February 27, 2008
Just completed the “Personality” test. Don’t bother unless you feel like paying $29.95 I’m going to remove the link later, just in case someone particularly feels a burning desire to spend money.
As they have my details [personality] it will come as absolutely no surprise that I would rather lose a finger than pay money for their nonsense.
I thought the shape looked like the Roadrunner.
February 27, 2008
With the strong rally/trend today, I’ll be looking for a SHORT entry near or at tomorrow’s OPEN.
However, the trend in the short term, leading into earnings has changed from bearish to bullish. I may well consider purchasing a CALL Option into earnings [estimated @ 17 March-28 March]
With the Fed. so accomodative with monetary policy, the bank’s have an opportunity to mend their Balance Sheets [I'll write a post on how this works]
The MACD confirms the Quant algorithm. The problem is that I really don’t know how accurate, robust, correlated they are over a timeframe greater than a few hours, hence a CALL Option as a pure speculation.
February 27, 2008
Just added a link to the blogroll. I haven’t actually taken it yet myself, however I intend to do so, to see what it actually says.
It would be interesting to actually collate the information from the trading/investing community to acually assess what common or uncommon traits are present. If you take the test and feel like leaving your results, I would be interested.
UPDATE
From Brett Steenbarger, an article that relates to “Trader” personalities. Is there statistical evidence to support? I actually have no idea, but would be interested to find out.
Pierre of the Daytrading Blog in Germany emailed me with a very interesting observation earlier today. He pointed out that most financial websites are written in a very serious manner. “However,” he wrote, “I think that goes entirely against the idea of independent trading.” He further observes that, “I’ve never met a boring, successful trader”, pointing out that–oddly–”most books and websites are boring”.
I stopped short when I read Pierre’s post. My experience matches his exactly: It is *very* difficult for me to think of successful traders who are boring as people. To the contrary, many are characters, with idiosyncrasies, unusual interests, and unique views. That’s why books such as the Market Wizards series have been so popular: the interviewees are *interesting*, not just informative.
But Pierre’s real insight comes when he points out that a boring approach clashes with “the idea of independent trading”. His use of the term “independent” is important here. A successful trader has to have an independent mind; otherwise they will simply see markets and trade them like everyone else. Being able to stand apart from the herd, being able to develop fresh ideas and perspectives, looking for opportunities in unusual places: these are skills that are common among very successful traders.
When you have that independence of mind, you tend to be a bit unconventional. And that’s why successful traders aren’t boring people. They have unique views; they see things differently. True, there’s more to trading success than nonconformity. Still, it’s difficult to imagine sustaining success if you don’t have the ability to question consensus views and maintain confidence in your own, unique perspectives.
February 27, 2008
A number of people in the comments section, and other blogs and bloggers all seem to agree that trading past the morning tends to diminish profits; so why persist?
*Boredom; this I’m sure catches a few people, they are at a loose end, they know that they have a further 5+hrs in front of them, and they just can’t sit still. This leads into taking poorly considered trades.
*Addiction; this is by far the most dangerous problem. Addiction defines that you are no longer in control of your trading. That your trading controls you. In effect you have taken a business, and degenerated into gambling for the high. It is no longer about making money, it is about getting your fix.
*Greed; Huge numbers on the P&L are intoxicating, they are a high…greed is only a few steps removed from addiction. The idea of this business is [should be] to be profitable. This should by definition lead you to really understand *what* makes you profitable. Is it really chasing trades all day?
*Protestant work ethic; the guilt of making a lot of money in a short work day, or with seemingly little or no effort. Well, the effort if you are consistently profitable will have been enormous, no-one has just stepped up and instantly been profitable with no work. The work is put in daily, in any number of ways. That you get paid in 30mins is both irrelevant and misleading.
*Losing money early…must make it back syndrome; this is a pernicious problem. Really, assuming that you are trading your *best* idea’s FIRST [not necessarily the open] and they cost you losses…why continue with your sub-par idea’s? If you fail with your best…odds are, your worst will compound your losses. Take your FIRST LOSS [similar to the psychology behind a stoploss] and stop for the day. Do not trade in a diminished environment [set-ups, psychology etc]
I’m sure there are many others, but these were the ones that have plagued me at various points in my trading career. Each one had to be worked through, at a cost of lost profits, losses, mental anguish, and the highs and lows that come with the territory.
Now, I can get paid quickly, and stop.
February 24, 2008
Read the quote first.
It is this basic psychological pitfall that I try to avoid by defining as precisely as possible trades [set-ups] that I will trade, and those that I will avoid.
In essence we have an Entry and two potential exits. The first exit will be for a pre-defined loss at a Stoploss exit. The second exit will be for a profit at a profit target that exits our position.
The MINIMUM entry that I will consider is a 3:1 ratio. I would prefer a ratio in excess of 6:1 [or greater] Thus as an example; The low of the day is $177.33 and current trades are at $178.00 on an analysis basis I feel that price will reach $182.30
My stoploss will be $177.23. Therefore for each 100 shares I risk $77.00 for a potential reward of $430…this trade will be placed with the maximum number of shares that defines my trading capital defined maximum loss. On a daytrading basis, that stands at 0.5%-1.0% which is pretty tight.
This brings us to the important point. Stops are easily defined and are historical fact. Profit targets lie in the future, and are speculative, based on probabilities of your analysis or set-up.
I subscribe to randomness in daytrading, thus all entries are 50/50 at best. How then to define a probability of a profit target being reached?
This is quite a complex question, and all traders will have their own methodology of deciding upon profit targets; previous price levels defined as resistance/support that are measured via trendlines, pivot points, P&F, EMA’s, MA’s, Oscillators, etc.
From William Eckhard;
“One common adage on this subject that is completely wrongheaded is: you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”
