Apr 25, 2007

Hope and Fear, no Greed

As time goes by and I start considering myself a veteran trader rather than a newbie, at least wrt. the losses experienced and withstood and no longer left me shaking like a new born deer .. all this led to the dawning of the belief that I do have some insights into trading psychology that combined with the KickAss technical trading system(KATTS) will ensure that my firm TIOOG Advisors will be able to conservativly cough up the modest goal of 600% p.a. through circumspect trading.
As I say this I can visualize some market God reclining and saying "This guy is mine" while partaking the customary grapes. Ha.

.. but as I read and understood ,human nature is exact opposite of what is required in successful trading:

  • When in a Losing Trade we Hope - most hold on to a losing trade in the "Hope" that it will recover some..the rational thing to do is exit it now for sure but limited loss.
  • When in a Winning Trade we Fear -many a winning trade is exited too early for a small part of the total move because we fear losing the already made gains.
In the long term ,if you do manage to keep trading for long , these two traits are the only two reasons you are still there .. very unlikely you flouted even one of them for very long and are still in the game.Simply because these two habits bring the following to your trading :
  • many small losses(live to fight another day) rather than a few large lossses usually ending with either end of trading career or worse.
  • fully( or mostly) capitalising on the large moves you caught, without which your trading account will look quite anemic( owing to the regular small losses) if not finally DOA.
These two traits though not exactly rocket science need perspective,experience and balls ( maybe not in that order) to be practised .Though most experienced traders will unequivocally vouch for the soundness of the above theory and have clear understanding of the consequences of not following these tenets,they randomly ignore them to great pain.

So what is the difficulty? The issue is that any rational/reasonable person makes a simple choice of choosing :
  • a definite gain now is better than potential for bigger gain.(fear of losing)
  • a potential for a lesser loss is better than a definite loss now.(hope of recovering)
That's it , this is exact opposite of the above given gospel and explains why humans do not make good traders.Easier to preach than to practice..
"In theory there is no difference between theory and practice. In practice there is."(Yogi Berra).
The other point of note is that "Greed",the old suspect, is not at fault here, in fact the first situation of *not* wanting bigger gain is the exact opposite.
So, the culprits are just hope and fear and not greed.

..sheesh..enough said , what brought this blog about .. today was 2 trades,one winning and one losing .. winner reversed to loser..and loser became a winner after I cut losses at peak..
..as Finnian would say : "How now?"

Apr 19, 2007

Emotional mess

..the mistaken impression that fear and worry, hurt and anxiety, disappointment and regret were all real things.
But they're not real! They're just data. Heck, they're not even data about real things.
They're data about previous conclusions drawn about similar things! Sometimes, they're even data about erroneous conclusions previously drawn about similar things.(Phillip J. Eby)

So, that's about all there is to getting a grip on yourselves..just got to wire up the system to get a fresh recompile(at least ctrl f5) before generating random emotions based on previous stored conclusions to cloud the objective thought.
.. emotions are in all forms always detrimental to any decision making ..can't think any situation where this is not true .Now PJE says they are not even real.

Putting two and two together,since decision making starts at swinging out of bed in the morning to hitting the sack in the evening, it becomes evident that unemotional cool is the optimal state to cultivate for all waking hours.

Apr 18, 2007

Trading maketh sense

Trading is a crucible of life: it distills, in a matter of minutes, the basic human challenge: the need to judge, plan, and seek values under conditions of risk and uncertainty. In mastering trading, we necessarily face and master ourselves. Very few arenas of life so immediately reward self-development--and punish its absence. (Brett Steenbarger)

..after meandering around every kind of occupation and vocation,finally dawned on me to get a little smart with all these "smart" money managers taking home the lion's share of the bacon while we farmers bin tilling the land in hot sun for generations..

..and if mastering oneself is all that it took ,compare that to trying to communicate day in and day out with obstinate oxen..hell this looks easy..
..and no leg work..

Conventional lives

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally. (Keynes)
..this whole fucking planet is one grand incestuous club propagating mediocrity with all kinds of tools - social approval, religion, relationships, corporations, parents, children, peers(who let these morons in?)..running their entire gamut of tricks to ensure no one gets too adventurous.. no one upsets their comfortable status quo..

..but then some still seem to get away.. fortunately for all involved ..or we'd still be undiscovered savages in undiscovered lands.. ;)

KungFucius

Never argue with an idiot. They drag you down to their level and beat you with experience. (Confucius)

..where would I be today if the internet hadn't happened and carried these words to my village..
..arguing at sea level (maybe lower )?

another way of putting it:

It's a lot easier to avoid a barking dog than it is to pry his jaws off of your nuts after all.

Mark Twain in Punjab

Whenever you find yourself on the side of the
majority, it is time to pause and reflect.
(Mark Twain)

..the jatts in punjab have long been careful of not falling into any such traps, in fact they do not even pause to reflect..

Ode To Brar

There is no shortage of jatts doing corny,screwball shit for no apparent reason at all and carrying on that fine tradition is a very old friend Bavneet Brar - in his short life he has :

  • rode an 1100 cc bike from Detroit to India (into his pind)( barring the sea and pakistan)
  • been seen cycling across andes from Chile into Argentina.
  • run 7 marathons p.b 3:34:36
  • lost his bearings somewhere

Rang a bell..

..I'm tired of meeting clueless senior and very senior people in the tech business who can't see why I would be coding "..this is something you do when you are starting out in your careers,years back..now we have other people (minions) doing it for us .."
..cool as cats.
..well these very experienced "professionals",managers etc. are just that now- professional managers..It's not even fun playing TheEmperorHasNoClothes with them anymore.
..maybe I am gettin old.. :(

Then,I come across this :

Writing code is a form of leadership, because leadership is saying what you think of the world in a clear and visceral way. It doesn't require structural authority. Rather, writing code is functional leadership.
Since leadership has two components (saying and doing), coding is in fact a true expression of leadership because it both expresses ideas and it performs a function.
This type of blasphemous shit is unsettling to many a UsedToCodeVarietyProfessionalManager
..leadership for them is manifest in meetings, networking, schmoozing and generally "managing".