I took 7 pages of notes... yeah, I think I'll break up into sections. There were some really good stuff. I wish we did this more often. I'll start on what we talked about in our group break out sessions.
On being extremely profitable:
- There are no extremely profitable as opposed to the consistently profitable. The extremely profitable takes on excessive risk and when they go into a slump they become extremely unemployed.
- The best traders study and work on themselves, even when they're on top of their games.
- Video tape, review and prepare for the market each day.
- How much time you spend in front of the screen internalizing and focus on the market is going to make a difference in the long run.
- You have to be constantly learning from others, always changing, improving
- There's a difference between people who work hard to trade for a living and those who trade to not have to work hard for a living (he lost me a little bit here... I think I was too busy writing)
- Expand into different markets, different time frames and different set ups.
- When expanding, play it with the smallest size you can
- Eventually you'll always have a couple of things working for you
- In general, learn how to trade one time frame larger (I think I have stretched a lot more into the 4-10 min. time frame so I'd be looking for set ups that I can hold into the 10-20 min. time frame)
- Not knowing what they're good at
- Not sizing up enough when they're seeing the market well
- Size up to a point where you won't ruin your whole day if you are wrong or whole week.
- In general, size up 10% more at a time
- 20 to 1 max to min ratio depending on when you know you are right or not sure at all
- Trade small size
- You won't know at first if it's just temporary but at some point you have to reign in your size
- Identify what's a normal slump so you won't get super worried when it happens
- Do not get more aggressive
- Focus on your core competency
We talked a little bit more about having a plan compared to being stubborn when the plan is not working. Brett believes that when you're formulating a plan, you mentally rehearse for the different scenarios. I guess in a sense he was saying there's no way to be stubborn if you've already accounted for every scenario and what you are going to do in each case.
When the topic about the change in the market in 2009, Brett told us that the best thing we can do is to share what's working. You have to constantly process new information, whether it's through reading or listening and talking. Whichever method works for you best is what you should do.
In closing, Brett encouraged us to focus on the process and the money will eventually come. Learn to process your thinking in a different way and learn to love your losing trades b/c they will teach you something either about yourself, the market or the set up you're trading. You are who you are as a person and the trader side will reflect that as well. Learn to accept it, appreciate it, and love it because you can change it. I wish someone had told me this when I was like 16-years-old. I don't think I became fully comfortable in my skin until I was like 21 or 22.
10 comments:
I had to ask a side question...
Interesting question. Complicated because so many concepts at play. Let's strive to find clarity. Perhaps others will lend their perspectives as well.
...I've read a lot of William James material about the link between our thoughts and our action. In sales they've always told us that action cures fear,...
because 1) by facing the threatening situation, we realize that the brain's perception of the acuity of the threat is greater than its actual acuity, and 2) forcing the brain to focus on steps a/b/c rather than bigger picture helps to prevent it from restarting the debilitating fear process. Any other reasons?
...but I tend to think if you're having problems...
could 'irrational thinking' be synonym for "problems" or are there other concepts at play?
...it's easier to cure the mind first...
"cure" meaning reset to calm, rational thinking, yes? Is rational thinking always better than irrational thinking?
...I've asked other people this question before: Should we try to act our way into healthy thinking or think our way into healthy acting...
Think on this: I've enjoyed bowling since I was young, but often go for years at a stretch without playing. I've noticed a counter-intuitive phenomenon that often occurs on my 1st or 2nd game after a long drought - I'll get a very high score. From that high, my games will always decline in score to some plateau.
It's when my unconscious mind (just do it) is allowed to function independently of my conscious mind (which can't remember enough about my bowling technique to tweak my game yet) that I perform my best.
I know I can think productive thoughts that will lead to higher scores, but I know so little of how my mind works, that as I try to perfect my game, parts of the thinking process work against my game. If this is not so, then why do my scores go down from that initial high? If I could function on autopilot, letting my subconscious act on what it's learned, would I score consistently higher than when I am at the controls?
...In other words, should we trade our way into healthy thinking again when we're in a slump or think our way into healthy trading...
Is there really such a phenomenon as a 'slump.' From my experiences when the results of my actions consistently don't rise to my expectations, I have often considered myself to be in a slump. But does the slump really exist or I am just creating such a condition in my mind, through my irrational thinking?
Ex: flipping a coin. No matter how many times it has been 'heads' or 'tails' in past, the next flip is wholly independent and has 50% chance of being heads/tails.
Yet, if I have been consistently expecting heads & have been consistently getting tails, am I in a slump?
Expectations, Actions, Results.
Perhaps better to consider 'slumps' as being periods of time when our understanding of nature (or our control of ourselves) does not rise to our expectations. If we believe ourselves to be "doing everything right," but fail to meet our expectations, then there must be pieces of the puzzle that we do not yet comprehend (or do not yet control).
...Eric from the Quant Team falls under the healthy thinking then acting camp, Steenbarger said that both sides are valid but it seems that he's in the camp of trade your way into healthy thinking, as in trade very small to regain your confidence...
What is the value of confidence?
If confidence is based on believing that one understands nature to the point of being able to consistently predict outcomes when, in actuality, the high success rate was due to luck, does having confidence add value to the situation?
Does confidence lead one into a biased perception that one is right (must be right) even when nature begins to hint otherwise?
Or is the value of confidence that it leads action?
That it minimizes 2nd-guessing, which has been shown to lead to inferior results (at least in academic testing environments).
What is the difference between 2nd-guessing and perfecting one's course of action?
...and then once you're back, increase your size back up. I suppose this is no different from major league baseball players going back down to AAA or AA league to build themselves back up...
Rebuild one's confidence by winning against lessor opponents? Is this a common practice?
Should we try to act our way into healthy thinking or think our way into healthy acting?
How does one "act" there way into healthy thinking? Is this presupposing that there original thinking was correct? If the way one sees there world is not consistent and closely correlating to reality can acting take you out of a slump? If a batter's mechanics along with there fundamental talent level is not on par, or at its highest level of effeciency, lacking the level of consistancy that is required of a proffesional athlete, if these principles that are required for a succsessful athlete are missing, will playing at a inferior level bring adequacy? So acting your way into playing proffesional baseball will not work, why would acting your way into correct thinking work ? In something like trading would it not be wise to think about the probablities or the likihood of being wrong. The previous comment suggested 50/50 odds each time you make a decision, and hopefully for your sake, and your wallets, your odds are higher. If at a 70/30 probablity that your right, its possible that out of 10 draws of randomness you could pick up nothing all 10, based on the 30 percent. Odds being with you, but what good is an odd if you lose? So does this mean that your in a slump or that luck has played her hand and you lost, if your thinking is correct? For the less than savy investor there odds could be 50/50 or 40/60, and out invest you. Surely over the long run the wiser and more informed would outperform right ? To think correctly in which we see the world, and how that aligns with reality, is what increases the odds and allows for clarity of thought. How does one go about obtaining this?
From the link that sent me to this blog, it's my understanding Mellow Yellow works at the Kershner Trading Group, which is currently recruiting new traders.
He poses a number of good questions, which any trader or would-be trader would be wise to ponder.
The basic question is how to maximize one's overall performance.
From my limited perspective, I'd say it would be best to make extensive use of the autotrading tools and continually work to improve one's customized auto tools as they as they fail to predict the market changes anticipated.
customize & keep perfecting the autotrading 'rules' using simulators.
Jason, you've been working at Kershner for at least a year and undoubtedly use the lexicon of the accomplished traders. Why do these pros speak of 'confidence' so much?
To my mind confidence only has value because it leads one to take rational actions (as opposed to irrational actions (unhealthy thinking) or no action at all (fear of failure).
The problem with confidence is that, under the best circumstances, the best it can lead to is 'rational thinking' at one's highest level of performance. Under poorer circumstances, one's confidence is viewed by others as "over confidence" as someone, who doesn't possess the clarity he thinks he has, confidently bashes his head against a wall.
It would seem to me that a trader's best investment of time would be to focus on increasing his market clarity, while disavowing the role that 'confidence' plays in his successes and failures.
Well, I actually struggled quite a bit in February so I've spent the most part of March building my discipline back up and trying to clear my mind of distractions. Just until recently I started to feel I was seeing and reading market clearly and increased my position sizes. "Confidence" might have just been the first word that came to my mind.
to me that sounds like a somewhat demoralizing view of what has transpired, perhaps letting your emotions be adversely affected by your learning experiences, by seeing the experiences as failures (something that beat down your discipline/confidence), rather than simply learning.
I would argue that you had good clarity of the market conditions that you had been exposed to, until February, when the market started acting differently than you expected. Your experience in February has given you the opportunity to learn more of the market's more nuanced complexity.
If another "February" comes back in April 09, then you should be better able to understand what is happening and adjust your strategies accordingly.
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"Discipline" would seem to be a more appropriate term than confidence, in that maintaining 100% discipline keeps you at your peak performance. However, if one runs at 100% discipline (only attainable, I think, through autotrading) the #1 rule in discipline would have to be to pull back after some threshold of the market failing to act as predicted is reached, otherwise 100% discipline to some strategy could lead you past a point of no return.
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Oh, no doubt that I learned a lot from February. I had to really pull back and ask whether my disappointing result was b/c of me or b/c of the market and it's a little of both. With my personality though I tend to be hard on myself so I'm beating myself up over it and I can't control the market but I can control my entries/exits/size. I was just not happy that I didn't make the necessary adjustments.
March's been great and I've been talking to a lot of other traders about going forward how to repeat this month's success or prevent a repeat of February.
My take on unhappiness is that it occurs when one's situation falls short of what one expects. This is caused by unrealistic expectations or ______? I had a few ideas for the blank, such as lack of discipline, but they all seemed to shrivel away as I thought about them, for they all seem to be a subset of unrealistic expectations, i.e. failure to be more disciplined because one has unrealistic expectations about how disciplined one should be, etc., etc.
Unrealistic expectations may be a double-edged sword. I know they lead to unhappiness, but does the failure to meet these (at present) unreasonably high expectations also lead the average person to increased motivation to reach these goals or do the (literally unavoidable) failures cause him to turn away and pursue some other path in life, when he might otherwise have kept doggedly toiling along the desired path?
Instead of berating oneself for a failure to achieve expectations, would it be more productive to remove expectations from the equation, accepting one's current situation for whatever it is, while focusing on the desire for higher accomplishments and knowing that one's performance can always be improved through more practice.
motivate oneself through desire and not expectations. Without expectations of success, there is no failure. Without failure there is no fear. Without fear, there is only pure 100% confidence
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If your ultimate goal is to calm the mind of distractions, then you would have to admit that, in order to do so, one must remove emotions, as they cloud judgment. A golden key from the desire to beat yourself up ;)
that is ... if you can diminish the power of Jason-the-berater.
Hopefully, Jason-the-success-seeker is the stronger of the two.
Anonymous poses the crux of the matter:
"To think correctly in which we see the world, and how that aligns with reality, is what increases the odds and allows for clarity of thought. How does one go about obtaining this?"
Very good question. In no particular order:
[It is with this reply that I wish I had the capability to go back & edit, for this is a very complicated question & I know that however clearly I understand my reasoning now, it will be more clear to me later. Perhaps we should create that website/blog I mentioned earlier & discuss the topic there, in greater detail, for this is central theme that all of our discussions have addressed, trying to see more clearly here, there, etc.]
Hmmm... I'll push this one off on Jason, while I think on this some more ;)
ok, discussion forum started at sanseek. The common name ;) was reserved for no one's use, so pick another. I'll be going by Jamp.
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