Sunday, October 22, 2006

For me trading is no longer war

Again I urge you to read christophe’s comment. And yes Christophe, I know, that trading is not comparable to real war. Still you chose to make that analogy. I just took it to the extreme, as your previous comment was one I thought about a very long time. Actually I finished the article only the next morning, as it took me some time to understand, why I couldn’t support your statements about what is needed in the markets to make it 100%.

Your observations are correct:

You need market knowledge, which most of us gain through very long and very tedious screen hours. The charts tell you all and if you have no one telling you when the big players enter, over time you will notice them in the charts, in the tape, as size leaves footprints and if you know where to look, you see them.

You need financial backing, so you can continue trading after a loss. And you need resources to finance your learning to trade the markets.

I disagree, that you need size to learn trading. Yes sure you need to trade size, if you want a good return. But once you know how to trade you can make 30 to 50 ticks a day with one contract, which gives you 300 USD to 500 USD per day or 75.000 USD to 125.000 USD per year. This will allow you to live and continue trading. Actually it will allow you to increase your trading account, even when you need to take out monthly amounts to live. It’s nothing big, but it’s not so bad either. Size and over-leveraging are the most common factors, which lead to the downfall of a trader. So size matters, but for a private trader, Risk– and Money-management are a lot more crucial. And they will tell the private trader, that it’s better to add another month trading “just” one contract to build up a bit of extra safety margin.

And you need mental preparation. I fully agree, that chat-rooms can be a lot more distractive than helpful. But once you have a trade on, haven’t you made the observation, that leaving the trade alone instead of micro-managing the trade by being totally focused on it cost you more than it was worth? It all depends on your trading style. When I’m trading the HSI or Gold, I would never ever take a look at a chat-room, but when trading say the German Bund, the ESTX50 or the FTSE and everything is going as it should, the market is working to reach my target, bounces show lower lows and lower highs or higher highs and higher lows, why shouldn’t I take a look at a chat-room or stand up and let my program manage the trade. Micro managing has cost me a lot in missed profits as suddenly the fear to lose profits comes into play.

But for a new trader, for learning, most chat-rooms are a distraction, which will cost you a lot of money eventually.

So it seems I agree with all the points you made, actually I also believe that trading naked might eventually be the way my charts look. For now, my mind is still drawing clues from additional information I have on my charts, even if I trade price only. But I will take a look at a bare Line on Close chart and see, if it makes it even clearer to see than now.

Still I felt uncomfortable, something was not right for me. And that was the analogy that trading is a war. Yes it is competitive and more so in a trading room full of different traders and personalities, less when sitting alone at your computer at home. Yes for years I saw trading as a war I was waging against the market against other traders to take their money. A war i was about to lose.

But somewhere along the road I changed. I realized that I was trading only against myself. It was my mind which interfered with my trading success. It was my mind playing games, using emotions to play havoc with my trading plan.

I was at war, but not against the market, not against other traders, I was at war with myself. And you can’t win this fight. It’s impossible.

So I changed, I decided to stop trading against myself. I was no longer at war against myself. I tried to analyse what it was, what bothered my subconscious mind. I wrote about it and long time readers will know about all the struggles I went through, ideas and trading approaches come and gone, once correct now discarded.

And then my subconscious mind started working together with me towards a common goal. It started giving me new ideas, which I tested, which I traded and integrated in my trading plan, if they looked solid. All the while I kept my promise to listen, to recognise the feelings, when my subconscious mind tried to warn me, tried to tell me, that it felt uncomfortable with a trade, a decision made by me. Or when it saw other pressing matters at hand to be done, before I would be able to continue trading free of any worries.

This all might sound strange and maybe a real world example will show you what I mean. I’ve a mountain rescue dog named Sully.

Sully

When I trained him, I couldn’t let him go and do what he had to do: Finding people in need for help. Tests were average at best, but suddenly that changed. I had come to the conclusion, that I couldn’t do the job I had trained my dog to do. I couldn’t run for hours, search 100 to 300 meters left and right of me in the forest, when we searched for a missing person and I had to cover a distance of 3 to 10 kilometres. I had to trust my dog that behind me would be no one, that we hadn’t been in the vicinity, might had even found that person still alive, but my dog hadn’t found him. I think it was, when I was looking for hours for a missing girl in a forest, that I decided finally to trust my dog, that he would do his job 110%. That if he did not tell me that there was someone, then there really was no one. The missing girl was found weeks or months later in a totally different part of that forest, a part no dog had been assigned to search in. But since that time we are a team, I trust my dog and he trusts me.

I still know the feeling, when I decided to let go, to give up that control I thought was necessary. And I did the same with my subconscious mind. We had been at war for so long, because I was neglecting it’s, my other needs. because I had a lot of unfinished but important business to do, before I was free to trade.

My subconscious mind and my conscious mind now trust each other, they work together to do the best for me. 5 years after I started trading futures, 10 years after I started trading, I finally trust myself to do what’s best for me.

Of course you don’t need to go through all that struggle to trade, but it might be worth to start listening to your subconscious mind. It has a lot to tell you and it will provide you with analysis and insight you would never be able to come up with in time for a trade, when you consciously thought about it.

5 comments:

Christophe said...

Hi Croc,

What a beautiful dog :)

I can see where you coming from, and i think it is one of those things where beauty is in the eye of the beholder.

I think i am referring it as a war because often it feels like it on the trading floor. you are probably right that most traders dont feel like it as a war ; it is just a personal thing, the world as i see it:)
It is not a war against myself nor do i fight against the market. I believe only very few players can do that and only in very specific market conditions.
It is more like a video game kind of war where once you know how to play the game you can put all your personality in there (like athletes do when they are in the zone and they get "eccentric":))

You should see for example when non-farm comes out (or when Fed of ECB release the minutes of their meetings like when Trichet mentions the word "vigilance"), not only there is pression on the floor but there is the pression from the Chicago pit we can hear in the sqwak and even more funny the countdown to the release and the realease of the price on the sqwak and obiousvly the price jumping around at the release when it is out of line. I think that is defitly the most intense time on the floor :).
When the countdown comes to 10 my heart bit must be going 160 bpm :)) The reason why there is so much pression is because in few milliseconds traders loose and make huge amount of money. There is just no margin for error at that time. We need to know what is expected and what is not and then it is pure reflex.

Btw, i did not write that you need size to learn, on the contrary i mentioned that you need size once you know how to trade and once you know what you are doing (like the analogy with driving and speed)

One more thing money management is paramount even more important when you trade size, more important than the setup. Because when trading size you can scale in and scale out.
As you said size is the surest way to meltdown if you dont know what you are doing.

As always great blog!
Good trading to you,
Christophe

Globetrader said...

Thanks Christophe,
I really enjoyed our discussion this weekend. You gave me a lot to think and I wish you all the best. As I just finished a Voyager series film I end with a proper greeting:
Live long and prosper,

yours Chris

udo goelzer said...
This comment has been removed by a blog administrator.
udo goelzer said...

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http://www.ruthroosevelt.com/metaphors.htm


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Ray Wen said...

Hi,

How did you manage to get your subconscious mind to work with your conscious one? Usually, the subconscious mind reminds one of one's past failures, mistakes, etc. It actually creates doubts and confusion to one's thinking.
Thanks.

YK Lim