its easy cuz you have made easy money in the past, then the market will offer a good lesson at some stage.


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dovetree
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Hi Spider.
It all depends on your definition of trading. Most professional or full time traders would consider buying 30wk MA's and or exiting at that or other levels medium to long term investing.

The mental set required is not that of a trader.


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peterloh
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Thursday, March 30, 2006 - 02:38 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



The end of all trading is the bottom line after tax. It is not just growth but growth plus income after taxation. I maximise my position by reducing my tax payable by 50% which means a maximum tax payable of 25% even if I have to stay in a trade a bit longer.We are not talking about trading futures or currencies here but equities which time frame is more flexible depending on our individual position.It doesn't matter what you call it,how you do it, the end result is how you maximise your bottom line.If what you say is correct dovetree, everyone makes money in a bull market ,they wouldn't be any unsuccessful traders around.They wouldn't be any bears in a bull market.There is no requirement or needs to review your stock in trade regularly.There wouldn't be any wrong stock purchased.The difference between an investor and a trader is a trader needs to have a stock in trade and makes money not only from dividends and distribution but having to cash out to realise the profit with regularity from the stock in trade.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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peterloh
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If you are a real estate owner, your turnover takes considerably longer than that of a green grocer who needs to have a daily turnover.The real estate owner is not a trader! Do we all have to be a green grocer to be a trader, dovetree?


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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dovetree
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Thursday, March 30, 2006 - 02:56 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Peter

I broke my unwritten rule, and got involved in a pointless debate.
You have your view, I have mine.

Perhaps a better thread would be the psychology of bulletin boards, and how they affect trading.


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hilarius
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Good Afternoon

I've noticed a couple of personality types at Bulletin Boards

(1) Open, caring and generous personalities, of which Peterloh, Stickman and Tony M are outstanding examples, along with many many others who contribute in like manner and who contribute generously and/or who observe attentively and appreciatively

(2) Unable to discuss this group within forum rules

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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spider
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Thursday, March 30, 2006 - 06:01 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Unfortunately dovetree does not want to play anymore, but personally I would like to hear some definitions from others to go with peterloh's excellent contributions.

This is an interesting topic as there have often been differences of opinion on this forum simply because people do not understand the differences between traders and active investors and investors.

What do you consider yourself to be, and why?

spider.



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chart_rider
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Thursday, March 30, 2006 - 07:15 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Some definitions:

Invest:

To commit (money or capital) in order to gain a financial return - to put one's money into a business or project to make more money.
www.mcwdn.org/ECONOMICS/EcoGlossary.html

To put money into trading ventures, existing contracts or organisations (eg shares or building societies) with a view to producing income and/or increases in capital value.
www.businesszone.co.uk/resources/pdp/append/glossary/i.htm
To put money at risk for the purpose of making a profit.
www.stanlake.co.uk/recruitment-candidates/recruitment-glossary.php

Trade:

buying or selling securities or commodities
wordnet.princeton.edu/perl/webwn

Trade is voluntary exchange of goods and/or services. Exchanges may take place between two parties (bilateral trade) or amongst more than two parties (multilateral trade). In its original form trade necessarily used barter and the exchange of goods and services and recognized equal value desirable to both parties. Modern traders generally negotiate through the use of a medium of exchange, i.e. money, and rarely through barter: as a result one can separate buying and earning from selling. ...
en.wikipedia.org/wiki/Trading

Opening a position in the market, either long or short, with the expatiation of either closing it out at a substantial profit or cutting losses short if the trade does not work out.
www.nirv.com/nirvana/Education/Glossary.htm

The process of buying and selling securities; can be conducted for a firm's account or for its customers; either conducted on an exchange or over the counter.
www.efgi.com/glossary/t.html

Thus:

Investing appertains to the commitment of money to a venture with the intent of profit, with no alliance to time frame. Hence, a day trader may place an investment for a few minutes, while a longer term trader may place an investment for many days / weeks / months / years.

The act of opening or closing the investment position is placing a trade / conducting a trade.

As such, to debate the status of trader or investor appears to be a futile exercise.
The question is, is psychology important, and the only possible answer is, how can it not be. If psychology was not important, then any idiot could place a trade at any time, in any investment, and make money.

Psychology:

The science of human behaviour, derived from the Greek word 'psyche' meaning breath, spirit, or soul.
www.inneraccess101.com/glossary.htm

Knowledge of human behavior (sic) and performance; individual differences in ability, personality, and interests; learning and motivation; psychological research methods; and the assessment and treatment of behavioral and affective disorders.
www.careers.org/topic/06_cref_62.html

Thus, individual though processes involved in determining suitable investment strategies, and the corresponding trade criteria are based upon ones individual psychology.

The ability of an investor to limit trades to predetermined strategies and to follow such a strategy throughout an investment, be it 5 minutes or 5 years, is based upon psychology.

Each investor / trader has unique psychology and therefore will apply a unique action to each market event, thus the market moves are infinite in outcome and so unpredictable in nature. Reactions to the unpredictable events are based upon individual psychology, leading to investment results that are affected by individual psychology.

CR


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smallworld
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Tony,
I think there are at least 3 types of psyches in traders.
in your words, type 1, like you said is forever searching for the holy grail but is not in the market. They are academic to me, I never see their money.
type 2, like you say are there for the kill. they are my most formidable opponent and I watch out for them all the time.
I think there is a also type 3. they think they are type 2, but they are not ready, and dont have the will to prepare to be ready. I love them, they pay my bills.

Like Bobby Knight says
" Most people have the will to win, few have the will to prepare to win".

Long term, short term or even intraday is no matter. Both marathon runners and 100 m sprinters are athletes. A win is a win, gold medals are gold medals. But they all train damn hard and have the will to do what it takes to win.


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tony_m
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Trading, 'a commercial act carried on as a means of livelyhood or profit', that is one of the definitions shown in the dictionary.

Observation suggests there is some common use interpretation that traders are oriented toward short term activity and medium/long traders are often called active investors, a term coined I think by Alan Hull in his writings and investors are the long haul buy and hold variety.

I saw in a preceding post a comment about professionals not trading with 30 week MA's. I assume that 'professionals' in that context is meant to denote hard core traders but to suggest that they only trade short term would be drawing a long bow.

I position trade (or active invest if you like) for a living, it is my only source of income, I use weekly charts and 30 weeks is about the right arena, it is my profession now, ergo I must be a professional but I dont trade short term, unless I get catapulted out of a position early in the piece.

Really I think I am a 'position' trader. The main differences between me and a short term trader is that I have a higher tolerance to price movements and will stay in the trade longer in most cases and I dont normally get involved in early breakout activity, a major and riskier hunting ground for the short term traders.

I trade the same stocks, often buy at the same time but dont dont bail out on minor retracements otherwise we both do the same thing most of the time. If a stock keeps on going up without breaching the stoploss in most cases we would be riding the same wave.

Tony_M

(Message edited by tony_M on March 30, 2006)


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snorter
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I think the point that dovetree was making was that to say trading is simple based on novices making good money trading long term over the last couple of years is misleading.
Just buying and holding the index would have made good money and psychology need not have played a big part.
Making money in a sideways market would be a bit more challenging.
My belief is the shorter the time frame, the bigger part psychology plays.


"Failure is not an option"

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dovetree
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You are correct snorter that was my point.

As for definitions. Just as i'm sure peter loh's definition of a trader as trading in real estate or groceries is correct. I'm also sure that that sort of definition is pointless on a BB which essentially is designed to discuss trading on the stock,futures and commodities markets.

Hence my early exit form this debate spider. And you are correct I don't to play pointless games on BB's.


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hilarius
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Good Afternoon

What one person considers pointless another may consider interesting

Effort spent judging others as "pointless" could stifle useful discussion

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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dug
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smallworld,
your 3 categories[Academics,Formidable,Think they're formidable but not]doesn't classify or clarify where You slot in.
I wonder how many of you have bought and sold anything else other than shares or derivatives.This 'conflict' between Traders and Investors reminds me of similar debates in the Antique Trade between Dealers and Collectors.

I've noticed a rise in macho aggressiveness re Trading.One BB sent me some ad about being a Predator and what a boon it would be to consider myself as such [PREDATOR,ooooh ahhh]
I've seen twaddle written on this Forum about being a Lion going on the Hunt,to take down 'something' so you and yours can FEED.
I think feelings and the development of emotions of Superiority over others are the greatest detriment to the Psyche of a trader or anyone else.It isolates.
Happy Trading.


Avatar- PHACOPS{speculator}from the Devonian Period.

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spider
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Welcome back dovetree,
I thought we had lost you from this thread.
And, congratulations to snorter for the excellent translation, I must admit that I missed it the first time through, you are obviously better at reading between the lines, and I thank you again.

In my last post I asked people to post a few definitions to help us understand where people's heads are at on this issue.
Obviously you believe that this is a "pointless" discussion, so I wont expect you to contribute further.

I was a little surprised that you thought that this was a "BB". We are in a forum, which is a little different, and serves a different purpose.

"#

1. The public square or marketplace of an ancient Roman city that was the assembly place for judicial activity and public business.
2. A public meeting place for open discussion.
3. A medium of open discussion or voicing of ideas, such as a newspaper or a radio or television program.

# A public meeting or presentation involving a discussion usually among experts and often including audience participation."


Now, that sounds like us. doesn't it?

I see that you are a futures trader, and I know that can be a brutal place to be.
Being a successful futures trader, which I'm sure you are, is a special thing. The futures market tends to chew people up and spit them out on a regular basis, and only the best survive. So, being successfully involved at this level would give you the right to consider yourself a trader.

You haven't supplied us with a definition, but if I try and read between the lines, like snorter did, I would say that you consider short term trading to be the only 'legitimate' form of the art, did I get that right?

The written word can be so clumsy at times, and it can often convey the wrong message, but, and please feel free to correct me if I am wrong, you seem to be annoyed by the idea that a buy and hold strategy could be considered trading. Why would that cheese you off?



snorter,

you're points are well taken, particularly the one about sideways markets, and all ships floating in a rising tide.

While we are on the subject snorter, where do you stand on this long term/ short term/ trader/ non trader debate?

Thank you to both of you for taking the time to post.

spider.



Sometimes I have to look very hard to see the message, but snorter saved me this time.



spider.



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spider
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dug,
your post came through while I was typing.

Your points are very well taken, and I know that you didn't need me to say so, but , as we are often on opposite sides of a debate, I thought I would ruin your day by saying that I agree with you!

chart_rider.............. wow.

tony_m ............ could not agree more.

smallworld .......................love the Bobby Knight quote.



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lafee
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Hello All,

I don't think success in trading is that much different to having success in any field. It all comes down to taking the responsibility of learning upon yourself. The difference in trading is that only the best prosper whereas in other fields of work you can be quite pathetic and still earn a living. The analogy of a great trader and a professional athlete is therefore a good one.

I personally believe that there are more people making money off traders than there are individual traders making money. Perhaps the following quote might bring some insight:

"You see, Dr. Stadler, people don't want to think. And the deeper they get into trouble, the less they want to think. But by some sort of instinct, they feel that they ought to and it makes them feel guilty. So they'll bless and follow anyone who gives them justification for not thinking."

Ayn Rand (from 'Atlas Shrugged')

There is an paper called 'Trading the Ranger Way: Training the Elite Trader' that reader might find interesting:

www.greatspeculations.com/brett/ranger.htm

In the spirit of the above paper, I think Ablert Einstien was quoted saying something like: I'm not smarter than anyone - I'm just passionately curious.


Cheers

Laffee
Ps. It doesn't matter what tools you use or what timeframe you trade. All that matters is if you can make money with them.

(Message edited by lafee on March 31, 2006)

(Message edited by lafee on March 31, 2006)


If nobody can be certain of anything, how can I be certain of that?

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snorter
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spider

An investor is someone who buys and holds until some event unrelated to the market prompts them to sell.
Or if you play no part in selecting trades (by leaving all decisions to a full service broker), then you are an investor in the stock market.

If you make the decisions based on market related information, then you qualify at least as an apprentice trader. The time frame is irrelevant.

To be able to say you are a trader, you must consistently make money doing the above.

I am an apprentice trader.

Back to - How important is psychology? You probably can answer that fully if you are still a "trader" after experiencing all stages of the market.


"Failure is not an option"

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suemac
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Perhaps the definition of investor/trader as defined by the Commissioner of Taxation would be relevant here. I cannot find it myself unfortunately, but recently a friend was able to reclaim a pension once a decision he was one or t'other was reversed, so there's obviously a significant difference, taxwise.

Spider, "A public meeting or presentation involving a discussion usually among experts..." has a lovely ring to it!


Behold the turtle; he makes no progress unless he sticks his neck out!

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dug
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SueMac-it may be the SS definition of capital gain=income that your poor pensioner friend came up agin?
[SS=social sic Sec]Tell'em ya just nervous that's why ya did so many transactions

I'd ask suemac how d'Tax Course is going but that's banter and VERBOTEN.

Lafee-"you can be quite pathetic and still earn a living"FULLSTOP


Avatar- PHACOPS{speculator}from the Devonian Period.

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lafee
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Hi Dug

How can a pathetic trader earn a living?

Cheers

Lafee


If nobody can be certain of anything, how can I be certain of that?

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dug
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Well lafee how do the 'pathetic' earn a living doing anything?
By staying in their comfort zone.Be a society doctor not a brain surgeon,for example.
or don't go into options and derros but stay with slow shares
I know down the Bar drinking absinthe and explaining wormwood thru sugar cubes is exotic and requires share trading to be exclusive and elitist and 'not for everyone'[but suits me]babble/waffle
but in reality IMHO analogies comparing Traders to professional athletes let alone SAS/Rangers...................
cheers,
jr

(Message edited by colin_twiggs on April 03, 2006)


Avatar- PHACOPS{speculator}from the Devonian Period.

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lafee
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Dug,

Maybe you should analise why you feel the need to distract facts through categorizing me as something you feel others may dislike.

I take responsibility for my comments on this forum as I take responsibility for my own progress as a trader.

Find out what your scared of and deal with it.

Laffee


If nobody can be certain of anything, how can I be certain of that?

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dug
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the need to distract facts
[detract from facts??is that what you mean,lafee]
Listen lafee,getting "categorised as something you[meaning I ]feel others may dislike" is waffle as far as i can read it and rather than finding what I'm scared of and dealing with it?I'd rather get some iota of inkling of what on this earth you reckon you're making a point about.

I don't reckon being a common garden variety Buyer and Seller of Stuff,any stuff but particularly shares,is any where near on a par with being a Professional Athlete[IMO a narcisistic endeavour that ends in tears]or being some Forsaken Warrior in some Army [with an overactive Killer Instinct]
Furthermore I reckon anyone who thinks different?Well,should get around a bit more while they're still young instead of shoving their...[well i won't go on]

I enjoy your posts lafee.They're new and somewhat different.I don't agree with all their points but then I shouldn't,right?? but,well,just don't read my posts as being snide,or slimy or as you read the one above,ok?
Learn to laugh at yourself.
LOL.
jr


Avatar- PHACOPS{speculator}from the Devonian Period.

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lafee
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Dug,

Professional athletes live by there performance and nothing else - so do traders. A soldier can be killed buy a single event so can a trader. It's really not that difficult to understand.

Do you know who the authors of the article I posted are? I dare say they know a lot more about trading than you do.

Why do you not consider trading a real job?
If you think trading is inherently bad why the hell are you involved with this forum?

I understand you better than you think (even though I am half your age)Perhaps that is your problem. It is people like you that stifle the creativity in the world. Why shouldn't a trader act in his own self interest. Is that somehow bad or do you think the creative should give there money, there skills, there knowledge to the lazy, the ignorant and stupid. Who do you think makes the world go round?

I say distract because behind your huff and puff I don't think you have much to say.

The traders who become successful are the ones that will evaluate the market through there own ideas. They are the lest likely to ask others for advise because like any entrepreneur there edge is there unique perspective.

I will not say any more on this matter, you are not worth my time.

Laffee


If nobody can be certain of anything, how can I be certain of that?

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dovetree
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Hi Spider, No need to read between the lines just read my posts again. Whilst not taking anything from snorters contribution I think you'll find that the "rising tide floats all ships " comment was in my earlier post.

I don't really want to get into a semantic debate about forums versus BB, so I won't answer that statement.

I will answer your ?
I am not annoyed or otherwise that some people consider buy/hold etc trading. In fact I have no feelings on the matter. If people want to consider that trading I don't really mind or care.
My statement was simply that most professional traders would not consider this trading and would consider the mind set required is totally different.
If you have been a long term/investor/trader and trader in bonds or futures on a day to day basis and don't believe it requires a different mind set that would be interesting.
And whilst I don't consider trading(or investing) a form of"art", I do consider trading (more short term) a profession.

So as for definitions I'll leave that to you, since by the number of posts you have entered, you are better qualified than I am to give definitions of forums, BB's and such.

cheers


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hilarius
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Good Morning

Short term scalping is somewhat akin to scouring garbage tips for bits of gold among the rubbish

Long term trading takes real skill, because it involves disciplined study of the characteristics of a company

Both short term scalping and long term position taking are trading, but one is closer to gambling and the other requires skilled research and true professionalism

An exception to these comments is the kind of shorter term charting done by Colin Twiggs on a consistent professional basis

Scalpers just fritter their life away with no real insight into anything except their betting activities

I am happy to hear of any short term traders who have other life skills ... most don't

With Best Wishes

Hilarius (acting as Devil's Advocate)


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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dovetree
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Ah yes the Orwellians are out in force on this discussion.


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histrionix
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A cautionary note, Brother Hilarius, when on yard duty with broom in hand, one must take care not to be engaged in sweeping genaralisations. For in doing so, the seeds of truth can be lost in the leaf litter.



H


There is a tide in the affairs of men which, taken at the flood, leads on to fortune.

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greatdane
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......and the FATA dialog continues long after the tiny bit of beer left at the bottom of the pint glass went flat -


Regards, GreatDane

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nutmeg
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Good wishes to you all.

If I may be permitted to share my personal view and experience. Pl guide me to the proper IC forum if not appropriate in here. Thanks.

I've been in the market for 10 years. I've been an investor and a trader as defined in many IC forums, and a day trader.

Personally, I consider myself to be an INVESTOR if I bought and held stocks selected, strictly on fundamentals (with no regard to TA) for long term holdings from a year to ten.

I was being a DAY TRADER buying/selling within the day or few, strictly based on TA, throw in bit of news, announcements, and murmurs for valid reasons.

I believe myself to be TRADER when not investing or day trading.

I've analyzed my stock picks from 10 yrs back, and reached the conclusion. Even after taking in to consideration few penny stocks having gone up hundreds %, I was better off holding on to my FA selected stocks. I would have done MUCH BETTER if I had timed my buys/sells using TA.

Most serious money, I've lost has been day trading with pennies and cents. I accept blame for I was new to day trading, put too much faith in the chat sites. I had none, till today don't possess the intuition and expertise required to be a successful day trader.

With all due respects.


.
Learn your lessons quickly, and move on.
.

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hilarius
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Your Royal Highness Histrionicus !

A careful re-reading will show that my advocacy on behalf of the King of Darkness was littered with escape clauses

Thankfully I just managed to escape in time as you drove your royal garbage truck straight through the largest of the many holes in my otherwise skilful argument

One must always be careful not to generalise!

(I'm trying not to generalise of course)

:-)

Hilarius

(Message edited by Hilarius on April 02, 2006)


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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peterloh
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dovetree,

I am surprised that my old discarded style of short term trading is deemed professional in your interpretation.I find it hard to believe because I find it more stressful, less predictable results,less research required being more mechanical, smaller capital trade and often over trade, more brokerage and my broker loves it and not that profitable overall.I was using this method for 20 years till I changed.

Today, I tend to hold my trade longer because I don't believe in selling when my stock keep on rising. I do not think I should sell for the sake of short term profit when I can get a better price by holding out.You see I do use all the tools available in my trade, in this case TA to assist me in my entry and exit,FA to analyse the quality of my stock.Today my results are more predictable, my trade better managed as it is not a toss of the coin(probability/percentage wise) any more, as the trend is on my side.Would you sell your stock in trade today, when you know that you can get a better price tomorrow?.My trade is also more profitable. I can call myself a truly professional now because it not only can give me a living if I require it to but most important it can sustain a life style. Today I trade with several portfolios and they all provide consistent results.I trade smarter today than I have ever done in the past.It is not a matter of making a living for me anymore that I trade but it is a business, isn't that more professional?

As for your quote " a rising tide float all ships", I
disagree because you will find that telcos are not risings, are they? Besides you will find a few sunk in a rising tide like SGW,HWE,ION etc, I can go on.Please note even in a rising tide, some ships travel faster than others.

I find you provide a pretty narrow interpretation of trading.If I am just investing and not trading which is not keeping on a close watch on the stock in trade, I would have ended up with one of those unwanted stocks.Also I need not discard certain stock which was not making money and made room for others which give me a better return.To trade long term, we require a different set of skills, it is an art by itself.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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dovetree
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Username: dovetree

Post Number: 53
Registered: 11-2004

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Hi Peter,

In reading your first paragraph I'm surprised you stuck with short term stock trading for 20 years, by the sound of it you shouldn't have.

As for the quote about the rising tide and telcos not obliging, I'm sure any one can find an exception to all things reasonable in the markets, thus your statement about telco's doesn't invalidate the general rise of most stocks in a bull market.

Finally , I have not provide a definition, narrow or otherwise, of anything. All I originally said was that short term trading in bonds, futures, commodities etc requires a different mid set than longer term investing. And form your first paragraph it seems to be true.

cheers


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hilarius
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Username: hilarius

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Good Morning

What is the difference in mind set required?

Hilarius


I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

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colin_twiggs
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Username: colin_twiggs

Post Number: 2517
Registered: 09-2002

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Dug,

"well seems to me you're trying to justify not having a REAL JOB!!"
is a breach of forum rule #1: Treat other members, communities and the forum with respect at all times.

Regards,
Colin Twiggs


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peterloh
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dovetree,

It was the short term trading that help to build up the initial capital base.

I am surprise you constantly pass judgement on things that you have no idea of.On what basis that you consider that I shouldn't have stuck to the short term trading? How do you know when it was the right time to change?Are there any other factors which necessitate the change, such as capital base, capital management etc besides skill alone?

How long have you been trading on your own as a living besides being employed as a futures or commodity trader?


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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colin_twiggs
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Peter,
I think that dovetree was merely commenting on what you had told him in the earlier post. A fair observation -- if something was not working, why stick at it for 20 years? The answer, if I may, is also obvious from your post: longer term trading is less stressful and more profitable.

Regards, Colin


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dovetree
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Hi Peter, I was not passing judgement only reacting to your seemingly disgruntled view of how your short term trading went. You said you were giving brokers more in commission etc , stress etc , etc. And if you were then maybe you would have had more success doing something else.

I have been trading for a living for more than 15 years on the CBOT, SPI and Bonds, prior to which i worked in US.


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peterloh
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Colin/dovetree

It was working except that we have build up our capital base to such an extend that we have to use a different system to improve our returns and manage our overall risks. It is not because that short term trading is not profitable.Other aspects that we have to consider is the scale of one's trading,taxation advantage,individual situation like use of margin lending, self manage superannuation fund, family trusts etc.Also other sources of research and information, computers,technology which were not available at the time which we can avail ourselves nowadays.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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lafee
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Username: lafee

Post Number: 215
Registered: 04-2003

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Guys,

I cannot accept a statement such as long term trading is more profitable than short term trading. To whom is it more profitable? Your own effectiveness is the real question. How well suited are you to one or the other. If your smart you will choice a style that is supported by your individual circumstances. That is the key.

Successful people ask themselves where there edge is, then act on it. They find there edge by facing the reality of there own circumstances. That includes, how quick they can work, how patient they are, how much money they have, if they have a job, if they have kids, etc etc.

Why a government can discriminate against the short term trader is a whole other issue. But the fact the it does, is not!

Cheers

Laffee
(Maybe I should move to Monte Carlo)


If nobody can be certain of anything, how can I be certain of that?

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stevo
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Username: stevo

Post Number: 344
Registered: 01-2003

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Monday, April 03, 2006 - 07:03 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



This is an interesting debate as to what really constitutes a trader versus an investor. There is a perception that the psychological issues are different depending on the length of the trade.

If one has a clearly defined strategy with exit, entry and position sizing criteria I would consider that the individual is a trader. Time is a bit like a fractal. Very similar strategies can be used for trades lasting 5 minutes to 5 years. So, to some extend, time is irrelevant when determining if one is a trader or an investor. Then we have the tax office.....

I am sure that the psychological pressures are different for a trader that typically holds a trade for 5 minutes as compared to 5 months, and there is a smattering of instant gratification and reward/punishment in the former, whilst the latter would probably be a little less on the edge of the seat. However there would be some similarities in terms of mindset.

stevo


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ingot54
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Username: ingot54

Post Number: 1277
Registered: 05-2004

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Monday, April 03, 2006 - 08:43 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I think we might be trying to read too much into the psychology thingo sometimes.

I just call them by their names, not the box they come in!

GREED AND FEAR

Fear of missing the bottom, of missing the move, of selling too soon, getting in too late, getting in too early, missing the optimum exit, and so on.

Greed - associated with wanting to trade one more day, or one more tick, to take the most off the table, trying to pick the top, entering position sizes way over safety limits, or use of excessive leverage; entering stocks on hunches, tips, or with unsound expectation of risk : reward because the move "is going to be a beauty" and so on.

I feel these two emotions are the essence of trading psychology, or at least the greatest part of it, and if they are not acknowledged or dealt with properly, the trader will be hounded by "bad luck" right through his trading life.







Keep Smiling

Trading style :CFD's predominantly. Looking for ways to enter CFD trading over long term.

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peterloh
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Username: peterloh

Post Number: 1662
Registered: 03-2003

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Tuesday, April 04, 2006 - 01:14 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ivan,

Let me add to your observation on the poison pills of trading. You have explain the poison pill "greed and fear". The other two are, ignorance and aversion.Besides greed and fear, ignorance is the main obstacle of trading .An aversion to risk will not assist.When thinking of returns let us not forget its relationship to risk.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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