How NOT to trade a speculative miner

stoxclimber said:

I wonder if he would still have called it a mistake if he made money.

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Absolutely. I posted in a thread elsewhere on ASF that I was going to discuss my WMT trade at its conclusion whether it made or lost money. Regardless of whether it made or lost money, it was a bad trade.

BBand said:

It seems the in statement being bandied around just now is that the most important requirement to be a successful trader is psychology, which is peddled around by quess who - our psychological gurus, they must have something new to help sell their books. It used to be expectancy and money management - oh sorry, I believe its now called position sizing - what will the catch phrase be next year?

Dont get me wrong, I totally agree that psychology is very important - just not that important compared to having a good trading plan

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I have come to the conclusion that in fact psychology IS the most important part of trading - hence my reasons for posting the WMT trade.

Having said that, it's no use whatsoever having the correct mindset if you have a negative expectancy, since you'll confidently trade yourself to oblivion.

But also having said that, it's also no use whatsoever if you have a good positive expectancy trading plan and you continually violate the plan rules, losing money.

I think everyone should have a go at discretionary trading a spec miner breakout with a small amount of capital - it gives great insight into how your emotions get involved in the process and affect your decisions - which in turn gives insight into how a lot of the rest of the crowd is feeling in those situations as well.

It is also a good way to start to learn the discipline required to keep the emotions at bay and unemotionally trade profitably. (can still be a positive emotional experience but in a different way - satisfaction about sticking to your decisions etc.).

I'm not a trader by back ground and still only enter a trade if comfortable with the fundamentals, but I've had some fun and learnt a truckload with trying out trading over the past year or so - some of it in these breakouts.

I think different factors have more or less importance at different stages of the market cycle - strong bull market - psychology, crowd behaviour etc. are key drivers. Depths of a bear market - fundamentals rule. (I'm still a strong believer in fundamentals as a factor in any situation though and never ignore them).

MichaelD said:

Absolutely. I posted in a thread elsewhere on ASF that I was going to discuss my WMT trade at its conclusion whether it made or lost money. Regardless of whether it made or lost money, it was a bad trade.

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Have to praise you for that.

Having said that, it's no use whatsoever having the correct mindset if you have a negative expectancy, since you'll confidently trade yourself to oblivion.

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The importance of a blueprint,more important than the expectancy in my view,as market conditions almost certainly will trade outside those from which a system was/is developed. The Turtles may have failed due to this---I dont know but suspect that to be the case.

But also having said that, it's also no use whatsoever if you have a good positive expectancy trading plan and you continually violate the plan rules, losing money.

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Thats why its developed in the first place. Doing anything else is just reverting to discretionary trading or your trading rules.

nizar,

Iv been thinking about systems trading and backtesting for the last few days, and my conclusion is, its the best way to trade. Its not by all means the only way to trade profitably in the markets, but its the only way you can trade confidently in my opinion, and ill explain why.

For new traders like myself, the last 2-3 have been a dream. We all have a trading plan, and we think our plan works, but every fool and his dog has been making money the last few years, and some bullmarket champions like to think its because of their fundamental research, or because they can read charts, or because of their method. But when you have 80% of the mining sector going up, its not really that hard to make money. Throwing darts, ini-mini-miney-mo, whatever you did the last 3 years, it probably worked.

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Don't confuse all for being beginner champions. Some actually have the psychological fortitude to do well regardless of experience.

So once you have backtested your systematic plan over a certain universe going back through bear markets, and sideways markets as well as bearmarkets, and its profitable with acceptable drawdowns and standard deviations (and montecarlo analysis gives 100%), and has a positive expectancy that you are happy with, you can trade with confidence knowing that if you stick to the blue print, you will succeed.

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If your emotions don't get the better of you. The only way it is different to discretionary trading is if a robot or the computer does it all for you. Sure it is different in applicationa dn theory but emotions stilllllll get involved and second guessing is always present no matter how much you try to block it out. It's the survival instinct in us all!

There are some systems/indicators that can be used for all markets but are beyond most here and not freely available. Maybe Michael has found one or IT.
Cheers
Snake

A great thread, very much worthy of revival, especially in the current climate.
Well @barney, you really are one of the forum fossils...
I never knew....

frugal.rock said:

A great thread, very much worthy of revival, especially in the current climate.
Well @barney, you really are one of the forum fossils...
I never knew....

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Indeed FR. I am getting old in the tooth

I'm not sure whether Michael D is still a member but he was a valuable contributor for many years