Dump it Here

[Skate]

Different ways of thinking
There are many different ways to think about a situation or a problem at hand. Thinking is usually divided into a multitude of categories but I'll concentrate on just two, as trading is a thinking game. Why just two? Because trading relies on making the best decision with the available information at hand.

"Analytical thinking" & "Lateral thinking"
These ways of thinking at times work together & at times independently of each other. Nevertheless, both are required to trade profitably. Let me give you a condensed version of what they both do so you can determine their worth.

Analytical thinking
Is "visual thinking" that gives us the ability to solve problems quickly & effectively by a step-by-step approach. A "step-by-step approach" allows breaking down of complex information into manageable components.

Lateral thinking
Is a manner of "solving problems" via "reasoning" that is not immediately obvious. It involves ideas that may not be obtainable using only traditional "step-by-step" logic of "Analytical thinking".

Skate.

 

[Skate]

Dualistic thinking
Analytical "visual" thinking is a different beast entirely to Lateral "problem-solving" thinking. Sharing the experience I’ve gained over the years, there are alternative ways of thinking about issues beneficial to making trading decisions. My way of thinking about issues is sometimes a little contrary to the accepted norm but normal for me.

We have lost the art of thinking
When people are in doubt, they tend to look to others first, that's human nature. Some people would rather adopt the opinions of others rather than form their own. It's greater today than in the past, today we have lost the art of thinking for ourselves. After thinking for ourselves without an answer that's the time we should seek the help of others & not before.

Where are these posts leading to?
I'll wrap it all together in the next few posts as it will add validity to a way of thinking about the current state of the markets.

Skate.

 

[Skate]

What's trading all about?
Trading is like playing pool, it's not about sinking the ball, but lining up the next shot. Traders are often paralysed into inaction by the way they are thinking about the markets at any given moment. This way of thinking keeps you emotionally & financially tied to "that line of thinking" costing you substantially while you wait, hoping for a recovery.

Have we missed the bounce?
Most people really aren't smart enough to deal with the information overload which now exists & even intelligent people with good critical thinking skills, suffer the same fate. When processing information that supports our beliefs even after the evidence has been totally refuted, people fail to make appropriate revisions to their trading which tends to be one of our biggest design flaws of being human, "faulty thinking".

Trying to apply too much logic to these types of events, usually results in nothing much more than a headache. Sometimes you just hold your nose and jump in and hang on as best you can. If you wait for the all clear, markets are long gone and trying for a good entry is just a waste of time. The time to jump in is often when all looks lost. Easier said than done.

I'll leave the last word to @Beaches

"Just trade what you see"

(END)

Skate.

 

[frugal.rock]

Cogito, ergo sum.
René Descartes
Translation;
I think, therefore I am.

With the game of pool analogy, there's 2 games to consider;
Setting your balls up near pockets,
setting up the white ball from every shot, making it difficult for your opponent to succeed.

F.Rock

 

[Skate]

Skate.

 

[ducati916]

Seemingly good advice. However we (should) know that what we see is very often influenced by what we think we see or what we want to see. Here you have the entire psychological field of cognitive bias to consider.

Second, even if you can filter out the bias and other traps, it has become very clear that to 'see', we have to know what to look at. There seems to be a significant issue with looking at the wrong thing. Media etc.

Even if we are in a darkened room, locked away and looking only at the price chart: what do we actually see? Price charts are a comparative tool. While you will make your final decision: buy, sell, stand-pat on a stock price chart, those price charts are reactive overall conditions. Those 'conditions' are myriad. So what are you looking at?

To 'see' you have to learn how to look.

jog on
duc

 

[Skate]

Skate.

 

[Skate]

realising a 40% loss due to the recapitalisation. This unexpected and undesirable outcome is just bad luck although the fundamentals of DCG were known to be poor. This is a good example that $hit happens when dealing in the market.

Capital Raising
I’m “Crystal balling”, forecasting that there may be a series of capital raising in the near future for many companies. Whether the capital raising is for “private placement” to take advantage of the current conditions for personal gains of company officials or it may be capital raising through a shareholder offer (both are done at a discount)

Private placements
This type of placement can be done on the quiet, offered to selected company officials including the Directors with an announcement simply saying more “shares have been issued” with most shareholders taking no notice.

Shareholder Capital raising
By offering discounted shares to current shareholders (at a bargain price) effectively reduces the value of existing shareholders. Raising capital this way circumvents the banks to increase or extend their line of credit.

Win, Win
It’s a win for the company at the expense of shareholders as @peter2 has experienced.

Skate.

 

[Skate]

When an opportunity exists
Profiting from the stock market is exceedingly difficult to do consistently over a long period of time - it’s our job as traders to identify opportunities, to anticipate a move & take advantage of that move (that’s the front end of trading, "stock selection"). From my experience, it pays to take action while a situation is favourable or where opportunities exist.

The back end of the trading
In its purest form trading is timing the market, buying & selling just at the right time. The best tactical tool a trader has is "selling". Timing the exit “determines” the outcome of a trade, critical to the success of any strategy.

Successful trading is largely the art of selling
Buying a stock & getting into a trend is easy, determining when to cut our losses or take our profits is the hard bit. It is so hard to determine when it’s the right time to sell, many just don’t do it or do it too late. This is a reason to look more closely at the (VIX) to "complement" existing exit conditions.

Skate.

 

[Rsthree]

View attachment 104717
When an opportunity exists
Profiting from the stock market is exceedingly difficult to do consistently over a long period of time - it’s our job as traders to identify opportunities, to anticipate a move & take advantage of that move (that’s the front end of trading, "stock selection"). From my experience, it pays to take action while a situation is favourable or where opportunities exist.

Skate.

Well this rings very true. My post Covid crash paper portfolio is still running at 25%. All I did was pick stocks that were trending strongly pre covid crash and their basic fundamentals didn't indicate they were going broke before the crash.

At the time I decided to paper trade as I'm still green in the market, there was high volatiliy and I feared that the market was in a sucker rally and and would retest the crash lows.

Well it hasn't (not yet anyway) so opportunity missed. In retrospect what would I have done differently..... Well thats irrelevant as my psychology at the time was in a very different state.

Learning slowly

 

[ducati916]

1. At the time I decided to paper trade as I'm still green in the market, there was high volatiliy

1(a) and I feared that the market was in a sucker rally and and would retest the crash lows.

2. Well it hasn't (not yet anyway) so opportunity missed. In retrospect what would I have done differently..... 2(a).Well thats irrelevant as my psychology at the time was in a very different state.

Learning slowly

1. There was high volatility. What did you learn re. volatility? There are some very important facts that relate to volatility. When you understand them, you will have made significant progress re. trading volatility. Have you researched them? If no: why not?

1(a). Why did you believe it was a sucker rally? What informed you that it was? Why did you accept that as an authority?

2. You should absolutely list the things you would do differently and why.

2(a). What drove your psychology? If it was the 'market', then this is highly RELEVANT. You need to understand yourself and your reactions: most importantly, if you cannot control or manage your reactions you need a strategy that prevents those psychological reactions to begin with.

Now I don't mean to be rude, but you have learned nothing at this point. The good news is that you have plenty of time to do so.

jog on
duc

 

[Skate]

so opportunity missed. My psychology at the time was in a very different state.

@Rsthree, your post allows me to get on "the soapbox" as there was no question but a statement from your recent experience.

"My psychology at the time was in a very different state" (your quote)
Fear & greed directly drives the markets & it’s our perception that creates the value at any given moment. The markets are a "reflection of the overall beliefs of all the traders" in the market at any given time. While one person sees a buying opportunity of a lifetime, another sees the meltdown of the global financial system as we know it. Reading a few threads, this becomes obvious in the extreme on both sides of the argument.

Psychological outlook controls perception
Your psychology plays the biggest part when it comes to trading because it controls your perception (the drivers of your reactions). When to be in the market & when to stay out of the markets is a personal decision & that decision is made while in an emotional state. Emotions can be good & bad, recognising the difference is the secret to trading.

We need to understand market momentum
@ducati916 recent series of posts are full of examples with supporting graphs adding validity to his posts. The momentum shifts the share price & our decisions determine if we are profitable traders in the long run. The "sentiment" of the players creates momentum in both directions. In a nutshell, trading is about "knowing when to hold them & knowing when to fold them" (Kenny Rodgers)

Perfect time
Staying out of the markets at the moment shouldn't be seen as a lost opportunity but the perfect time to evaluate your trading plan. I try very hard "not to give advice" because others will do as they please & "not what's in their best interest".

Skate.

 

[Skate]

Now I don't mean to be rude, but you have learned nothing at this point.

"You have learned nothing at this point"
@ducati916, those words were a bit harsh even for me but I do realise the frustration you must feel because of the amount of effort you have put into explaining why the markets are reacting to the "volatility" controlling the day. It's worth remembering, we all learn at a different rate & our level of experience differs from one member to another. @Rsthree meets my expectations because he is one member who is thinking about some of my previous posts. Remarking that "his psychology" is now different today from the time of the COVD-19 crash.

Thinking
Thinking & curiosity has been pulled out from under us as traders but now's the perfect time for us to reclaim this area. Critical thinking (not touched on in my previous posts) is important but not as important as discovering new ways of thinking about issues or problems. Traders fail to realise that trading is just making one decision after another, making the right decision has a huge bearing on your profitability.

The key element
Fear drives capital preservation, which is the key to the longevity of a trader but sometimes (at a cost) stifling portfolio growth in the process. What we see in our "mind" sometimes doesn't align with reality, leading us into making a poor or wrong decision.

Summary
There is never a dull moment in the markets.

Skate.

 

[ducati916]

View attachment 104722


"You have learned nothing at this point"
@ducati916, those words were a bit harsh even for me but I do realise the frustration you must feel because of the amount of effort you have put into explaining why the markets are reacting to the "volatility" controlling the day. It's worth remembering, we all learn at a different rate & our level of experience differs from one member to another. @Rsthree meets my expectations because he is one member who is thinking about some of my previous posts. Remarking that "his psychology" is now different today from the time of the COVD-19 crash.



Skate.

Not as harsh as losing all his money. That is the reality. If you do not understand at least your own trading, you are highly likely to blow-up your account.

The years 2000-2003, 2007-2009 were huge learning opportunities (I would have loved to be trading in 1987, what an opportunity). If you were not trading then, you missed them. Looking at history can only take you so far. You need to live the market to fully appreciate the market. 2020 is a godsend for those serious about markets. It provides all you need to learn about trading bear markets.

Learning is an active process. It just doesn't happen via osmosis. It is good that he is willing. It is not good that he is missing object lessons being provided by the market.

How his 'paper' portfolio performs is worse than irrelevant, it is positively dangerous. Almost anyone can generate paper profits. Paper from real is 100% different. That however is not the central issue: the issue is that two critical factors are discounted as unimportant.

His paper portfolio is UNIMPORTANT. The other factors are CRITICAL.

jog on
duc

 

[Rsthree]

Yes I did say learning.

What I did learn

• I'm more risk averse then I thought I was
• Amibroker has a steep learning curve and I'm a long way from developing any sound code and successfully back testing the results with any confidence
• I realise that I will need to buy, beg or borrow system code that I can tinker with, tweak and learn. I don't think I'll have the tenacity to develop the level of Amibroker competence I'd be happy with
• It's bloody hard to keep things simple
• After reading enough content to make my eyes pop out of my sockets I could find an expert with an impressive set of charting tools to justify just about any result that I could dream up.
• It's bloody hard to keep things simple..... yes this one keeps popping up
• Common logic and basic economics don't seem to apply to the markets when fear, greed and fomo are in play.... Well at least not in the short term.
• I now know more about what I don't know
• Paper trading has limited learning value for me as it doesn't exercise / test the emotions enough, which seems to be atlest half the game. I'm better of trading a small account and just paying for the learning process with trading fees.
• Lots of small learnings like developing portfolio tracking tools and excel skills, trading accounts etc.
• My exits are still work in progress, ie. Finding the right balance between being too cautious with tight stops.. fear factor.. or allowing more space to avoid over trading.

Yes still learning and the more I learn, I learn more about what I need to learn.... if that makes sense.

 

[Warr87]

https://www.marketcalls.in/library
https://alvarezquanttrading.com
and the AB forum all have plenty of code to play with

I still have a while to go with my coding, but you can always macgyver some code snippets together and follow basic rules to avoid overfitting/unrealistic results. I don't blame you for wanting to buy code though, as even though I have working systems I may buy one of Radge's turnkey systems.

I also still strongly believe that the complexity in systems comes not from the buy/sell rules, but rather the periphery code (making sure stops are coded correctly, or risk is implemented, or even just the exploration code, etc.)

 

[Rsthree]

How his 'paper' portfolio performs is worse than irrelevant, it is positively dangerous. Almost anyone can generate paper profits. Paper from real is 100% different. That however is not the central issue: the issue is that two critical factors are discounted as unimportant.

His paper portfolio is UNIMPORTANT. The other factors are CRITICAL.

jog on
duc

Justleaised there's been a few more posts since your initial comment, the joys of typing on a mobile device.
Always happy to recive criticism, it's part of the learning process. Hehe.

Total agree with your comment on paper trading, it was a l long way of the real life drama of a live portfolio. But it allow me learn a few technical aspects of managing the process.

 

[Rsthree]

https://www.marketcalls.in/library
https://alvarezquanttrading.com
and the AB forum all have plenty of code to play with

I still have a while to go with my coding, but you can always macgyver some code snippets together and follow basic rules to avoid overfitting/unrealistic results. I don't blame you for wanting to buy code though, as even though I have working systems I may buy one of Radge's turnkey systems.

I also still strongly believe that the complexity in systems comes not from the buy/sell rules, but rather the periphery code (making sure stops are coded correctly, or risk is implemented, or even just the exploration code, etc.)

I did write down a set of rules that I wanted in my trading plan and then laid them out in a logical order of how I thought they would be coded.
I then tried to to find bits of code for each of my rules and tried testing each element. The individual pieces sort of worked, but then trying to string together some of the rules it all fell apart. So yes it became very frustrating process.

I'll take the opportunity, again, to remind all the seasoned traders that we are in a beginners thread. I've found that sometimes even seemingly simple and common trading concepts are not so simple when you start to dig in to them. At times I'd be been diverted for hours into the bowels of the WWW trying to find answers, and it's amazing the amount of **** you can dig up.

 

[ducati916]

1. I did write down a set of rules that I wanted in my trading plan and then laid them out in a logical order of how I thought they would be coded.

2. I then tried to to find bits of code for each of my rules and tried testing each element. The individual pieces sort of worked, but then trying to string together some of the rules it all fell apart. So yes it became very frustrating process.

3. I'll take the opportunity, again, to remind all the seasoned traders that we are in a beginners thread. I've found that sometimes even seemingly simple and common trading concepts are not so simple when you start to dig in to them. At times I'd be been diverted for hours into the bowels of the WWW trying to find answers, and it's amazing the amount of **** you can dig up.

1. With the recorded rules, did you also list 'why' you want that rule. Market divergences are a critical element of analysis in the market. You want to ensure that your rules are performing as expected. To do so, you must note your expectation.

2. For Mr Skate.

3. That is very true. Re-reading my posts, they are intemperate. Apologies.


jog on
duc

 

[Skate]

1. With the recorded rules, did you also list 'why' you want that rule. Market divergences are a critical element of analysis in the market. You want to ensure that your rules are performing as expected. To do so, you must note your expectation. 2. For Mr Skate. 3. That is very true. Re-reading my posts, they are intemperate. Apologies. duc

@ducati916 thank you on two fronts.
(1) Getting me to think about how I can help others in the same boat as I've helped @Rsthree yesterday.
(2) Making an apology, where one was due (impressive)

Skate.