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Forward Projection

by The MoleSeptember 4, 2015

As the long weekend approaches we should expect only minimal participation today, which is a good opportunity to pass along some food for contemplation. A seasoned trader really never fully rests; although there may be extended periods in which no actual trading activity takes please you should not confound this with a license for mindless pursuits. I personally spend quite a bit of time on pertinent activities such as system building, bug fixing, support issues, etc. But at the same time I do spend extensive hours in meditation and self examination. This may happen whilst laying in bed, while listening to music, or during a trading session – thoughts come and go and do enjoy revisiting and re-analyzing previous days in my mind.

And that is not by accident. Although I would characterize myself as a pretty cerebral person in general, I am keenly aware of the fact that my activities here at the evil lair are constantly open to public scrutiny, and that there is very little room for mistakes. As such the privilege of commanding the attention and perhaps respect of a lively trading community counting into the tens of thousands comes at a heavy price.

Whereas you may one day find yourself on an emotional bender after a series of trading mistakes the Mole does not have that luxury. I’m only as good as my last campaign and nobody gives a rat’s rectum about how well I did during the past week, past month, or past year. You’re only as good as your last trade, and it only takes a handful of bad trading decisions to not only tarnish your reputation but to also seriously impair your own self confidence. Unlike you I can’t just say ‘screw this’ and then walk away for a few weeks or months and then return and pick up where I left off. Passive income via monthly subscriptions sounds like an enviable scenario to most until they realize that you will never ever be able to truly take a day off again. And the same applies to anyone running automated strategies – unless you hire a person you can trust 100% you will not be able to completely detach yourself.

Which is why I am sometimes surprised that I’ve managed to keep this place together for more than seven years now. And what has kept me in the game here for so long, post after post, is not the additional income. Clearly it’s a benefit as it blunts the pressure a little, but I could easily do without it. No, the biggest personal reward of doing what I do here is to impose personal accountability. I do not believe that I could have become the trader that I am today had it not been for this project. Evil Speculator started as my personal trading log back in 2008 and its secondary function was that of educating and possibly benefitting others in the process. But I have never lost sight of my core mission – which is to become the damn best trader that I can possibly be. To never stop learning. To be a consistent earner who is able to negotiate any market terrain. And to be in full control of my emotions, to never act reactively, and to abide by a set of rules and principles that I have defined for myself over the years. Sounds easy enough, doesn’t it? 😉

In fact it’s a pretty daunting task for the most resilient and talented amongst us. Now imagine if at the same time an audience of thousands follows your every action. If everything you do is being analyzed and often criticized on a daily basis. It can either make you or break you. The one principle that I believe has kept me in the game so long is that of forward projection, which is my personal technique for avoiding self deception.

2015-09-04_spoos_briefing

I will try to explain this to you as best I can – in essence it involves using reliving past behavior/emotions to teach you that none of them really matter. It’s not really a cognitive bias – it’s more related to the Dunning Kruger effect. In a nutshell – we all want to be right – whether or not we admit to it or not. At the same time we all have a tendency to over estimate our personal skills as novices whilst at the same time under estimating them the more experienced we actually become. Being wrong creates internal tensions and frustrations which we suppress during the initial stages of learning – which is good to some extent as it keeps us from giving up. Heck, had I truly known how tough it would be for me to learn Spanish I may have just not bothered. Now that I have three+ years of constant practice under my belly everyone tells me how well I talk but deep inside I truly think that I still suck.

When it comes to trading however the incessant human urge for making predictions combines with that of wanting to be right. And I have written quite extensively how those two motivations can wipe out a trading account in a very short amount of time. My personal technique for constantly reminding myself of this fact is to project forward. Take the chart above – pick a spot (and perhaps cover everything past it) and then think to yourself: What would I have thought at that very moment? There are times when the tape is more explicit and gives us many clues. But then there are times when it’s a complete coin toss. Especially when it matters the most. Remember I mentioned that the other day?

Two day ago I’m sure that many of you were short (I was with a tiny position). Then we got squeezed a bit the next day and I’m sure the very same people were thinking – ‘hey, clearly this is going to continue further now’, conveniently forgetting that they were 100% certain that the tape would drop like a rock just a day earlier. So what are you thinking today? Are you convinced we are descending lower? If you are – how will you feel about that if find out you were completely wrong next week? As a matter of fact – how do you reconcile the fact that you have been wrong so many many times in the past? Do you actually acknowledge this to yourself or do you conveniently suppress it – rationalizing it by saying to yourself ‘let’s move on, that’s yesterday’s news.’ You’d be surprised by how many people do exactly that and it’s usually the ones who are most vehement in defending their opinions here in the comment section.

However if you were looking at that chart whilst thinking that it’s almost impossible to know, well then congratulate yourself. That’s the first step in embracing nothingness – in accepting randomness and chance. There are times when it’s possible to pick a spot and proclaim: ‘Here’s a great spot to be long and if this and this happens then I’ll be out.’ Done. Perfect. Not because you know the future but because sufficient technical context (i.e. your lens) affords you a momentary opportunity. But there are times like right now when the tape is sitting at a knife’s edge and market makers are determined to take both sides to the woodshed. Do not over estimate your ability to make any type of prediction – instead simply project forward and consider what the odds are for each possible scenario.

When I post my charts here I have always already gone through that very exercise. I evaluate all clues offered to me and then arrive at various scenarios that seem most plausible. Most of all – I remind myself that my trading decisions have to hold muster in the presence of a large audience. If things go against me next week (and they often do) then it’s important that I made this call based on technical evidence present at the time and not because of wishful thinking. I project forward and ask myself: ‘what happens when (not if) I’m wrong’? Am I still going to be satisfied about having taken this entry? If the answer is ‘hell yes – this is an entry I would take every single time’ (even if it was scary) then you won’t be losing any sleep over it. Even if someone’s watching 😉

 


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • CandleStickEmUpper

    Great post Mole. Have a great weekend. (I managed to scalp some ill-gotten gains during the unemployment number just now, I think Im done for the weekend, unless of course some fireworks occur later. Will be around).

  • Edd

    Thank you, simply outstanding

  • evilasevildoes

    journeyman!

  • Skidmarkalot

    Superb post Mole!!!

  • http://evilspeculator.com molecool

    Just to show that even the best entry doesn’t guarantee success. Copper today – perfect entry via Scalpius and then it swings up and stops out by one tick. Only to continue toward what would have been a 5R+ winner. All part of the game – as I said, automated systems do not insulate you from the emotional roller coaster – you only exchange one set of internal conflicts for another.

  • RonnieH

    Great post

  • vladv

    keep up the good work

  • BobbyLow

    Great post Mole.

    I came to ES sometime in 2009 and I’m amazed at how much this site as grown since then. If I remember correctly, we were Wave Wanking and pretty much a Bear Cave back in the early years.

    As ES has changed over time so have I. My trading mindset has had a complete makeover primarily due to what I have learned from people right here.

    Has change been easy? Hell no. My change has been gradual because I’m probably like many here who are type “A” personalities and just a little crazy for doing what we do in the first place. :)

  • BKXtoZERO

    Thanks for continuing to write. You write well enough that I already knew and accepted and embraced what you said after reading here for about 4-5 years now. I have personally grown quite a bit although far from being one of you I am perhaps halfway there. My performance in the last 2 years compared to the years before I started reading, and worse, before I started LISTENING has gotten much better. I was without a doubt a self admitted complete 100% dumb phuck before and now I am perhaps half that and improving :-) so thanks!

  • mugabe

    Great and honest post. I would take issue with one thing, though:

    ‘I’m only as good as my last campaign and nobody gives a rat’s rectum about how well I did during the past week, past month, or past year.’

    In the scheme of things, your last campaign, or last 10 campaigns, are irrelevant. Whereas the past year IS much more important. If people think your last campaign (or 10 campaigns) are important, that’s not your problem; it’s their recency bias.

  • mugabe

    big volume today. holiday weekend?

  • Zhang_Ke

    Great post Mole! I have learned a good deal from you on this site over the past year or two and I much appreciate it! And I must say that I also hate those trades that take you out by a tick! Although I’ve hit some buy points and exit points in the past to within several pips (FOREX) and felt really goooooooood about it! I guess that stroked my same need to be “right” about a trade.

  • Huey

    Thoughtful post Mole, thanks! Will reread this weekend and let it sink in more.

  • nyse

    Thanks a lot for this post. I have lurked on this site for years and have learned much from you and many other the other mainstays at ES.

  • http://greenlander1.blogspot.com/ Greenlander

    Great post Mole. I am impressed how much you have developed as a trader from when there used to be EW posts here. But what has really impressed me is your (and Scott’s also) understanding of trading psychology. It keeps me coming back and appreciate the reminders to keep that at the forefront to maintain my self-awareness instead of any overconfidence in a system or lingering cognitive bias.

  • http://pugsma.wordpress.com/denalis-turning-points/ denali92

    ABSOLUTELY AGREE!

    It is an excellent reminder of why this site is not just good for all of the systems (zero, etc..) and set ups, but also for the regular lessons and reminders on trading psychology.

    THANKS!

    -D

  • http://pugsma.wordpress.com/denalis-turning-points/ denali92

    This will probably be my last comment for quite some time – possibly up to 3 months – as I am having shoulder surgery on Tuesday and will only have the use of my off arm for at least 6 weeks, if not 12. I am highlighting the likelihood of the radio silence, so that Scott and others do not think I have just blown up playing the opex, employment and holiday turning points in the SPX! (what a GREAT post August opex bottom last week!!! – opex is 8 for 8 this year on turns!)

    I am biased towards a low post employment and a rally in to opex…. as that is what history and the September opex dynamics would suggest, but the below study does highlight two analogs (particularly June 2011) that would not see a bounce until late in opex week / post opex)

    Have a GREAT holiday weekend.

    I’ll be back,

    -D

    Unfilled down gaps on Employment Friday have happened 8 times in the last 6 years – not very often – and by posting this now, I may be jinxing the study…. But I thought it interesting to consider.

    • Two of the gaps were from the highs, so do not help provide perspective.
    • Four of the gaps bottomed shortly – 1 on employment day (Apr 13) and 3 post employment ( June 10, June 12 and Mar 15)
    • Two of the gaps started significant runs lower that did not stop till late in opex week.

    I am NOT trying to data mine here…. The data do seem to support the scenario that I favor which is lows next week and a rally in to opex (or at least close to opex….) (Jun 10 is the analog that BUT, the data also highlight two extreme analogs – May 2012 from the highs…. But also June 2011 where the market fell relentlessly until opex Thursday in June 11 and opex Friday in May 2012….

    Just something to keep in mind.

    I am sticking to my approached laid out here

    https://pugsma.wordpress.com/denalis-turning-points-2/denalis-turning-points-2015/

    but June 2011 is a reminder that we could see a run lower for longer than just next week (if that is the market’s plan)

    Details of unfilled down gaps on employment Friday.

    1. 4-Jun-10 – Bottomed on the Tuesday after employment. 22pts below employment day close and just 2.5pts above the late May low (which was slightly below the flash crash low in SPY). Market then begrudgingly moved higher in to a Monday post June opex top

    2. 3-Jun-11 – This was the start of a lower bollo band run that saw minimal bounces before bottoming on opex Thursday – 40pts below employment day close. (note: From the June opex low, the market rocketed higher to test the spring highs!)

    3. 8-Jul-11 (LATE employment report from the HIGHS) This gap was not filled until Feb 2012! It was a late employment report and the market was well above the upper bollo when the gap occurred – not really relevant

    4. 4-May-12 – Market had peaked on the 1st and was down down down until May opex day – then briefly bounced from there until the final low post June employment

    5. 1-Jun-12 – Selling had been going on for a month – market gapped down and ran – correction bottom was found on the Monday after 10pts below the employment day close. Market then rallied for 3 plus months!

    6. 6-Jul-12 – Had closed at the highs before the 4th of July – topped and pulled back until the Thursday post employment before resuming the rally.

    7. 5-Apr-13 – Very sharp initial Q2 correction ended at the employment day open and market rallied for 6 days before falling back in to opex week.

    8. 6-Mar-15 – Down big on employment day. Inside day on the following Monday and then continued selling until the Wednesday post employment. Market bottomed 31pts below employment day close and then rallied strongly in to QUAD opex week and the FOMC meeting. Topped on the Monday post opex

  • OzarkHillBilly

    Good luck with the surgery!

  • ridingwaves

    I had a S vix entry in the green nicely with 1/2 sell at 1280 and the turn yesterday was at 1277…
    not in the red but the green is very light….maybe setting stops below your target as retracement stops might be prudent…though I didn’t…

  • ridingwaves

    ditto

  • OzarkHillBilly

    Great point today about accountability. I have two good friends that also trade, and although we all have different styles and strategies, we share not only what we are seeing but what trades we are taking. I’ve found that it helps to keep me in check and be more objective. To a lessor but still significant degree, being open here about what I’m doing keeps me in check as well, since I respect the time & effort that you, Scott, and Ivan (as well as others) put into helping people when you could easily just say “screw this.” I honestly don’t want to be a just another disappointment here. And when my boy kids older, I don’t want him thinking that I’m a loser either!

  • Malcolm O’Mara

    Stopped out UGAZ@1.65

  • Huey

    Followed Mole into the EURUSD buy in small size yesterday, just added another 1/4 on the strong bounce off of yesterday’s low. Not taking a big position on this one.

  • evilasevildoes

    here is chart of four taps on trend lines try it yourself ——>http://schrts.co/D2C82s

  • Mark Shinnick

    Yeah…and be as patient and disciplined with it’s healing as you can be in the markets.

  • ridingwaves

    stopped out s Volatility for zilch…crazy pre-holiday tape today..

  • http://evilspeculator.com molecool

    Yeah, if someone would have just told you ahead of time…. (sigh)

  • Mark Shinnick

    Yeah…its a blast to nail the numbers…but temper that because its also a good way to be wrong by missing the objective, or the move altogether. A expression I love is that technical expectations seem to work more often than not… but not always.

  • http://evilspeculator.com molecool

    What I’m listening to right now…

    https://www.youtube.com/watch?v=JbTUL1rK0yo

  • Billabong

    Look forward to hearing about the operation’s success … Take care and praying for a speedy recovery.

  • OzarkHillBilly

    Musical preferences are linked to cognitive styles. Seems like this may have already been brought up. Read this the other day and thought of you.

    http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0131151

  • Zhang_Ke

    Yes. Thanks. You are spot on…. I’ve missed some nice moves thinking I was so smart about technical targets! I now will set a buy or sell based on the measured target and if not hit, I will still enter the position on a moving average cross. And in fact, I’m still looking for a resource that has studied the completion probabilities for the more common technical patterns, knowing that they are not 100%. You wouldn’t happen to know of any would you? Thanks again.

  • BobbyLow

    Just got back from running some errands and I’m amazed at just how volatile this market has been lately.

    The way things appear through my lens is that I’m still inversely positioned with a long Oil position via UCO and Short Oil Companies via ERY. Until these things get synced up that’s the way it will be. I don’t mind holding this pair over the long weekend because they are kind of off setting.

    OTOH, I’ll be closing my latest Short of the GBP/JPY before the COB today. I’ve been a One Trick Pony when it comes to Forex as of late. But what can I say? I love this Pair. This thing has shrunk by 1200 Pips over the past 2 weeks and I’ll have banked at least 800 of these Pips by the time I close it out again today.

    One thing that relates to this morning’s post about change and or growth is that in the past, I would have tried to go against the grain because I would have pulled a thought out of my behind and said “this thing has gone down so far it has to be due for a reversal”. But now I am able to look at my chart and see that there has been no real sign that it is turning around. Then the question is can it go down some more and the answer is – Hell Yes! :)

  • wandering196

    We don’t share the same taste in music but I can get over that :)

  • mugabe

    Peter Brandt has some work on this as has Tom Bulkowski.(books included). Try googling.
    The problem is, the definition of the pattern can be subjective

  • mugabe

    This whole thing about being late to a trade is debatable. I think it depends if you’re sucked into the trade emotionally or your entry is based on a rule.

  • http://evilspeculator.com molecool

    Sorry…

  • http://evilspeculator.com molecool

    That is interesting!!! thanks for sharing :-)

  • http://evilspeculator.com molecool

    I’m glad she told me before I bought the ring…

  • mugabe

    can’t remember mole ever posting music here …

  • http://evilspeculator.com molecool

    seriously? RAMMSTEIN? I was famous for that!

  • mugabe

    I said *music* :)

    edit: actually, this isn’t too bad

  • wandering196

    I still love you dont worry

  • http://evilspeculator.com molecool

    Ha – good luck doing that on me. I like rap, punk, metal, death metal, trance, salsa, classical music (especially baroque like Bach and Beethoven), rhythm and blues, etc. The only one you can chase me with is jazz – especially freestyle jazz. Yuk…

  • http://evilspeculator.com molecool

    It’s not you – it’s me…

  • http://evilspeculator.com molecool

    Wow – this is so interesting. Get this:

    “And because systemizers have a tendency to construct and analyze systems, we predicted that systemizers would prefer music that contains intricate patterns and structures.”

    Trance, punk, metal, even classical Bach – yup I think they nailed me on that one.

  • wandering196

    I agree on the Jazz. My parents used to wake us up with classical music (decades ago). I have a good appreciation for it plus I inherited a huge library of records. I actually play them !

  • http://evilspeculator.com molecool

    Seriously? The Spanish have the worst taste in music I have ever come across. You guys not only completely missed the boat on trance, punk, metal, etc. – the stuff I hear in the bars is making my toenails curl up. What they call it – Spanish pop rock or something. The other day I mentioned to some Spaniards that a song was a bad remake of David Bowie’s under pressure. Fucker didn’t even know who David Bowie is – I shit you not.

  • wandering196

    That is really interesting

  • http://evilspeculator.com molecool

    I wish I would have had your parents. Mine woke me up with a beating and that was on a good day! (j/k)

  • Bill

    Some old school Paul Oakenfold is like ritalin.

  • Bill

    Looks like we may see an EOD ramp job.

  • OzarkHillBilly

    Dude, i could say the same. I’m sure I was the only kid in my 5th grade class listening to Iron Maiden and Judas Priest back in the day. Still remember the first time I heard Metallica. And the first time I heard NWA was as I climbed into the backseat of a tinted-out, smoke-filled black Monte Carlo headed to the wrong side of town. Summertime takes me back to the pre-Hagar, fun loving Van Halen days. I still listen to all that as well as tons of electronic music; I had turntables for a few years and if it gets real quiet I think I can still hear a beat. Breakbeat trance stuff was my bread and butter for awhile. Some electronica is modern day classical, IMO. But I can just as easily jam to some good bluegrass.

    Not a big fan of the harshest metal; went to a Pantera concert once just to hear the opening act Type O Negative. And fucking jazz ……. I can take some of it but it’s all that my gf’s dad wants to listen to. Drives me nuts in the car.

  • http://evilspeculator.com molecool

    Agreed – Paul VanDkye as well.

  • http://evilspeculator.com molecool

    Now in their defense – they do have brilliant music down here but I don’t hear many Spaniards actually listening to it. Some of the poppy flamenco stuff is very cool – here’s one:

    https://youtu.be/hwyYo0qzDrA

  • BobbyLow

    I like em all but for the most part, I’m still stuck in the 60’s. :)

    How about a little Jimi Hendrix?

    https://www.youtube.com/watch?v=TLV4_xaYynY

  • CandleStickEmUpper

    Am I the only one thats watching the emini futures tape today?

  • Billabong

    One thing I heard many years ago was that many professional traders have only one or two things they trade and not a vast array. GBP/JPY has had a great run … One campaign of the next 100.

  • Mark Shinnick

    Yes…that “has to be due” prejudice is usually subjective recency bias creeping in. Needs to be justified by some actual concrete objective

  • Billabong

    It also depends on your system. I primarily use a MOMO system and being late decreases the probability of a profitable outcome. If I use the trend system and take advantage of a pullback to enter, then a different dynamic is in play.

  • Billabong

    He has RBT buy and sell signals. By letting the right brain takeover, he doesn’t follow his signals and uses judgement. Thereby, checking the mistake box and adding another one for the month…

  • OzarkHillBilly

    Lots of good stuff from back then. I was just trying to find some Jefferson Airplane tunes on Amazon last night. If you have Amazon Prime, lots of music is available there. Put some Hendrix in my library there just a couple of weeks ago.

  • ridingwaves

    Gypsy Kings rule the roost over there…sounds like an offshoot of there influence…

  • Billabong

    Mole, thanks for the post today. You’ve given me a short refresher training thought piece. These pieces are worth their wait in gold for reinforcing the right things to do. For you, it’s probably painful to write the same stuff over and over again through the years. For us, it probably stops us from making the same mistakes over and over again.

  • Mark Shinnick

    Cool self-awareness cross-check tool, “RBT”.

  • Mark Shinnick

    Who’s long?

  • tristan37

    2nd VWAP test coming…

  • Billabong

    Long bond….

  • OzarkHillBilly

    And there are always new students lounging around the entrance to the dojo that need to hear these things as well. Everybody has to chop wood and carry water in their own way, even the master.

  • Mark Shinnick

    Yeah…I think you have a point there.

  • BobbyLow

    Me too. Maintaining a limited stable is a good fit for my personality/trading style. If I try to stalk too many things, I can get into trouble. So for me, it’s definately the KISS Method, “Keep It Simple, Stupid. :)

  • mugabe

    Agreed .. but I’m not Spanish!

    Possibly my favourite Spanish pop album is this one:

    https://www.youtube.com/watch?v=NXb20Citeec

    Los años de la movida

  • mugabe

    you were lucky!

  • http://www.ProfitFromPatterns.com/ Ivan K

    O’Billy – there are many words / phrases mis-used globally now .. evolution perhaps … or a steered path … towards singularity … ‘two good friends who also trade’ is the go still in my world … same as a dead bird on the road is a dead bird.

  • mugabe
  • mugabe

    I’m not that surprised. this is sort of connected … when trotsky was in cadiz on his way to being exiled to the US in 1916/17, he was surprised to see that there was no news of WW1 in the Diario de Cadiz … spain not being in it!

  • OzarkHillBilly

    Not me, but I got out of the rest of the puts I bought yesterday. I choose to rest and play this weekend.

  • mugabe

    not boasting, but it’s an 18 incher

  • mugabe

    that is exactly right … and both Mole and scott are aware of it.

  • mugabe

    great quote:

    When no one knows what the economy or stock market will do next, people say there’s high uncertainty. This is different from low uncertainty, when people think they know what the economy and stock market will do next, invariably followed by being wrong, which they blame on high uncertainty.

    http://www.fool.com/investing/general/2015/09/01/downturn.aspx?source=iaasitlnk0000003

  • Darkthirty

    not me , gotta sit to pee

  • http://greenlander1.blogspot.com/ Greenlander

    I have always found it fascinating the obsession with ‘musica heavy’, i.e. headbanger stuff. I encountered some of bars with this kind of music back in the old part of Bilbao almost twenty years ago. Ten years later, they are still there with the same people. It’s like a living time capsule!

  • http://evilspeculator.com molecool

    Except the kings are from France actually :-)

  • http://evilspeculator.com molecool

    You’re confusing cm with inches again.

  • captainboom

    If you are talking about your penis, I call bullshit. Here’s the data to back it up:

    http://news.sciencemag.org/biology/2015/03/how-big-average-penis

  • phylum

    Have at look at Ivan’s work at profitfrompatterns.com

  • mugabe

    think I’ve got a poblem with my glasses, lol

  • Scott Phillips

    Thats very funny!

    I’m also short es from the break of the daily low, stop at the daily high

  • mugabe

    Good interview with Brett Steenbrger.

    Take-aways:

    1 Not having an edge (and therefore experiencing sustained losses) is the usual cause of psychological problems with traders. These problems normally don’t exist in a vacuum.

    2 The biggest mistake traders make is to persist with a system when market conditions have changed and the system is no longer operative.

    3 To get superperformance, you by definition need an edge which is unique and is not just a replication if what many others are donig.

    4 You learn more by analysing successful trades rather than unsuccessful ones.

    http://blog.stocktwits.com/themustfollowpodcast-dr-brett-steenbarger/

  • http://evilspeculator.com molecool

    Reg. 3 – you can’t be successful doing what everyone else is doing. Applies to all facets of life actually. Since childhood we are being taught to conform, to be good little worker bees, not to rock the boat, wait your turn, be patient, karma is a bitch, all that crap. If you want to get into the top 1% – guess what, you can’t get there doing what 99% of the people are doing.

  • mugabe

    He also makes the point that you’ll never get this extra-ordinary edge without long study of the markets/charts … and even then it’s by no means guaranteed that you’ll arrive at it.

  • http://www.ProfitFromPatterns.com/ Ivan K

    M – there is a school of thought that holds true that it is far more beneficial to strive for an ongoing series of personal bests … as opposed to being better than / beating someone else … life is all about choices.

  • http://greenlander1.blogspot.com/ Greenlander

    No 2 is a really interesting one for me. It’s really difficult to be disciplined yet flexible/ creative and visa versa. It isn’t in most people’s nature to do both because for a lot they are opposing traits.

  • http://greenlander1.blogspot.com/ Greenlander

    In Brett’s own words…It is often a trader’s virtues–consistency and discipline–and not vices that create losses during periods of market flux.
    This is why the single most important trait of traders who achieve career success is adaptability.

  • mugabe

    I think it depends on the strategy and the financial implications of trading it when it’s not working. These can be merely temporarily negative or devastating depending on the case.
    Mole’s equity curve filter is interesting in this regard. Check out for example the CI spreadsheet and see how often trades go down to 0.1 R size.

  • fearful_syymmetry

    Is this freestyle to you or intricate? I could see this as a Zero soundtrack:

    https://youtu.be/xXgssoTVgJo

  • http://evilspeculator.com molecool

    That solipsism at its best, Ivan. Fine if it makes you happy to be at your ‘personal best’ – but that’s a relative measure. What matters is how you measure up to everyone else, and more often than not that’s not good enough.

    The fastest among us can sprint 100m at a speed of 15.9 mph, or between 13-14 seconds. That might sound fast, but it doesn’t mean we’re ready to take on the champions. The Olympic qualifying time for London 2012 was 10.18 seconds in the men’s race and 11.29 seconds for women.

    So if I want to get away from a group of drunk thugs then 13 seconds is probably good enough. But in a real contest I’ll get left behind. In the market you are competing with everyone – including world champions. And it is those few 1 percenters (or less) who are the outlier – they bank more coin than the lower 80% combined.

  • mugabe

    I completely agree wth Ivan in general, but you’re right wth regard to the markets ie your personal best *may* not be good enough.

  • http://evilspeculator.com molecool

    I dunno – this ‘do your best shit’ started in the 1970s and got worse toward the end of the 20th century. They don’t breed competitiveness anymore in schools – this whole notion of ‘there not being any losers’ is complete hog wash to make everyone feel better. It’s meaningless.

    Empires like Rome were built around competitiveness – there was no place for weaklings. Every privilege had to be earned. Today’s generation is way too complacent and narcissistic. That may be acceptable in other aspects of life except for where it matters. I don’t know about you guys – but I will die trying to become the best trader that ever lived. Odds are I will fail at this quest but that doesn’t stop me from trying. People have told me all my life that I cannot do this or that – and that this and that is impossible. Hasn’t stopped me yet.

    So screw ‘just do your best’ – you have to do BETTER!

  • mugabe

    I think this desire to do your best relates to personality type. To take a simple example, if you go to the gym, do you really want to push yourself or are you just content to keep at a comfortable level?

    It is also true that a burning desire to do your best in one area means making sacrifices in others. I don’t think by definition you can do your best in all areas.

    Back to trading … I think that if you want to the in the top 1%, you need to have the type of obsessivness and curiosity that you do, otherwise you don’t stand a chance. I don’t think you need that to be profitable, though – although to be profitable long-term, you need discipline and robust system. (I think that’s what I have.)

    Sort of related, here’s the superb Brett Steenbarger article that Greenlander referenced earlier:

    http://www.traderfeed.blogspot.com.es/2015/09/the-single-most-important-trait-of.html

  • Scott Phillips

    Sounds like what we preach here, exactly :-)

    And “I see this in the charts”, or “my charts tell me it is going to xxx” is not an edge

  • Scott Phillips

    The markets are not “every child wins a prize”, not a place for “oh well, you did your best”.

    It’s a gladiator deathmatch every single day and if you don’t come correct you will lose.

  • Scott Phillips

    Depends on your personality. Ed Seykota trades all kinds of things. The “eurex flipper” guy scalps only one instrument.

  • mugabe

    Judging from other references to Seykota, he has a framework which selects the markets that are currently most suitable to his edge(s). I think it might be more of a question of system than personality.

  • Scott Phillips

    No its personality, I know the guy. He is market agnostic, believing that one market is just like another market within norms.

    I tend to believe similar things, while others do not. Both Mole and Gabriel Grammatidis are examples of good traders that believe that specific markets exhibit market specific behaviour.

    There is no right answer

  • Scott Phillips

    Equity curve filters work, but far better is systems that implicitly trade only in the correct market phase as a function of system design. Scalpius is the perfect example of this, it only switches itself on and starts thinking about looking for a setup in extreme low volatility.

    We KNOW this is an edge because most often the biggest moves are “surprise” moves, and come after a period of incredible low volatility.

    Bollinger squeeze breakout systems are another classic example of this.

  • Scott Phillips

    I set a world deadlift record yesterday (300kg). Also Australian record bench press in my division, and Australian record total powerlifting score.

    I’m feeling like I got hit by a car

    https://www.youtube.com/watch?v=WM3FJGHSEpc

  • Ian Naugler

    Amazing!

  • hellbent

    Fn’ A! Congratulations

  • http://evilspeculator.com molecool

    Congrats – but would have been better IF THAT PERSON WOULD KNOW HOW TO HOLD A DAMN CAMERA!!!

  • http://evilspeculator.com molecool

    Yeah, BB squeezes – definitely a system in there. Maybe I’ll work on that next year.

  • http://evilspeculator.com molecool

    Thank you – I started to think I’m the only one who wants to win here.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Mugabe – my quest is simply to have my RBT in synch with the market and for as near perfect execution of it as I can … the DNA of my RBT must also match up with my own DNA … else the RBT will not ‘work’ for me.

    As an aside I always urge one to consider that … errors can and do have a positive outcome for both the operator and the R result.

  • http://www.ProfitFromPatterns.com/ Ivan K

    “Striving for an ongoing series of personal bests’ has the implication of striving for “new” personal bests every time … all part of the / my Journey.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Mugabe – ‘extra-ordinary edge’ … translation?

    Do we ever know what the ‘best’ performer or the x% is achieving?

  • BobbyLow

    That’s super Scott! We’re very proud of you over here in our part of the World. :)

  • phylum
  • phylum

    In most “events” 3 “prizes” or medals are awarded, if you achieved the Bronze medal but it was your personal best (pb), are you are loser? And what if you didn’t get a medal but it was still a pb??

  • phylum

    I ran the local Soccer (football) club for 10 years and every parent thinks their kid is a potential to play FA Cup… the reality is, 99.99% are not …. “the point” though is they all want to play the game … not all will stand on the podium.

  • phylum

    Winning is relative to the goals one sets.

  • phylum

    …and “who” are you trying to beat?

  • phylum

    Well done Scott… a goal achieved, I hope there’s more to come.

  • mugabe

    That’s what I’m saying .. but not in the markets

  • phylum

    And who gives out the medals?

  • Scott Phillips

    The way the vast majority of people trade you could remove “extra ordinary edge” and change that to “any edge, however small”

    My experience is that robust edges tend to be smaller, and edges which promise a lot mostly fail to deliver longer term.

  • phylum

    Then it follows … is an edge an edge? or …..???

  • phylum

    If it doesn’t exist, why flee, the mind creates all sorts of bogey’s, grounded in reality, though, i.e. what is, rather than what might be, is so much easier to deal with, or maybe not.

  • Scott Phillips

    One of the classic mistakes in trend following systems is waiting for certainty. This alters the risk reward ratio so quickly that waiting for certainty decreases the big R winners that these systems depend on

  • phylum

    When you have a kid, repost

  • mugabe

    No, we don’t. But if you look at all the profitable traders over time, anyone who has, say, more than 2 standard deviation profitability above the mean could be construed as having an extra-ordinray edge.

  • Billabong

    It’s the same with everything…

  • mugabe

    My feeling/hunch is that strategies which trade on a longer time frame are more inclined to be robust *over time* and need less of an equity filter as they are trading on ‘deeper’ market structure and are less affected by market noise.
    My hunch is also that they will not put you in the extra-ordinary category as they don’t trade often enough to achieve that and also they don’t require ‘superior’ insight/adaptability.

  • Billabong

    As long as the positive errors don’t cloud the judgement. Being in synch doesn’t mean trading everyday. Sometimes the best systems work a few times a year, but you have to be here and ready for it. Sort of like being in the retail business; 9 months of boredom and 3 months where the whole annual income is made,

  • Billabong

    “”People have told me all my life that I cannot do this or that – and that this and that is impossible. Hasn’t stopped me yet.” This probably sums up most of the people on your site … independent thinkers. Most will probably lose in the end but add to their life experience…

  • mugabe

    ‘The stock market is a device for transferring money from the impatient to the patient’ (Buffett)
    Totally different style, but the principle is the same.

  • Billabong

    There are relative levels of “winning” in life. Winning may be breaking out of the control box, thinking independently, and improving ones critical thinking skills.

  • mugabe

    in general, corrupt officials :)

  • Billabong

    Personal best shows up in leadership positions. Many people are moved into leadership roles they shouldn’t be in because their personal best is one notch below. It’s not that they don’t want to win, it’s a question of suitability.

  • Billabong

    Impatient = fear & greed?

  • Billabong

    Excellent! I especially appreciate this at your age…

  • mugabe

    and, possibly more importantly, inability to stand aside and not trade

  • newbfxtrader

    Dont you love vertical videos….

  • newbfxtrader

    Damn! Take it easy now.

  • http://www.ProfitFromPatterns.com/ Ivan K

    The natural flow of money is from the hands of many to the hands of few … same as water going from springs to rivers to the ocean.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Perhaps greed is the fear of missing out!

  • BKXtoZERO

    I think I could do that because I lifted some weights back in high school a few times 😉

  • http://evilspeculator.com molecool

    It’s my favorite pet peeve.

  • http://evilspeculator.com molecool

    “If you go to the gym, do you really want to push yourself or are you just content to keep at a comfortable level?”

    If I go to the gym I have the urge to kick everyone’s ass… hehehe :-)

    It’s not your fault mugabe – you’ve been brought up in a super socialized country. I see very few people here with any ambition – it seems to have been bred out of them. The average Spaniard dreams of having a secure 9-7 job (incl. siesta) for life – preferably in government or a large int’l corporation. Universities here actively discourage independent thinking and do not prepare young people for entrepreneurship. There are small groups who are different and I’ve come across a few entrepreneur clubs on meetup.com. But I am talking vast majority here – most people just want their safe little life and don’t seem to have higher ambitions. Now before you blow up on me – I said ‘most people’ 😉

  • http://evilspeculator.com molecool

    Bronze metal = second loser.

  • mugabe

    ‘Most people just want their safe little life and don’t seem to have higher ambitions.’

    Would agree with that with ref to Spain. And btw, I was born and brought up in England and neither of my parents is Spanish!

    I read an article that said that the reason there were no good heavy metal bands in Spain is that the vast majorty of people feel very safe in the coccoon of the family. Heavy metal in Spain is a pose rather than something visceral.

  • Billabong

    Ah yes, mindfulness….

  • Billabong

    Each trader knows which trading environment they’re weak in and if they don’t have a back tested system for that environment, they’re doomed because of what you said above…

  • newbfxtrader

    My wife does the same thing Aargh….

  • http://evilspeculator.com molecool

    Well, that explains a lot :-)

  • http://evilspeculator.com molecool

    Just say no to vertical videos:

    https://www.youtube.com/watch?v=Bt9zSfinwFA

  • Scott Phillips

    2) Is particularly devastating for stock traders.

    A 5 year low volatility bull market gives way to something else, which is what is happening now. Almost everything that worked for the last 5 years will now stop working.

    Ivan is fond of saying “Mrs market gives with one hand and then tries to take back with two”. A perfect example is the guy here who has taken a statistically insignificant amount of recent data to confirm a hypothesis that turning points happen around opex. Exceedingly unlikely that this continues into the future as market type changes.

    Some of the older participants are familiar with the 1999 era guys who learned in a high volatility bull market, when it was easy, who got slaughtered in the years to come.

    Another perfect example is Tim Knight, who is an incredibly good chartist but has lost money year after year after year. Because he is unwilling to take emotional responsibility for his results he keeps trading only on the shortside (or with token longs) right the way through a 5 year bull market.

    This type of behaviour is redolent of the same thing, a mental attempt to impose your own model of how things “should be” on the market.

  • Scott Phillips

    I did a pile of work on it already. Great concept, real edge.

    I think using darth mole + bollinger squeeze + first close outside bollinger as the entry with an ATR multiple stop would be a very good system

  • Scott Phillips

    There are plenty of great things to be learned as a kid. How to lose gracefully, how not to be the best, how to accept uncomfortable feelings, how to be humble in victory.

    The soccer field would have been a much kinder place for most of us to work our demons out than the markets 😉

  • Scott Phillips

    The markets are a zero sum game.

    I’m a futures trader, there is a human or a bot on the short side of my long trade, or vice versa.

    Either I take his money, or he takes mine. No amount of mental jerking off can change that inescapable fact.

    Seeking to impose philosophies of personal improvement is all well and good, but NOT HERE.

    Here, in the markets, you are either good enough or you die quickly. In the words of Al Brooks “If you lose money it is because you are not good enough!”

  • Scott Phillips

    His method is very in synch with his personality.

  • Scott Phillips

    Disagree

  • Scott Phillips

    Actually this is very interesting. Some of those who have two standard deviation or above (actually Neiderhoffer references his personal profitability in terms of standard deviations above the mean in his book) actually end up blowing up, for reasons previously mentioned (adaptability when markets change).

    Any amount of real edge, however small, compounded correctly will work to a great fortune over time. We don’t need to predict the future.

  • Scott Phillips

    Your feeling/hunch is demonstrably incorrect. Many of the best edges are more robust on smaller timeframes.

    Markets are demonstrably more predictable in smaller timeframes, balanced by the opposing factor that there is more noise/signal ratio and slippage becomes prohibitive the smaller the timeframe.

    The advantage of trading on a longer timeframe is that you get things happening slower, under less pressure. You get more time to absorb the constant flow of information in the now moment. For example in the last month or so it’s become clear that market weather changed.

    If you were trading a 60m chart this current shift would be quite bewildering if you were not 100% on your game right now.

  • Scott Phillips

    It would be virtually impossible to rely on the statistics others have generated.

    Get out your pencil and paper and build your own :-)

    You get a lot of benefit from this

  • Scott Phillips

    Bulkowski’s numbers are made up, a work of fiction from entire cloth.

  • mugabe

    What I mean is that a longer term strategy will probably be more robust and have far less chance of blowing up when traded through all market conditions. For example:
    http://www.optimalmomentum.com/trackrecord3.html

    This is not superperformance, though.

  • Scott Phillips

    Not so. Just an illusion.

  • hellbent

    I played one game of competitive soccer as a kid. We lost 12 nil to the host town nearby. Beautiful game get fucked. Great lesson!

  • BobbyLow

    “Some of the older participants are familiar with the 1999 era guys who learned in a high volatility bull market, when it was easy, who got slaughtered in the years to come.”

    Damn, and that would be me. LOL

    Trading was tremendously easy back then. Just about any Tech Stock was a way to fame and fortune. I thought I was an expert. My account would change by multiple thousands each week and mostly for the better. My experience might be analogous to the high from a first shot of heroin only to eventually end up totally in the shitter.

    In hindsight, I might have been better off to have begun trading in a Bear Market. However, without any training and by not having a RBT, the end result would have been the same except that I would have missed out on that first high. :)

  • Scott Phillips

    It’s got everything! Low scoring, confusing rules, inconclusive action, lots of ties

  • Scott Phillips

    Also, a forgiving environment like being a long only stockpicker in a bull market, becomes a brutally unforgiving place when the weather changes.

    Mistakes, even one in 10 trades, will kill you

  • Scott Phillips

    Most real edges are not present in all market types.

    This is because the nature of sideways markets and trending markets are so different as to be entirely different things.

    The nature of high and low volatility markets are very very different.

    Look at Ivan’s patterns. In low volatility sideways markets they are demonstrably not an edge. Not a one of them is worth trading. In a volatility breakout situation they become reliable.

  • hellbent

    You’d be a 360 man I’d say

  • Scott Phillips

    And yet…. if you do not have an objective edge in the market no amount of perfect execution or personality matching can overcome it.

    This is why you can’t find any books on “the mental game of surgery”

  • Scott Phillips

    Excellent point. For me to do well in my powerlifting involved literally 6 hour workouts in the gym. This is unsustainable and not healthy long term. Things suffer. Truth is, November last year I was fat and single and it wasn’t a good combo, I set out to change it.

    I have been a hobbyist martial artist for several decades…. could I compete in the UFC – absolutely not! I don’t have the talent and never did, and never put in the 6hrs of training a day necessary.

    I HAVE done the work necessary to be a trader. It took, for me, 5 years to become profitable, and another 3 to become what I would call acceptable minimum standard, and another year to become genuinely average professional level. I’d say realistically, another 5 years of not that hard but consistent work to be elite level.

  • mugabe

    what work will you be doing?
    improving your mechanical systems?
    testing and taking on more systems?
    improving your mechanical execution?
    improving your discretionary trading?

  • Scott Phillips

    I don’t trade discretionary.

    I will be improving my execution

    I will incrementally improve my systems (rather than reinventing the wheel constantly, one of the characteristics of successful traders is they have an air of “the search is over” and are relatively uninterested in new methods)

    I will improve my system monitoring and record keeping, and weekly, monthly and yearly reviews.

    That’s all there is

  • Scott Phillips

    Same. I came here because I was a bear-loser-tradeabuser and looking for like minded souls to justify my pre existing bias.

    Over time it changed to something first useful, then good, then great.

  • http://evilspeculator.com molecool

    What is this – ZeroEdge?

  • http://evilspeculator.com molecool

    “Markets are demonstrably more predictable in smaller timeframes, balanced by the opposing factor that there is more noise/signal ratio and slippage becomes prohibitive the smaller the timeframe.”

    Yes, that is a school of thought I have adopted myself.

  • Scott Phillips

    It’s an over 40’s world record so all things equal

  • http://www.ProfitFromPatterns.com/ Ivan K

    Are the markets actually a ‘zero sum game’ in reality’ … one person taking a profit as you enter the market (taking their opposing side) is ‘losing’ … hmmm … I guess it does get down to one’s view.

  • http://www.ProfitFromPatterns.com/ Ivan K

    ‘My’ patterns aka the setups that have served rather well over 3 decades are the same as a hammer or a chisel … the end result / product will always depend on what you do with them and how you apply them.

    As we both have agreed, the actual setups are a very small part of the entire equation … both Money Management and Campaign Management play a pivotal roles in whether ‘not a one of them is worth trading’ or not.

  • hellbent

    I cannot see any way to be successful trading without achieving “an ongoing series of personal bests”. Relative performance may provide a yardstick measure of success and some clues for areas that need improving. Actually improving though requires measurement and analysis of one’s own performance first and foremost I would think.

  • hellbent

    OK Rats, who’s in for a BB squeeze breakout group entry?? I’ve been eyeing up nat gas weekly and it’s pretty well squeezed now. First close outside the bands looks good to me… Unless it’s on the low side that is.

  • http://www.ProfitFromPatterns.com/ Ivan K

    H’bent – from my perspective to achieve whatever is perceived to be the goal … there are two main areas to work on … Self in terms of the ‘whole’ … and RBT … the DNA of both need to be a match as I wrote here … they are inextricably linked.

  • Billabong

    It’s still world class!!!!

  • hellbent

    I hear ya.

  • http://www.ProfitFromPatterns.com/ Ivan K

    H’bent – one is dealing with a four dimensional cube in reality here!

  • hellbent

    That’s a novel way to look at it.

  • http://www.ProfitFromPatterns.com/ Ivan K

    ‘Novel way’ is a great way to see the forest and the trees.

  • TheRooster

    i have been looking at something similar to this.

    One of the interesting things i am seeing is that the initial breakout which fails can reverse strongly and also be very profitable in this situation. It’s early days in my research but I think 2 entries could be justified using this method.

  • TheRooster

    they are minus sum game if you are a trader – the sum total of all losses doesnt add up to all the wins due to transaction costs

  • TheRooster

    This one scares me more than all of the others. None of my set ups are particularly original, complex or ‘secret’. They are all tested by me and hopefully robust but who knows in the future?

    on the other hand, when i have shared my systems with friends they couldn’t handle the drawdowns or trade them consistently enough to get the results so maybe trading a simple system well makes you a 1%er?

  • Scott Phillips

    Its squeezing pretty good – could be either side breakout

  • hellbent

    My bias disagrees. But then crude looks like it could easily take another dive yet.

  • Scott Phillips

    We all have bias. It’s a much more compelling trade emotionally for the long side since there is a powerful ego win of catching a long awaited reversal.

    The highest probability outcome is a shoot to fresh lows and then reversal after it shakes the bottom pickers out

  • Scott Phillips

    Most definitely, in my opinion whipsaw entries are very profitable in this setup.

  • Scott Phillips

    You are far better trading an average system that suits your personality that you can trade with a high degree of efficiency.

  • Scott Phillips

    Yes the futures markets are a zero sum game, by design and in practice.

  • Scott Phillips

    Correct

  • Scott Phillips

    Positive errors can really fuck you up. Look at the guy last week crowing about his $11K in gains from bad trading.

    There is no doubt he will repeat his mistake now. If he lost a small amount, even $500, maybe he would be starting work on his system now ;-(

  • hellbent

    Nah, I’m tired of bottom picking. Next!

  • http://evilspeculator.com molecool

    ( ( ( ) *
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    (()/( (()/( ( (()/( )()) )))( ( ) ` ) /(
    /(_)) /(_))) /(_))((_) ((_)() ) ((((_)( ( )(_))
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  • OzarkHillBilly

    Rest assured that I’ll be gently introducing the right concepts to my boy and any other gets I have.

  • OzarkHillBilly

    I used to drive my parents crazy with that book when I was a little kid.

  • OzarkHillBilly

    Fucking group projects in college. I hated them.