Discretionary trading attitude

[sinner]

The five stated goals of Trading in the Zone by Mark Douglas

1. To prove to the trader that more or better market analysis is not the solution to his trading difficulties or
lack of consistent results.

2. To convince the trader that it's his attitude and "state of mind" that determine his results.

3. To provide the trader with the specific beliefs and attitudes that are necessary to build a winner's
mindset, which means learning how to think in probabilities.

4. To address the many conflicts, contradictions, and paradoxes in thinking that cause the typical trader to
assume that he already does think in probabilities, when he really doesn't.

5. To take the trader through a process that integrates this thinking strategy into his mental system at a
functional level.

It also points out, right at the start of the book, without an edge (which the book is not about), you cannot trade. The book is about teaching you to trust your edge. But you must actually have one. Otherwise you risk suffer from being one of the people who

...seems as if the consistency or ultimate success they desire is "at hand," or
"within their grasp," just before it slips away or evaporates before their eyes, time and time again. The
only thing about trading that is consistent with this group is emotional pain.

 

[Gringotts Bank]

The five stated goals of Trading in the Zone by Mark Douglas



It also points out, right at the start of the book, without an edge (which the book is not about), you cannot trade The book is about teaching you to trust your edge. But you must actually have one. Otherwise you risk suffer from being one of the people who

Correct. I'm taking it one step further and separating out 'edge' from 'psychological factors'. If a trader makes 100% using a sort of hybrid approach, how much of this is due to 'edge' and how much due to 'psychology'? It's unknown - could be 80:20 or 20:80. So I'm removing extraneous factors and looking at each factor independently. I suspect that edge is not of great importance when discretionary trading. Obviously in mechanical trading, edge is everything.

 

[notting]

I just bought an audio CD off eBay of Reminiscences of a Stock Operator.
He apparently shot himself!!
I hope not to follow him too closely.

Admittedly I bought for pure entertainment and curiosity after I heard a couple of broker types saying how good it was on Sky. I'm not into all the training stuff and books.

What a load of crap!! Glad I only paid $10. It was mildly entertaining.
The only message was "trust your own assessment and 'the tape' rather than others."
Don't bother.

 

[sinner]

Correct. I'm taking it one step further and separating out 'edge' from 'psychological factors'. If a trader makes 100% using a sort of hybrid approach, how much of this is due to 'edge' and how much due to 'psychology'? It's unknown - could be 80:20 or 20:80. So I'm removing extraneous factors and looking at each factor independently. I suspect that edge is not of great importance when discretionary trading. Obviously in mechanical trading, edge is everything.

OK to humour you, assume that the proportion is 80:20, so, do you have an edge to fill out that 20%? I assume you agree some edge is necessary to execute on. It sounds like you're proposing a 100% psychology approach, i.e. gambling.

 

[Gringotts Bank]

OK to humour you, assume that the proportion is 80:20, so, do you have an edge to fill out that 20%? I assume you agree some edge is necessary to execute on. It sounds like you're proposing a 100% psychology approach, i.e. gambling.

I'm proposing investigating "100% psychology" and leaving edge out of it altogether. Only then can we determine how much influence psychology has. If it comes back 100% importance - great, my hypothesis has been validated. If it comes back as 0% importance, then I will trade 100% mechanically.

 

[sinner]

I'm proposing investigating "100% psychology" and leaving edge out of it altogether. Only then can we determine how much influence psychology has.

I'll leave you to it then. My money is all on red!

 

[notting]

I'm proposing investigating "100% psychology"

You can't test psychology unless you are in the trade for real.
Just start a thread and report what you do within 10 minutes of doing it.
That should add to the psychosocial test.

 

[rnr]

Hi GB,

Was the BHP trade you entered yesterday (March 20th) "Probably a low risk entry here, I'd posit." and exited today (March 21st) "I don't like it today. Just sold." an example of the type of discretionary trade to which you refer?

You didn't mention your stop-loss or entry price at all so perhaps you could step us through your thought process from entry to exit!

 

[boofis]

This thread was disastrously painful to read. Can we have a warning put in the title that nothing ever actually happens lol.

 

[Gringotts Bank]

Hi GB,

Was the BHP trade you entered yesterday (March 20th) "Probably a low risk entry here, I'd posit." and exited today (March 21st) "I don't like it today. Just sold." an example of the type of discretionary trade to which you refer?

You didn't mention your stop-loss or entry price at all so perhaps you could step us through your thought process from entry to exit!

I'm trying out lots of different methods rnr. Different methods, but they all have the theme of trading as "intuitive discretionary".

I wasn't happy with the method I used for the BHP trade, because I only made a tiny profit. So there's no point me going over my technique there.

My trade today is KCN. The way I did it was to take a small inconsequential position and just sit with it. I just wanted to see how it felt. Then I imagined having a bigger position and how that might feel. The feeling was right so I bought my usual size. Having done that (ave:$4.09) it still feels ok and I'll hold over the weekend.

I have lots of other methods to test. The exit on this particular trade will be determined by gut feel, whether I be in profit or loss.

 

[Gringotts Bank]

summary so far: I am attempting to access the 'zone'. By 'zone', I mean the ability to see the market (any market) in a purely objective way, that is to say, free of distortions created by past impression. By past impression I mean conscious and unconscious memories, and how these can prevent objectivity through referencing my most recent trades, overall trading history, mood, general attitudes and beliefs. In particular I am trying to not apply logic, nor pattern recognition, nor any traditional trading method. I prepare the method, then look at the chart (about 1 year daily history) and I decide. This approach is a test and does not discredit other methods of making money in the markets.

Method 1: completely accepting possibility of loss. Betting history was good, trading (one stock only) was basically break even (tiny win).

Method 2: entering small positions gradually and re-assessing using gut feel after each lot. Aside from my betting, I used this approach to buy KCN, so I'm not holding any great hopes for that in the coming week. The betting account didn't do well with this method.

Method 3 will look at mood and it's effects on decision making. Method 2 made no attempt to control or watch mood, so that could have confounded the result there. There is a way to control for that variable but I didn't think of that at the time - so I may go back and do that later depending on the outcome of this test. Method 1 did have the effect of neutralizing mood and taking it out of the equation. So this test will look at positive versus negative mood, as opposed to neutral mood.


Other things I have notice:
- in every case, difficulty in coming to a decision would result in a loss.
- hurried decision making can also frequently lead to losses.
- there seems to be an optimal 'pacing' with decision making, neither hurried nor delayed due to indecision. This is not likely to be a primary factor, but a symptom. In that sense it can be used as a check before clicking the buy button.

 

[tech/a]

there seems to be an optimal 'pacing' with decision making,

If your working on Gut feel then there is no decision.
Or are you saying you are indecisive on acting upon gut feel.
You cant decide on what your gut feel is telling you?
Buy or sell or hold?
I cant understand what your deciding on?

I would assume the best thing to do would be to have
NO CHART
NO NEWS
NO idea of what happened in news.
Just a company name really?
Gut feel??

 

[Boggo]

I cant understand what your deciding on?

Lost me ages ago

Can you just do something and tell us what you are doing or have done so we may get some idea ?

 

[Gringotts Bank]

If your working on Gut feel then there is no decision.
Or are you saying you are indecisive on acting upon gut feel.
You cant decide on what your gut feel is telling you?
Buy or sell or hold?
I cant understand what your deciding on?

I would assume the best thing to do would be to have
NO CHART
NO NEWS
NO idea of what happened in news.
Just a company name really?
Gut feel??

There's still a decision made every time I act, it's just that gut feel decisions are not a conscious decision-making process, but rather subconscious. In other words, there's no "figuring it out" or logic applied. Gut feel decisions (method 2) weren't successful. Decisions made this way presumably will access memory, so in a way Method 2 was a test to see if accumulated trading memory would be a problem...and it seems it was.

Earlier in the thread I used the word 'intuitively' in a different sense, so I'm going to try to stop using that term to avoid confusion. Getting a water tight scientific methodology is extremely hard due to all the confounding factors, however I'm doing what I can to control variables.

In regards to stock trading, I do use information (the chart), and there is an important information processing component, but the mind will process the information differently according to the factors I'm investigating. Have you ever looked at a chart on a Saturday and thought it looks good, only to review it on a Sunday and have second thoughts? That's an example of how the mind can perceive the very same information differently.

 

[tech/a]

Have you ever looked at a chart on a Saturday and thought it looks good, only to review it on a Sunday and have second thoughts? That's an example of how the mind can perceive the very same information differently.

No
Every chart I consider a potential trade I look at with the view of minimizing risk.
My process involves very clear cut decision making and forward planning.
Each trade I view as having a very clear chance of failure.
The information I look at will lead me to very clear trade proceedures.
From trigger to stop to trade management everyday I re evaluate daily in this market.

Unlike you I believe my gut feel can be as wrong as it's right.
Just like my conscious mind.

 

[skc]

summary so far: I am attempting to access the 'zone'. By 'zone', I mean the ability to see the market (any market) in a purely objective way, that is to say, free of distortions created by past impression. By past impression I mean conscious and unconscious memories, and how these can prevent objectivity through referencing my most recent trades, overall trading history, mood, general attitudes and beliefs. In particular I am trying to not apply logic, nor pattern recognition, nor any traditional trading method.

I prepare the method, then look at the chart (about 1 year daily history) and I decide. This approach is a test and does not discredit other methods of making money in the markets.

Isn't that just self contradictory? If you look at a chart you are letting unconscious memory affect you.

You can't trade BHP... surely you know what BHP is and has some unconscious notion on what the company does and/or how it share price behaved.

You need to move to a different market. Say take a 4 digit random number generator, see if this number coincide with a stock on the HKSE, then decide whether to buy or sell the moment you know that it is tradable.

Then report back your findings...

 

[Gringotts Bank]

Isn't that just self contradictory? If you look at a chart you are letting unconscious memory affect you.

You can't trade BHP... surely you know what BHP is and has some unconscious notion on what the company does and/or how it share price behaved.

You need to move to a different market. Say take a 4 digit random number generator, see if this number coincide with a stock on the HKSE, then decide whether to buy or sell the moment you know that it is tradable.

Then report back your findings...

There's two ways of looking, one is affected by memory, one isn't. I could write an essay but knowing your perspective on things, I promise you you wouldn't like it. It would just create arguments.

 

[Gringotts Bank]

No
Every chart I consider a potential trade I look at with the view of minimizing risk.
My process involves very clear cut decision making and forward planning.
Each trade I view as having a very clear chance of failure.
The information I look at will lead me to very clear trade proceedures.
From trigger to stop to trade management everyday I re evaluate daily in this market.

Unlike you I believe my gut feel can be as wrong as it's right.
Just like my conscious mind.

Two different styles.

One style says "how I prepare myself will determine how I see the chart. Then I act spontaneously".

The other style says "The market does what it does, I set my boundaries for risk and reward and let it play out. I act logically".

By adopting the first method, I'm aiming to create a higher win rate. Whilst I'm not setting R:R, so long as I am aware that winners must be allowed to run and losers must be cut short, then the R:R principle is still respected.

 

[Gringotts Bank]

Sold KCN for brokerage. Bought with method 2. Sold with method 3. Mood - 7/10.

 

[skyQuake]

How do you determine if something went 'right' ?

Is profit the only benchmark?

Thnx