The Foundations Of Trading Success

thread: The Foundations Of Trading Success

  1. #1

    The Foundations Of Trading Success

    Most aspiring traders spend an inordinate amount of time studying technical indiors and egies in search of trading success, while many of these fundamental questions about the markets and trading stay largely ignored.

    Contrary to popular belief, the foundations of gambling success are philosophical and plogical in nature rather than technical. With the proper philosophical underpinnings that the choice/development of a trading egy becomes a relatively easy task, however without proper plogical prep the trading of that egy is fraught with danger.

    My intention with this thread is to share a few thoughts about these matters in the hope that the growing trader might find something which helps him/her along the way. And I believe this could fill a gap. As trading plogist Brett Steenbarger says:

    That is the fantastic weakness of the majority of efforts at'trader eduion'. Such eduion is made up of seminar presentations, magazine articles, and isolated Website posts. Even novels in the field don't build a conceptual foundation for traders to help them know what to trade and the reason why. And, of course, few eduional efforts help traders edue their'eye' to observe the patterns from their conceptual integrations. That, in gambling like in chess and ne, is a procedure which takes years of dedied effort.

    How does one achieve such conceptual integrations? On this particular thread operating metaphors are occasionally utilized to that end. Operating metaphor is a term coined by Charles Faulkner of Market Wizards fame. Here is an excerpt from Jack Schwager's The New Market Wizards:

    Jack Schwager:
    Anything to add regarding traits which distinguish winning from losing traders?

    Charles Faulkner:
    A final crucial characteristic distinguishing winning traders from losing traders relates to what I have termed operating metaphors. An operating metaphor determines how we see the Earth, and it shapes our beliefs, activities, and life-styles. A few of the metaphors used by traders to describe the market are a woman, warfare, and a match, to name a few of the more common ones. As an instance of the sport or puzzle-solving metaphors, Richard Dennis says, It is like playing with a hundred baseball games at once. Pete Steidlmayer says he's solving the markets. Paul Tudor Jones sums it up with, It's a sport, and cash is a means to keep score. Each operating metaphor will direct a trader's mind to a different set of beliefs and also a different approach to the markets, with a few being more effective than others.

    Contrast the metaphors I simply cited with some of those operating metaphors I have typically heard around the trading floor. I got torn up today, makes the market into a beast of prey. We chose a hit reflects believing the market is a warfare and the speaker a injured participant. Which metaphor will result in your sense more objective in the market--playing a match, even a high-stakes match, or protecting yourself from an attacking wild animal? The answer is obvious. The difference is in what is suggested by the metaphor. From the match, there are winners and losers, but your survival is not at stake, as it is with being attacked by a wild animal. You may respond brilliantly to save yourself from the monster, but that metaphor doesn't encourage you to understand and practice long term egies and tactics how a match does. Possessing an operating metaphor appropriate to your trading style is fundamental for success.


    For much more information about Charles Faulkner and operating metaphors, visit http://www.metaphorsofmovement.co.uk...sfaulkner.html.

    An operating metaphor for the task of being a trader is discussed in post #96 on page 7.

    Operating metaphors for your connection with the market are discussed in post #59 on page 4, also in post #67 on page 5.

    And contrary to popular belief, the Holy Grail isn't a system but a mental state. This can be discussed in post #26 on page two.

    Next post was initially posted elsewhere in response to a question.

  2. #2
    Junior Member Morei12's Avatar
    1
    Involves creating a profitable trading system out of continuous development and several years of FX experience and observing daily market fluctuations and world events and keeping the information for future improved functionality.

  3. #3
    A lot of the fear which I used to feel came from the fear of failure rather than the fear of losing money. After investing in a biblical quantity of time studying and trying to trade profitably, then seeing yourself shed trade after trade was such a moral drainer.

    Nowadays I dont feel this bad, I believe I have reached a stage now where I could at least make some money, or in the worst not shed too much. I try to not think about much about the future, and that which I will be doing in a year.

    To overcome this-

    I enjoy the excercise Mark Douglas indies in his book, trading at the zone. This is to exchange in batches, this usually means taking 10-20 trades without any kind of hesitation and without looking at the past, then analyzing the results.

    Or do what I have done this past year, which is to split my year in 6 blocks, of 2 months. At the end of every section its time to go through the records and look at what was done and what could be learned for another block of trades.

    Seeking to achive professional standing in 1 giant jump is pretty hard, by breaking up the year we produce almost a ladder into reaching our objectives.

    Trade===gt; Assess performance===gt; Improve the areas that require it===gt; commerce again and so on.

    Another factor which should help with plogy is a drawdown limiter. We should stop after so much drawdown and re-assess and re-group before going forward. For me this is 4 trades lost, and then its automatic week off. Of-course this does not finish the drawdown, it simply stops it for a time, it does not mean that when we begin again we'll win. However, it does mean that our mindset will recuperate. This may not be as important for the system trader, but for those people using discretion, we ned to prevent ourselves digging our own grave. If you aren't in the stage where you're completely unaffected emotionally by losses, then stopping untill we're healthy is a necessity.

    Exactly like a footballer, they wont play if they're hurt, simply because it is going to make their injury worse, so if your head is hurt due to a couple losses, there's I high likelihood for making your situation worse.

    If your not fit to commerce dont!

  4. #4
    Junior Member noeses95's Avatar
    1
    I don't want to highjack this thread, or proceed in different way than has in mind, so I'll just post few lessons from Stock market wizards whom I've read previously”cut and replied” somewhere on the internet.
    Successful traders use trading techniques that match their personality You can't control what the market does, but you can control your response to the market To be a winner, you need to be willing to take a loss HOPE shouldn't be in your language If you are on a losing streak, reduce your position size Do not underestimate the time it takes to succeed as a trader Approach trading as a voion, not a hobby Possessing a business / trading plan Be honest about your weakness and DEAL with it Know when to do nothing Being a fantastic trader is a process. It is a race with no finish line. Never ever listen to other opinions. Create your own trading decisions Analyze your previous trades. Study what happened to the shares once you closed the place Do not take on excessive leverage. It just takes one error to knock you from the game Great traders continue to understand and adapt Do not just stand there and allow the truck roll over you Being wrong is acceptable, but staying wrong is totally unacceptable Contain your losses Great traders handle the disadvantage; They do not fret about the upside Wall street research reports will tend to be biased Understanding when to escape a position is as significant as when to get into excel, you need to put in hard labour , Discipline, Discipline!!!!

  5. #5
    Junior Member Davidalvaro's Avatar
    1
    Medici. I am trying to comprehend your trading principle of follow, do not anticipate. However, I believe it's not possible to not anticipate.

    By detecting price action and momentum at a certain price level (support/resistance/pivot amounts ), I am in a position to follow where price is likely to proceed.
    But before I enter the trade, am I not anticipating where price goes when I put a predetermined target profit or risk/reward?

    So am I not following and anticipating in that feeling? Thanks in advance~!

  6. #6
    Medici, thanks to your wisdom. I'm trying to understand that your trading principle of follow, so don't anticipate. But, I believe it is not possible to not anticipate.

    By detecting price action and momentum at a certain price level (support/resistance/pivot levels), I am in a position to follow where price is likely to proceed.
    But before I enter the trade, am I not anticipating where price would go when I put a predetermined target profit or risk/reward?

    So am I not following and anticipating in that feeling? Thanks in advance~!
    Hello. Glad you. Don't know about intellect. . .it's part experience, and part reflection and the joy of writing.

    I agree that it's difficult not to anticipate. After all, that is probably how our brains grown - by reading the signs in nature and anticipating where pray or meals can be found. And we appear to have terrible difficulties with uncertainty and not knowing. Thus all of the weird beliefs people hold and also go to war for.

    The problem is that we see patterns, anticipate and shape beliefs where there is very little ground for it. From the markets we behave under uncertainty and with incomplete information.

    Under such conditions anticipation might become a fool's game. Our minds fill up with ideas about what we think the market will be doing, instead of focusing on what it is doing.

    As I saidI used to be an anticipator, but these days I tend to consider in scenarios instead. From the context of the market is doing, what might happen? What are the possible risks and rewards from the scenarios? What are the probabilities?

    Placing transactions based on such considerations has made all of the difference, as there is no personal participation or investment in beliefs about what will happen.

    So that it's about seeing and behaving objectively/impersonally rather than based on beliefs colored by desire, fear or the need to be right. Objectively all you can do is evaluate risks, which subsequently is associated with having the ability to read the market and follow it's rhythm.

  7. #7
    Junior Member Enekitpk's Avatar
    1
    I've just discovered (and browse through) this particular thread! What a delight!

    Thanks to Medici and the Rest of the contributors. I will read this one again and again because there's a lot of value in this!

    I'm still learning to be a succesful trader, having discovered the markets little over a year before, and have made just about all the mistakes mentioned! I also have begun to realize that I'm the biggest risk in my own trading also that I must find MY egy which works for ME and follow it with Discipline!

    Please do not let this thread die!

  8. #8
    Junior Member claaraagud's Avatar
    2
    Mark Douglas.. .the man admits he can not commerce - how can he then set out on a career as a trader mentor and trainer?
    The same way Walter Hriniak became one of the greatest major league hitting instructors yet Couldn't hit a lick ... while Ted Willi was known as a horrific hitting trainer go figure

  9. #9
    Today's quote:

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