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moment, he could be talking about analytical techniques and would appear as the consummate scientist (he holds a degree in electrical engineering from MIT), bringing up a three-dimensional diagram on the computer screen, generated by one of the many programs he had designed. Yet, in another moment, when the conversation turned to the p...
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appeared to me that psychology, and its application in helping people solve their problems, had become a more important element
trading and psychology are one and the same thing.
He is extremely perceptive about people. For example, at one point in our conversation, Seykota asked me, “How many minutes fast do you set your watch?” I found this question particularly striking in that in our brief time together, he had been able to pick up on one of my basic character traits.
He impressed me as someone who had found meaning in his life, and was living exactly the life he wanted to be living.
About that time, I saw a letter published by Richard Donchian, which implied that a purely mechanical trend-following system could beat the markets. This too seemed impossible to me. So I wrote computer programs (on punch cards in those days) to test the theories. Amazingly, his theories tested true. To this day, I’m not sure I understand why or whether I really need to. Anyhow, studying the markets, and backing up my opinions with money, was so fascinating compared to my other career opportunities
Over the course of about a half year, I was able to test about a hundred variations of four simple systems for about ten years of data on ten commodities. Today, the same job takes about one day on a PC. Anyway, I got my results. They confirmed there was a possibility of making money from trend-following systems.
I was inspired and influenced by the book Reminiscences of a Stock Operator and also by Richard Donchian’s five- and twenty-day moving average crossover system and his weekly rule system. I consider Donchian to be one of the guiding lights of technical trading.
exponential averaging method because it was easier to calculate and computational errors tended to disappear over time. It was so new at the time that it was being passed
Systems don’t need to be changed. The trick is for a trader to develop a system with which
I thought I knew better than the system. At the time, I didn’t really trust that trend-following systems would work. There is plenty of literature “proving” they don’t. Also, it seemed a waste of my intellect and MIT education to just sit there and not try to figure out the markets. Eventually, as I became more confident of trading with the trend, and more able to ignore the news, I became more comfortable with the approach. Also, as I continued to incorporate more “expert trader rules,” my system became more compatible with my trading style.
My style is basically trend following, with some special pattern recognition
The key to long-term survival and prosperity has a lot to do with the money management techniques incorporated into the technical system. There are old traders and there are bold traders, but there are very few old, bold traders.
Sometimes I trade entirely off the mechanical part, sometimes I override the signals based on strong feelings, and sometimes I just quit altogether. The immediate trading result of this jumping around is probably breakeven to somewhat negative. However, if I didn’t allow myself the freedom to discharge my creative side, it might build up to some kind of blowout. Striking a workable ecology seems to promote trading longevity, which is one key to success.
Over time, I have become more mechanical, since (1) I have become more trusting of trend trading, and (2) my mechanical programs have factored in more and more “tricks of the trade.” I still go through periods of thinking I can outperform my own system, but such excursions are often self-correcting through the process of losing money.
No. All trading is done on some sort of system, whether or not it is conscious. Many of the good systems are based on following trends. Life itself is based on trends. Birds start south for the winter and keep on going. Companies track trends and alter their products accordingly. Tiny protozoa move in trends along chemical and luminescence gradients. The profitability of trading systems seems to move in cycles. Periods during which trend-following systems are highly successful will lead to their increased popularity. As the number of system users increases, and the markets shift from trending
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Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals.” However, if you catch on early, before others believe, then you might have valuable “surprise-a-mentals.”
am primarily a trend trader with touches of hunches based on about twenty years of experience. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite
try to identify a point at which I expect the market momentum to be strong in the direction of the trade, so
I turn bullish at the instant my buy stop is hit, and stay bullish until my sell stop is hit.
virtually all the speakers were bearish. I said to myself, “Gold is probably near a bottom.” [The market did indeed rally after that conference.]
Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I
I tend to cut bad trades as soon as possible, forget
After I bury a dead trade, I don’t like to dig up the details again—at least not in print. Maybe some evening, after dinner, sitting around a fire, off the record, deep in the Tahoe winter . . .
Trying to trade during a losing streak is emotionally devastating. Trying to play “catch up” is lethal.
I am a self-taught trader who is continually studying both myself and other traders.
continues.
just like YV
feel my success comes from my love of the markets. I am not a casual trader. It is my life. I have a passion for trading. It is not merely a hobby or even a career choice for me. There is no question that this is what I am supposed to do with my life.
Perhaps some day, I will have a more explicit rule for breaking rules.
Gut feel is important. If ignored, it may come out in subtle ways by coloring your logic. It can be dealt with through meditation and reflection to determine what’s behind it. If it persists, then it might be a valuable subconscious analysis of some subtle information. Otherwise, it might be a dangerous sublimation of an inner desire for excitement and not reflect market conditions. Be sensitive to the subtle differences between “intuition” and “into wishing.”
the markets different now than they were five to ten years ago because of the much greater current participation by professional managers? No. The markets are the same now as they were five to ten years ago because they keep changing—just like they did then.
How about market letters? Market letters tend to lag behind the market since they generally respond to demand for news about recent activity. Although there are certainly important exceptions, letter writing is often a beginning job in the industry, and as such may be handled by inexperienced traders or non-traders. Good traders trade. Good letter writers
I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing.” The old-timers, who talk about “maybe there is a chance of so and so,” are often right and early.
The stock market behaves differently from all other markets and it also behaves differently from the stock market. If this is hard to understand, it is because trying to understand the markets is a bit futile. I don’t think it makes any more sense trying to understand the stock market than trying to understand music. A lot of people would rather understand the market than make money.
classic difference between sales and marketing....sellers and bullshiters
What do you mean, “The stock market behaves differently from the stock market”? The stock market behaves differently from itself in that easily identifiable patterns seldom exactly repeat.
Good traders have a special talent for trading just as good musicians and good athletes have talents for their fields. Great traders are ones who are absorbed by the talent. They don’t have the talent—the talent has them.
proclivity
Also to consider are the joy and pain of not participating. The
have a gentle financial and emotional touchdown.
Psychology motivates the quality of analysis and puts it to use. Psychology is the driver and analysis is the road map.
People’s trading performance probably reflects their priorities more than they would like to admit.
PSS.......accurate analysis & prediction translating into monetary profit is a sense of achievement, non dependance on incompetent people for financial reward , owner of one's own time therby prioritizing one's intetersts and pastimes
they are probably also playing for excitement. One of the best ways to increase profits is to do goal setting and visualizations in order to align the conscious and subconscious with making profits.
I use a combination of hypnosis, breathing, pacing, visualization, gestalt, massage, and so forth. The traders usually either (1) get much more successful, or (2) realize they didn’t
It is a happy circumstance that when nature gives us true burning desires, she also gives us the means to satisfy them. Those who want to win and lack skill can get someone with skill to help them.
think one of the functions of dreams is to reconcile information and feelings which the conscious mind finds intractable.
I think success has to do with finding and following one’s calling regardless of financial gain.
this appears to be possibke answer to PSS recent search for meaningful career aspirations
Hite’s philosophy was to aim for the best growth rate consistent with extremely rigorous risk control.
an average annual compounded return of over 30 percent. But it is their consistency that is most impressive: their annual returns have ranged from a worst of plus 13 percent to a best of plus 60 percent. Their largest loss in any six-month period was only 15 percent and under 1 percent in any twelve-month period (not just calendar years).
consistency mirrors PSS need and priority
The whole class laughed, except me. For some reason, the idea of trading on 5 percent margin made perfect sense to me.
came away with the idea that successful investment was really a matter of odds, and if you could compute the odds, you could find and test methods that could beat the market.
