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--- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
<andysmith_999@xxxx> wrote:
> I have a question (unrelated to Metastock) for the experienced
traders
> on this forum.
>
> I have now read a dozen books on trading -- not the foo-foo books
that
> promise $10M in the next trade, but ones by Tharp (my favorite),
> Chande, Le Beau, Stridsman, Elder, Covel, Schwager (and O'Neil,
> Link,...) and a couple of Tharp's IITM publications on money
> management etc. Will get to Kaufman next. And of course every issue
of
> Roy's MSTT which are simply marvellous.
<SNIP>
I think that the "reasons" for failure are strongly dependent on what
kind of "trader" we are talking about. (Of course, the same can be
said
about success.)If one focuses on "technical" traders (i.e. those that
hypothesize that past prices have predictive value for future prices)
then, IMHO, "failure" can be causally linked to falsity in a
collection
of hypotheses. There is an interesting area of mathematics called
Ramsey Theory. Ramsey demonstrated (in loose terms) that "given a
sufficiently complex system there will always be 'patterns' in the
phenomena that have no 'causal' or 'illuminating usefulness' - they
will simply 'exist' as a kind of byproduct of the 'density of
variety'.
It might be easily argued that "Ramsey Theory" is a "scientific
explanation" of why things like a belief in Astrology persist.
Technical traders can fall into an Astrological Trap, if you will, if
they are not ruthlessly skeptical. I could easily elevate these
comments into a towering rant on the subject but I will spare you
(and
yours truly). Somethings that are useful to ponder are - why do
most "indicators" need to be "tuned" and, more importantly, why will
one set of indicators be useful for certain time series while with
others they will "whip-saw" the snot out of you? I have found it to
be
a useful (ie profitable) exercise to try to determine what the
general
properties of a price series are that will reliably indicate when
YFBOI
(Your Favorite Batch of Indicators)will be angels or monsters BEFORE
you apply them. Think about that.
As a purely mechanical matter - perhaps the most common causes
of "failure" are A. Not setting APPROPRIATE Loss Stops B. Playing
with "micro-cap or smaller(!)" stocks C. Not taking your chips off
the
table when there is no defensible reason to leave them there.
Also, "failure" is not a bad thing if you learn from it. Analyse IN
WRITING what happened when that position went "Toilet-down-the"
G'Luck!
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