Futures blog, GB

[Gringotts Bank]

You could pretty much trade whatever you want with a 10k account with AMP, lowest margins around. That's the beauty of them, keep your money in the bank. Use only what you need for margin.

Speaking of AMP failures...

I think I will go with them eventually. But I thought of a solution in the mean time. Only take short positions. Markets only go down via the elevator, not up. Market meltdowns/fat finger f-ups/algo weirdness/CME server hacks...resulting in huge drops and unfilled stops... can all be avoided.

 

[Gringotts Bank]

Some updates on my simplified Wykoff boxing match analogy.

PS = has no meaning to me.
SC/AR = I view this as one event, rather than two. The bear lands what he hopes is a haymaker but it doesn't cause quite the damage intended. The blow bounces and/or is absorbed by the bull. AR is like a low force recoil (low volume).
ST = bear lands another blow to the bull, but with less force (tired from the effort put into the haymaker).
creek = Bear is tiring, but he manages to keep up an appearance of strength ("keep your left up"). Bull steps in with more and more volume on each subsequent blow.
spring = bear is dazed, reaching, not connecting, low volume (power), slow (time lengthened)
jump the creek = crowd is taken by surpise, they thought the bull was gone for all money (they are still affected by the haymaker attempt and haven't noticed the change in behaviour).
SOS = bull steps up with confidence, landing blow after blow with only small defenses offered by the bear.

 

[Gringotts Bank]

Thinking about adding Buteyko method to my training. My current methods for optimizing my psychology for trading are very compact and easy to implement when I remember, but I need something physical to power it up. Weights are ok, but they still don't hit the mark. If I can get this sorted, the money should start arriving at a speed which will satisfy me.

 

[Gringotts Bank]

AR is not an attack, but a defense so solid it causes the bear to recoil. Since it's not an attack, it has lowish volume. The bear knows his time is limited unless he can bring more and repeated power, which is possible but unlikely. He will make the effort though. Some bears have reserves to draw on, and with a second wind he might be able to take back control (re-distribution).

An AR which is high volume and reach (ticks) is probably not an AR. When the two boxers exchange very heavy blows, one immediately following the other, no one knows what happens next because it's not common. It gets the crowd excited, that's all. Not good to take trades after that sort of exchange, because both sides have clearly shown they are willing and able to fight for supremacy.

 

[Gringotts Bank]

A few hours into reading about Buteyko method, and I'm getting a distinct feeling that the correlation he observed between breathing and health were/are very strong, but that he may have missed the importance of underlying cause. Despite that, a strong correlation can still be very useful if you can get under the hook and tinker...which is what I plan to do.

In particular, I'm interested in any way to optimize/maximize oxygenation and therefore the quality of trade decision-making. Avoiding all costly emotive decisions.

 

[Gringotts Bank]

*under the hood

Buteyko made some really sharp insights. In relation to trading, I have found my breathing changes slightly even when placing small trades. With bigger trades, it can change quite significantly. The change is a subconscious attempt to reduce the awareness of anxiety about the trade moving against me and causing loss. Anything you suppress becomes magnified unless ever greater energy is expended in the process of suppression.

The greater the confidence in one's technical approach to trading, the less anxiety (and therefore better decision making). But technical mastery is a small part of the equation. Strong vibe + half-baked technical approach will massively outperform low vibe + solid technical approach.

Currently I'm checking various 'self-statements' against the breath, to see which alters it the most in a favourable way.

 

[Gringotts Bank]

Reduced volume breathing (RVB) rapidly brings you into contact with the accumulated psychic pain stored in the nervous system - I think that's why it works. Similar to meditation but powered up significantly. So if you hate meditation you'll really hate this!

Doing RVB with a close awareness of the raw 'out of breath' sensation actually dissolves that feeling, leaving you with the realization that not breathlessness at all, but psychic stress. We overbreathe as a way of avoiding that feeling, and for all intents and purposes, it feels like a lack of air in the lungs. So it seems to work, but imho, not for the reasons Buteyko claimed. Without the correct awareness, RVB will be aggravating, stressful and quite useless. Maybe that's why it didn't pass clinical trials.

 

[Gringotts Bank]

copied from https://www.normalbreathing.com/i-hyperventilation.php

Also see the criticisms in the comments section because they are important.

 

[Gringotts Bank]

Buteyko - not noticing any difference so will leave that alone.

Since the subconscious is a supercomputer designed to recognize patterns and form associations, I'm proceding on the basis that it will know the future price direction with just a glimpse of the chart. At least I believe this would be true for experienced chartists. I've got hundreds of examples, both my own and others to back this up. Soros has this 'knack' of being fully aligned with his subconscious. All good discretionary traders appear to have it. Some of the best systems traders I know who can program like ninjas will fail to beat the market. Having said that, maybe they're coding the wrong things.

https://hypnotc.com/laws-suggestion-rules-mind/

 

[Gringotts Bank]

A Wyckoff-style backtest for ASX speccies. Will probably use this as a filter - whilst the curve is nice and smooth, the returns are small. Brokerage included, slippage not, position size is $5000 ($200000 daily turnover stocks) over 18 years. Slippage is always the killer with systems, which is why high turnover instruments appeal. Unfortunately, this system doesn't work on futures but I may find a way. Pick the right stocks judiciously and really pile it in. A stock like DFM - finds that sort of thing.

In general, backtests reflect a desire to find certainty in the market. And whilst there is some certainty, there's certainly not much - ie. most technical edges are thin. The best of the best use their ability to feel and flow with the price.

 

[Gringotts Bank]

The quality and profitability of financial decision-making deteriorates with anxiety. And yet as far as the mind is concerned, anxiety is a good thing since it promotes survival. But wait ... part of survival is the ability to generate an living from trading! Two strongly opposing forces powered by the very same impulse. Logically, the only way to achieve very high profits would be to completely release anxiety...

... and like Riba said, just let it ride.

 

[Gringotts Bank]

We can convince ourselves that anything is real. Sometimes all it takes is a convincing salesman or woman who speaks in a very confident way.

Up until the 3:15 min mark, anyone watching this video will be sighing, rolling their eyes and thinking "she doesn't believe him; she is obviously just playing along". And she is just playing along... right up until the message gets past her critical factor (3:16) and she calls the red card black! And then what about when she can't find her car?

Now instead of red/black we could instead use candlestick patterns, MACD crossover, "smart money", support and resistance, fractal hoo-ha or whatever you like.

 

[Gringotts Bank]

50 years ago women would do "Jazzercise" classes to help with fitness. Then came aerobics. Pretty soon, people saw that you could exploit the ignorant masses by packaging a desirable image. So then there was pump classes, Tae bo, cross fit, spin classes, then yoga made a come back, and pilates and so on. If you were to go into a gym nowadays and speak to one of those personal trainer dudes, he'd sell you on "core strength" (despite the fact that it's not really important, according to the science), and he would sell you that idea with so much gusto because he himself believes it! Someone sold him the idea! Now you believe it! And then you go and tell everyone about core strength. Where does it end?

I'll tell you where...

It ends when a celebrity of sufficient status says "you know I used to be into core strength, but it's really all about the Jazzercise. Just look back 50 years ago how fit people were! Jazzercise - that's it. I've opened up a chain of 20 Jazzercise gyms across the country and we're having a grand opening where you will come and listen to me and you will believe me because that's what you do - you follow orders".

Exercise - Just choose a way to exercise that you find fun, because it's all just exercise. Fancy packaging changes nothing - you're still gonna sweat.

Charts - Just choose a way to trade that is fun, because it's just price and volume. Fancy packaging changes nothing.

 

[Wysiwyg]

We can convince ourselves that anything is real. Sometimes all it takes is a convincing salesman or woman who speaks in a very confident way.

You could say that woman is typical. Watches Ellen every day, dreams of a Hollywood hunk as the bf and has a mental image of living in a two story mansion. Easy to tap her imaginative (unconscious) state given the camera, attention and queued by what's-his-name to go under. Or maybe she played along and we will never know because she could lie anyway. It really is ummm ... b.s. and bears no connection to indicators for me.

 

[Wysiwyg]

A Wyckoff-style backtest for ASX speccies. Will probably use this as a filter - whilst the curve is nice and smooth, the returns are small.

Care to educate what the conditions are?

 

[Gringotts Bank]

Care to educate what the conditions are?

The system only looks good as an equity curve. It's not good in actuality.

Some technical approaches sound good in theory, and some (like Wyckoff) sound excellent in theory, but then when you come to apply them you find they are not real edges. The closest to an edge in regards to Wykcoff is 'the spring', so long as the leg leading into the spring has very high volume. But even that is a bit 'iffy'.

Being extremely thorough, covering all bases, dotting the i's and crossing the t's, having everything 'just so', doing everything 'by the book'.... these things are harmful to performance because they foster fear of loss. That's not to say you can't be thorough if you're already flowing nicely, but if you're using thoroughness to allay fear, it will backfire and hurt performance.

The most reliable real life boost to trading performance is the correct treatment of the fear of loss. The correct treatment is both counterintuitive and difficult. Obviously it must be counterintuitive and difficult, otherwise everyone would be doing it and benefitting.

All fear has the same roots. A fear of being bitten by a bee is the same as the fear of making a losing trade. It's all based in the same misconception.

 

[Gringotts Bank]

Humour, fun, light-heartedness, flexibility, an absense of hard rules (or even soft rules), and absense of structural overlay and unnecessary technicalities. Resisting the temptation to rigidly shoe-horn the chart to fit your beliefs about how markets must work. These are helpful things.

I first came across this idea when I was following a poster on HC many years ago. He was agonizing over the likely direction of NCM... will it go up, won't it? He must have had quite a bit tied up in this position, and as a result he was trying to balance up all the pros and cons in a highly rational and structured way. Then he came on one night and declared he'd given up! He walked away, relaxed completely and suddenly he realized the price was going up and he knew the exact price target. And that's what it did - it went up to his target. Obviously one such instance doesn't mean anything, but when you see it repeated over and again in your own and others' trading, you know there's a truth in it.

We think by 'adding stuff' that we can create a desired level of certainty and reduce the risk. But doing anything to add certainty only enhances fear, and that fear comes out in poor decision making.

One might argue that they know traders who are highly structured who are also highly profitable, and it's true there are such people. It's not the structure that's the problem though.... it's the reason for adding it that makes the difference. Is it done to treat fear of loss, or for the enjoyment?

 

[Gringotts Bank]

True edges do exist. Reliable, high win-rate, multi-market, multi-timeframe edges. But you never stumble across these edges without the correct mindset, and you can never apply them in real trading without the right mindset.

Get the right mindset first, then go looking for your edge. Don't start searching in a desperate frame of mind.

 

[Gringotts Bank]

http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0058244

http://www.thebroscientist.com/wim-hof-breathing-technique-method-legit-scientific-critical-review/

 

[Roller_1]

True edges do exist. Reliable, high win-rate, multi-market, multi-timeframe edges. But you never stumble across these edges without the correct mindset, and you can never apply them in real trading without the right mindset.

Get the right mindset first, then go looking for your edge. Don't start searching in a desperate frame of mind.

Have you got there GB