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Daytrading beliefs

December 30, 2013 Leave a comment

Richard Feynman

Cover of Richard Feynman

Mark Twain

Cover of Mark Twain

Matt asked:
From: Matth<snip>
To: Ken Long <longke@yahoo.com>
Sent: Monday, December 30, 2013 8:11 PM
Subject: Beliefs
Hi Ken:
          Been working on on my mission statements and business trading plan. I would like to model you – day trading (if you have no objections)
What are your beliefs that I could/should find useful.
Thanks Matt
===========================
my preliminary answer
i am on a journey of eliminating beliefs, trying to show cause why ANY belief is necessary as opposed to accumulating beliefs
i believe therefore that a couple essential beliefs are helpful; maybe these are attitudes more than beliefs:
1. Ask: what’s the evidence for this belief? Why is it necessary to have a belief on this subject?
2. What is a proper degree of confidence to hold on the basis of the evidence available?
3. What are the limits of the belief?  or alternatively:  how robust is this belief?
or, from a constructivist perspective: what is the utility of this belief-structure? What are the characteristics of the scaffolding? What does it allow me to do?
or Practically:
if you look at my daily and weekend report, I would say that each indicator/report-chunk is there because I have some belief that they have information content
or Specifically:
each published system has statements of core beliefs, assumptions, models, rules that stand together as a whole
the RFA e-book has a ton of things that might reward the research
my video on “Edges” recorded at an IITM workshop is probably a useful collection of beliefs
i have a very strong belief in the sayings of  Mark Twain with respect to human nature and behavior and in the sayings found in the complete book of Murphy’s Law when it comes to mankind trying to exert mastery over Nature, like “Measure with a micrometer, mark with a crayon, cut with an axe”
a lot of beliefs could be found in the chatroom archives where i respond to questions.  I find that questions push me to articulate beliefs out of the messy stew of ideas in my head at any time
whatever my belief sets  contain has to be large enough to stretch from the sparse beliefs and rules of the Frog to the increasingly complex RLCO-SQC framework
i am more interested in “intentional” action than I am in trying to find some kind of grand theory of everything for  daytrading; that’s in line with Feynman‘s belief that he was not trying to find ultimate truth, but rather simply trying to find out more about how the world works. I think that’s a healthy belief
i have a belief in the trade frames i make when i am preparing to act.  i believe they represent reasonable reward: risk ratio opportunities.  I believe that the habit of framing consistently builds proficiency an effective action/mental muscle memory and that over time provides an effective way to internalize adaptive judgement
start with the frog and RLCO frameworks; watch the live trading tapes and listen to my commentary for a belief set, especially when i am marking up the charts to try to create sense, sense enough to act
probably not the specific answer you were looking for, but it’s a start

Why trade?

September 24, 2011 Leave a comment

Hamburg-090613-0336-DSC 8433-Hanseatic-Trade-C...

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have to trade because of the intellectual and emotional challenge and the satisfaction I get from trading well.

love to trade because I find it interesting, and it challenges me every day to discover who I am and what I can do.

like to trade because it combines my passions for action, research, intellectual challenge and adaptation.

Trading directly supports my personal and financial goals and rewards me for the time and effort invested compared to other things I can do with my time.

experiment with housewives trading the futures during one of the most volatile weeks in the last 50 years

August 14, 2011 1 comment

Image extracted from Systems Engineering Funda...

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the ladies traded very well, netting  2K for the week, using simple support & resistance levels, with good risk management and money management techniques.

they traded 2 indices: Russell2000 and the DJIA, at  contract per trade, with an initial risk of 250; they added some practrice tardes in some currencies later in the week fro the experience: mostly Aussie and Canadian dollars

the 3 of them around 2 laptops and 2 extra screens doing their collaboration was very instructive and motivational to the rest of the trading room.  They  were very good and learned a lot and will soon be prepared to go live, now that they have a good understanding of the platform

May 27, 2011 Leave a comment

MACD 12,26,9

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Important insights from one of our workshop participants this week:  a ton of good learning inside these ideas

Our initial stop placement reflects the information available when our trade is initiated. Any price action after the trade provides additional information and can be used to update the stop placement. An example is the use of the MACD histogram to exit before taking a full 1R loss.

If your system is designed to catch singles, don’t wait for the home run before exiting. Take the single and move on (until you can recognize when the market is making it obvious that this time you should hold on for more).

Markets may have unique characteristics that should be taken into account when making framing and trading decisions. DBA, for example, can be framed with tights stops, seems to make orderly moves, and sees more action only after the opening of the grain futures markets.

Framing trades with tights stops right after the open feels like getting caught in a dolphin hunt (the underwater tornado). The lunch and afternoon sessions tend to provide a better environment for identifying trades using the WMB method.

The importance of understanding the type of move you’re trying to capture (F –> C; B –> A), and matching your entries/exits with that type of move.

After learning how to trade large index ETFs (IWM, SPY…), index futures provide a way of using the same skills to produce higher returns. 

Respect the R.

Opportunities are available any time the market is open. 

a good friend of mine interviewed me for his trading web site…

May 13, 2011 1 comment

Metropolitan Life Bldg., Manhattan, New York C...

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Describe your style of trading (short / medium / long term, trending / contra trend, what instruments….)

I would describe myself as a trader in a combination of short-term and medium-term time frames. In my short term trading I would classify myself as intraday with willingness to hold overnight if circumstances warrant it. My medium-term timeframe consists of swing trading and once a week adjustments to my asset allocation strategies. I usually have a combination of both trend following and countertrend trading techniques (otherwise known as reversion to the mean, which is a very important component of my overall strategy.)

Could your trading methodology be programmed into a computer?

I try to analyze my successful discretionary trading into rule sets that could be performed mechanically but currently I have a strong discretionary component to almost all of my techniques. When I do my back testing I always test against a mechanical rule set in order to determine if there is an edge that is persistent. Then in my trading I separate out  the combination of mechanical rules and discretionary trading in order to see what my personal value add as a trader is, if any.

What data services do you use? What does this cost a year?

I keep it pretty simple really, I get live price quotes from ScottTrade which is appropriate to use to manage all my accounts except for a few prototype testing accounts. I use Yahoo real time quotes because I like the way it integrates with Excel.

Describe your computer set up

I use a widescreen monitor for my primary trading machine which is a high performance laptop with a broadband connection. I  keep a second laptop with a separate Internet connection open at all times as my fail safe.

How many hours per week do you dedicate to trading?

 

I dedicate 3 to 4 hours a night to preparation for the next day’s trading session with probably an additional five hours on the weekend for research and additional preparation. And then of course I am alert to the market when the US market is open. I probably work harder in preparation than I do an actual trading, because preparation is all about what might happen, whereas actual trading focuses simply on what is happening.

What sort of annualised return should a trader reasonably expect?

From a design perspective I think you want to target 20% return per year with no negative months and a maximum drawdown of 10%. This is simply a heuristic to use as a target for assessing the potential of specific trading strategies and as a benchmark for my own.

Describe a trading strategy that you used to use (and, if you dont use it anymore, why not?)

You should try to catch breakouts and ride them for a long way. I used to try to trade the after-hours market. I used to try to time news events and initial public offerings. All three of these strategies I have proven to my own satisfaction that I cannot do. No amount of wishing will make it so.

How do you go about creating a trading strategy? Do you back test?

These days it normally begins with the observation of opportunity that catches my eye and looks like it might offer signals that I could take advantage of given my current setups and preferences. I start looking for that pattern to manifest with some frequency in stocks or exchange traded funds. If I see it happening often enough I will start designing some rules. I also have other strategies for different time frames and styles of trading that as I look at the interplay between them sometimes ideas for extending them will just jump into my head. I use a lot of reasoning by analogy and many times that will suggest a style of trading that I hadn’t previously considered. I read books with different ideas to see if I can find something that appeals to my style.

If your trading strategy was a car, what model would it be?

The 1993 Volvo 940 Turbo station wagon that is blue in color with leather seats and plenty of comfort and safety for long distance rides. It’s a steel cage surrounding me, because safety is most important. It has plenty of room to carry all my gear and lots of friends. It gets excellent gas mileage of 25 miles a gallon. I expect it to run for at least 20 more years. It is completely indifferent to the stylistic concerns or opinions of others.

Do you like volatile markets?

I absolutely love volatile markets because it allows me to get the most return in the shortest period of time and features more human psychology than quiet markets. Since I believe my edge consists of trading against human psychology, volatility is for me.

If you had to recommend one book on trading, what would it be?

I think the most important book on trading is your trading journal which reports all of your preparations, your notes and insights and trading records, periodic debriefings, your trading plan, and which represents your professional trading practice in action. If you don’t have that book you are in deep trouble.

If you had to make just one recommendation to spread bettors, what would it be?

Work out why the guy on the other side of your trade is in the trade; and then work out what can go wrong so that you can know your risk and avoid running off a cliff.

Do you agree with the saying: trading is a hard way to make an easy living?

Trading is certainly hard work, something you have to do every day to stay on your game. I think it’s like anything, in that if you really enjoy it it doesn’t seem like work.

Do you offer any services to traders?

I share my strategies, techniques, ideas, and personal records through a website, e-mail distribution, and host a daily live trading chat room for like-minded traders. I charge just enough to cover my costs, and keep my wife off my back. I publish my thoughts about trading on my blog atwww.kansasreflections.wordpress.com . A lot of people seem to enjoy reading them and I know that helps me by getting the words out of my head onto paper where I can review and reflect. My website is www.tortoisecapital.org and I invite your readers who are interested to try my unlimited free trial.

Any other thoughts on spread betting or trading?

Respect the game and give it the effort and attention that it deserves. Always know your risk and never be afraid to walk away from something that you don’t understand. And remember that when you think you understand, something might just be about ready to change.

May 07, 2011: silver pauses in its downward slide

May 6, 2011 1 comment

House of Joseph Banks and office of the Zoolog...

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silver finds a temporary support level after a nearly 4 sigma selloff in 5 days. the slight recovery.holding of support allowed for a reasonable intraday trade to the longside, but Monday’s trade should be especially interesting. Failure below yesterday’s low will be an autotrade in ZSL, but a breakout above today’s High will be a 551w pattern trade and/or typical  “max pain range compression”  style tarde (mprc)

The effect of learning preference on stress management in peak performance moments

April 24, 2011 Leave a comment

interesting use of the auditory channel to improve performance when under stress
i do the same thing with the use of drum solos to help me concentrate when trading at key moments in the trading day
 classic chokes — appear to rise from the process known colloquially as “thinking too much” or “paralysis through analysis,” and among cognitive scientists as “explicit monitoring.” Explicit monitoring, says Beilock, is “conscious attention to normally automatized physical operations that destroys the athlete’s normal fluidity.”