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Brent Aston wrote:
>
> Gwenn,
> Hope you don’t mind if I follow up a bit.
>I don't mind at all, and you are right to question every single bit.
That is actually a trait of winning traders. The best way to move
forward I found, is to challenge everything. Only then can you find what
is solid and what is not, at least for you. I do the exact same thing.
>
> I’ve been trading for 4 years so I’ve heard a great many rules like
> those you have listed. However, when confronted with the realities of
> trading, many find that the platitudes go out the window
>There are indeed many platitudes, but also many truths, some of which
you really understand deeply after some time. I had the same experience,
but found out that words are quite a poor vehicule to convey the
concepts of trading.
When you attempt to describe or explain something, you can either
summarize it in a short phrase, easy to remember, but maybe tough to
decipher and implement, or start a lenghty explanation, with a lot of
argumentation. But either way, you will still have to challenge
everything in order to deeply understand the idea and incorporate parts
or all of it in your trading.
>
> as the opposing side tries to wrest your money from you.
>Nobody is wresting your money away from you. Only you decide to put it
on the line or not. Anything that happens to your money is of your sole
responsability. RULE #1. Without this you'll go nowhere.
>
> From my own brief encounter with statistics, I recall that you can > prove anything you like with statistics. So I ask. Which statistics?
>Two sorts of statistics:
1 - Market behavior: I went over the last 15 years, and tested different
relationships: If the market is up by x from yesterday's close by time
T, where is it going to be 1 hour later, 2 hours later, etc?
There is no cheating here, you get results like: On 3000 occasions, the
market moved by an average of 20 ticks down 60% of the time and 20 ticks
up 40% of the time over the rest of the day. But 90% of the times the
market went down, it did not go up more than 7 ticks up after the first
hour. So one can cut losses at 8 ticks after the first hour, instead of
20 ticks...
2 - Your own trades: On my last 500 trades my entry or exit efficiency
was such and such, so you can test whether you could actually modify
your orders in consequence. Also, you can notice, that your worst
slippage or missed winning trades was on days that did this and this. Is
there any way to avoid such a slippage by modifying again your execution
or your attitude or anything that will improve outcome?
>
> Also is risk control an illusion? I know that for most traders it is.
>That depends entirely on your own discipline. By risk control I mean
getting out when your plan says getting out. No fussing,
procrastinating, no cancelling orders, exit with market orders if
necessary. No saying I couldn't...
It does not mean avoiding losses. It means taking the losses whenever
your plan is showing your trades have not proven correct. It is
preferable not to wait until the market proves you wrong, which may be
way past your pain threshold.
>
> Finally, I often hear money management sited like aspirin for a cold,
>but most traders manage their money until its gone.
>You are right.
Money management is the part of your plan that defines how many
contracts to trade, both initially, and along the way. For example, it
will tell you that given your current equity, drawdown and trading
results caracteristics, your maximum position can be 10 contracts. It
will tell you to enter any new position with 50% of full size, to add a
further 30% if it goes your way under predefined criteria, and still a
further 20% later. it will tell you how many contracts to exit, if your
position doesn't meet your criteria after x hours, etc...
Most traders don't do any of the above, but just feel the market is
bound to move up, buy 5 contracts, because 5 * $1000 potential profit if
it hits the target= $5.000 and that is what they feel comfortable with.
Most won't consider the downside, and those that do, will compute how
much they are OK to lose on 5 contracts, ie $1000/5=$200 which is 7 bond
ticks. There it goes, they are long 6 because the broker said it looks
real good, and the market is down 7 ticks now, but there was this news
that just came out, so they are going to stay in for a few more, it will
turn around. Before day's end, they are out by $2500, and the market
closed indeed up 27 ticks from their former entry level...
>
> I suspect that these platitudes were not the only thing that turned > your trading around.
> No and yes.
No, because there are all that's needed.
Yes, because it happened when I was tired and fed up of paying the
market trying to fight the rules...
>
> As for my record I have 3 losing years but this year I'm slightly > ahead.
>The best thing you can do at this point, is to go over your trading
stats. I am sure you can become consistently profitable by just applying
consistency precisely to your trading. That is the single most important
determinant usually.
>At any rate I applaud your success. Maybe some will rub off.
>Thank you.
>
> Questioningly,
>Hope that gives you new avenues to venture along, and above all, don't
take any of what I said for granted. Find out for yourself, and adapt it
to your own style. Your strength can grow only from within yourself, it
cannot be "imported".
>
> Brent
>
Get the best out of you.
Gwenn
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