Thought-provoking quotes

Trading Discussion
86

Absolutely. And we should always view specific detail in the overall context of what our market is doing. For example, an engulfing candle has a widely-recognised consequence. But do markets always respond accordingly - or are these sometimes like “Friday 13th”. Bad things apparently always happen on Fri 13th. But in reality, because we anticipate them, whatever bad occurs on that day only serves to strengthen the myth. But are there really any more bad things than on any other day…

Does the market always respond to, say, an engulfing candle in the same way? How often does it not do so? On what timeframes are they most reliable? What kind of market movement has preceded the candle? And so on…

We must remember that “the market” is not an independent entity with its own life. We often hear about what the banks are doing, and the institutions, and the speculators, and the investors, and the retail, and the brokers, etc. But “the market” is just the sum total of all these participants’ actions and the subsequent reaction to the overall majority view - and this majority view is real-time and changing constantly.

But knowing how your market moves and why is only half of the total story…

Perhaps even more important is to know how you, the trader, actually function within the market. It is worth seriously journalling every single entry and exit with an analysis of why you did it? why it was right, or why it was wrong.

For example, did I read the market wrong? did I miss a clue? did I panic and exit too soon? did I run my losses too far? did I anticipate a move instead of waiting for confirmation? did I ignore my exposure limit?

Every trade offers insights about what I can learn about my market and what I can learn about myself and my trading approach.

Without that kind of knowledge and development we will not evolve and we will just keep repeating the same mistakes and the same responses to the same market scenarios whenever they repeat in the future.

Analysing oneself is as essential as analysing the market.

Your trades are like sheep than can run in all directions with no logic or purpose, and other trades just follow blindly in the same fashion. Only you, the trader, are the sheepdog that can control and guide your trades into the pen.

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87

yes trading is very much about perception/interpretation ,that why day trading/ short term and long term trading are so different .

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88

not a quote but still good point
traders lose or give up not because they have more losing trades.
Its the big losers ,I believe is the difference,. an unsuccessful trader will probably have a few big losers which will make the difference ,the opposite you could say about a successful trader small losers, big wins.The concept seems easy ,but not easy to master

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89

I fully agree with you. Preserving and building one’s account equity is so crucial - and yet so ignored.

Some may get away with big, bold exposures and earn a chunk of money, but how long will it continue for? And many others will also take big, bold exposures and just lose big. And recovery from that position is very hard and soul-destroying. And if it repeats again then the pressure to give up is enormous and the remnants of the original capital too small to recover with.

This quote, I think, sums it up quite concisely:

"There are old traders and there are bold traders, but there are very few old, bold traders.” - Ed Seykota

I am happy just being an old trader…

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90

yes it some up everything up nicely, that quote
cheers

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91

This is an interesting quote from @easymoney22 and, at first reading, a fine ambition. I guess every aspiring trader thinks about their aims and goals and, naturally, these are firmly attached to how much money they think they can earn from their trading. And in an industry where there is theoretically no ceiling to how much one can earn, these aims and goals so often seem to launch off into the millions, even billions.

But could ponder on the fact that, in isolation, the forex market is close to being a zero-sum game. I.e. every gain is someone else’s loss. So as one gets richer so others get poorer - is that not a little ironic if the aim is to ultimately relieve poverty in the world? Of course, the forex market is not entirely an isolated, closed entity. There are many transactions that relate to activities outside the forex market such as trade and business, even travel, and these do not enter the “zero sum” definition. But speculating is just what it says it is and every gain has an equal loss on the other side.

But maybe the real question that we should ask is what do we really seek in life. What kind of lifestyle will we really be comfortable in? What kind of income/capital do I really need to achieve my aims?

In theory, it is “easy” to make millions: surely all you need do is find a strategy that earns a consistent income and then just keep increasing position size and the profits just get bigger and bigger. But in reality, it doesn’t work like that. The practical and psychological factors change along the way and strategies have a habit of waxing and waning in their effectiveness over time. There are countless stories of people winning and losing big money.

But is big money really the only target here? If the world has to wait for individuals to become multi-billionaires before any help arrives then it is going to be a long wait. Which of these alternatives is better, quicker and more likely to succeed: - an individual saving a few millions and then giving some away - or a million people all giving a few dollars to an organisation that specialises in aid?

Helping others is a great principle and is what our civilization is built on. But helping others does not need millions, it starts with your family, your friends, your neighbours, your work colleagues, your internet acquaintances, and much of this help does not cost anything at all. Even a smile and a greeting to a lonely neighbour can makes someone’s day.

It is a good exercise to take time and think about: “What do I really and realistically want to be and achieve in my life”

Good works can start already today. which brings to mind another favourite quote:

" All it takes for evil to succeed is for good people to do nothing"

Things to think about…

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92

From time to time the idea is put forward that if the vast majority of traders lose money then why not just trade in the opposite direction to what one would normally do.

This assumes that the problem is in the wrong analytical signals generated by one’s trading method.

However, what if the real problem lies in the trader themselves and their understanding/application of risk and money control?

What if the real problem lies in the trader’s emotional instability such as fear and greed, or lack of patience or poor discipline?

We really need to think about how much one’s failures are inbred rather than in our method.

As Daryl Guppy says:

“Our capacity for self-sabotage should never be underestimated, and traders should always be alert for the first signs of this destructive personal behaviour.”

Another column in our trading journal??

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93

There is a natural drive in humans to find and develop new things. And the process of developing includes fixing and patching the bits that are not working properly. E.g. all software products receive update patches, etc. Even in days of old armour suiting was developed to protect the soldier and every time a weak link was found an additional bit of armour was added. This continued until the suit was so heavy and limiting that it defeated its own purpose.

This phenomenon is also seen in trading. Many Newbies start developing a method, and every time there is a loss they will add another indicator or line to plug the hole. This process continues until the chart is so full of lines, levels and values that one signal is always contradicted by another and there is never a clear picture.

There is even a term coined for this state: “Analysis Paralysis”.

Traders who survive this stage almost always begin to realise that in trading “less is more”, whether we talk about the number of trades or the content on our screen.

In many cases, the reason behind this process is a lack of confidence in the core process and/or in one’s own ability to read the process. This lack of confidence is usually based on either a lack of tangible quantitative history concerning the method’s actual track record (not just backtesting) or experiencing a run of losses, which happens to us all from time to time.

But before simply adding more “armour” it is maybe worth going through what is already in your analysis process and evaluate every aspect of it. Keep what works, discard what doesn’t or which only duplicates what is already covered. Sometimes we may look back over a chart and see how often something works but fail to note how often it doesn’t. And when we to come to use it, the failure rate further eats into our confidence.

Afterall, price can only do three things: go up, go down, stand still - and the third of these rarely lasts very long and does no damage anyway. So we are left with only two options: up or down.

How much clutter on one’s screen - or in one’s brain - is really needed to help anticipate which way next?

Sometime we will be right and sometimes we will be wrong. The art of profitability in the long run is optimising the former and minimising the latter. For example, with a win rate of 50% you need a R:R better than 1:1. If your win rate is higher than 50% then your R:R can even survive being worse than 1:1. Equally, if your win rate is lower than 50% then your R:R needs to be better than 1:1.

That’s it. That is all one needs…

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94

Today’s thoughts are about humility.

One issue that is constantly raised is which is better fundamental analysis (FA) or technical analysis (TA) and can one trade with only TA.

When we say FA, we do not mean trading specific, individual, news releases. We mean analysing the data and info available and deciding whether currencies or commodities or indices are over or under valued and taking positions accordingly.

But FA and TA are not mutually independent techniques, they are just the two ends of the same piece of rope. If a trading institution forms a view based on FA then they will act on it and it will contribute to the sell/buy pressures in the market.

So what is price movement other than the grand sum of all the activity based on FA? If you want to know what the majority of the fundamental analysts are actually doing in the market then what better source is there than the price movement?

So can we say that whereas FA produces the moves, TA identifies the moves that the FA majority is producing.

So what has that got to do with “humility”?

As Daryl Guppy says:

“Humility means you understand and acknowledge that other people in the market know much more than you do…you cannot be smarter than the market or the people in the market. Humility means you appreciate their knowledge and you learn to follow their conclusions in the market. All of their information and analytical skill is revealed in the chart of price activity Every day intelligent people buy and sell in the market. You measure their knowledge and opinion by watching the price activity,”

So what does that communicate to us retail traders on the fringe, reading 2nd hand information, and only ever aware of a small fraction of the total information available - and even less aware of what the majority market participants are actually doing in the markets?

Trade what you see - not what you think…

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95

I hadn’t read this poem in about 2 years. But I thought of it the other day and wanted to share it.

image

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96

Thanks @dushimes for adding this to the thread. It is a very encouraging read for many people facing difficult situations in many forms and not only in trading experiences.

It is clear that trading is a challenging process for many people, maybe even most people, perhaps we could even say for all people at some time or other!!! And i am sure even the most successful traders have thought about giving up at some stage or other along the way.

But what this text offers is the encouragement that success may only be one step away and we all know that in trading one’s fortunes can turn around in a day!

But due diligence in appraising one’s strategy, non-slip discipline, and huge amounts of dedication and patience go a long way towards reaching success, and, more importantly, sustaining that success in the future…

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97

It often occurs to me when deciding on my position size what a contrarian business trading can be.

On one hand we recognise that there is no ceiling to profit opportunities and often the best opportunities come when the market looks its worst, but on the other hand we are readily aware of the real damage to our wealth that getting it wrong can cause.

We are constantly caught between the urge to maximise our profit potential and the need to keep our risk within sensible limits.

As in this quote by Ray Dalio, hedge fund manager:

“In trading, you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money.”

Neither, on its own, is going to bring long term success. It’s all about finding the right balance…

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98

“When it comes to trading a strategy, talking is easy but application requires an awful lot more”

99

This is excellent. Great tip to keep in the toolbox and reread every once in a while.

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100

Yes indeed! Trading is a business like any other but, in many ways, also very unlike any other!

Although we talk about trading this currency pair and that commodity and this crypto and that index, we are actually all trading only one and the same product: Probability.

Whatever our trading strategy, trading both “aggressively and defensively” can mean always first identifying the probability level and then seeking to trade aggressively the high probabilites whilst side-stepping the low probabilities.

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101

Great perspective! It can definitely be hard to put trading into that perspective. Especially for newbies who often only read the headline and don’t dig deep into indicators, systems, strategies, etc.

“The indicator said to place my stop here!”

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102

"Our goal is to locate opportunities where:
-the odds of success are in our favour
-the amount risked is less than the potential gain" - John Bollinger

It is not so easy to achieve a high success ratio of wins v.losses. So these two goals aim to a) increase the percentage of wins and b) increase the size of our average gains v. the average size of our losing trades. This process helps to optimise overall trading performance.

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103

and you don’t want to be left out the market

104

Exactly! One cannot trade with insufficient capital. It is important to balance the pursuance of profit with the protection of one’s resources…

"“He will win who knows when to fight and when not to fight.”…But “Who wishes to fight must first count the cost.” - Sun Tzu

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105

Abraham Lincoln:

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.“

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