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i read this list to keep current with tradestation, the trading platform i
love to hate. but when it veers off into "philosophy" about trading systems
i always find myself amazed at what passes for thought and enlightenment. i
write this to the list for no other purpose than to help somebody else who
might perhaps be able to hear it and benefit. i have been through all of
this myself, i have heard and done it all too, so understand i am trying to
help. and i don't want $5,000 or even $300 to do so...
some silly person wrote the other day that even discretionary traders use
systems and the difference between discretionary trading and systems trading
is just a matter of the complexity of the decision tree. how could you not
say this without realizing what you are saying? it's like comparing a
traffic light and traffic cop. the traffic light (a trading system) can
have some internal logic and use sensors to determine whether there is
excess traffic on one side of the signal, but it cannot take the place of a
traffic cop (discretion). when the big game is at the stadium (an
exceptional situation), they turn off the traffic lights around the stadium
and bring in the cops. it's obvious why, so i'll simply complete the
analogy. systems fail under exceptional conditions (and lots of others).
and when they do, they fail spectacularly. i read all this nonesense about
how successful traders use systems. if you cling to the belief that richard
dennis is a successful trader, then you don't understand the old adage that
"even turkeys fly in a hurricane." richard dennis made his nut in the last
commodities inflation cycle. how's he done since then?
more recently, how about all the "dippies" who bought the dips of CSCO all
the way down to 15? for ten years buying the dips made you look like a
genius. now, with a greater than 80% haircut, if you've been buying the
dips you've been getting margin calls. i talked to a man last night whose
professional financial advisor put his retirement into professionally-run
mutual funds that have returned him -55% in the last 12 months. these are
professionals?
then i read this "philosophy" about self-confidence and belief and all the
rest of the tony robbins horseshit. this is an off-shoot of the self-esteem
movement, whose results include american high schoolers who feel good about
their math abilities and have among the lowest test scores in the developed
world. no amount of self-esteem will replace knowledge and understanding of
the markets.
this is true: markets do exhibit quantifiable pricetime signatures that
reflect where they are in their growth curves. as i wrote once before
recently, the game is about knowing what time it is. is it the beginning,
continuation or end of the trend? or is "no trend" time (random walk)?
what is the pricetime magnitude of the trend? to learn this, however, you
will have to discard larry williams, tom demark, jake bernstein and all the
rest of them. and start thinking. for starters think about whether i am
right or not: are there any circumstances under which these guys would be
selling books, videos and hotlines if they knew what time it was in the
market? why would you: a) go through the enormous hassles they do when you
could be completely self-directed every day of your life? these guys sell
the dream, but they don't live it; b) sell the information you use to make
money for a few hundreds of dollars? answer: they don't have anything!
a good example is this larry williams "trading pattern" that was discussed
the other day. what larry williams calls a trading pattern might, at best,
be considered an entry trigger, if you already knew that you wanted to be
long the market. the fact that he stops it out on the first profitable open
demonstrates why he is, after all these years, an unsuccessful trader: he
won't let the trade work.
here it is in a nutshell: if you believe that optimized neuro-fuzzy networks
of ADX, RSI and stochastics are going to lead you to the promised land, then
you'll continue to give your money to me. throw out all the derivative
indicators and spend a couple of years looking at price, time and volume (OI
in futures). look at great stuff and look what it did to start, continue
and end trends. you'll be on the right track.
jh
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