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Wayne Moody wrote:
Wayne,
Thank you for your thoughtful response. I have added a few comments
below.
> Harley,
>
> We all want to be right about our trading plan over a period of time,
> but there is no need to be right in the current trade. Some will lose,
>
> some would have won even bigger if you only knew, and it doesn't
> matter.
> If your proven system calls for 3 points, and you start
> second-guessing
> it by expecting more or settling for less, you will probably guess
> wrong 75% of the time and fall into a vicious psychological trap of
> uncertainty, trying to be more accurate than your system.
I position trade and place a great deal of confidence in the mechanical
side of the trading system. But it isn't perfect sense I still have to
make subjective decisions. I think it is this subjective trading within
the mechanical system that I want to be right. It is my subjectivity
that I hope will reduce the number of losing trades that my mechanical
system may produce. SO it's not the trade as a whole that I what to be
right with. It is the subjective part that I want to be correct on when
I enter a trade.
A problem with my position trading strategy is that I have no idea how
much of a move a stock will move. (However, I do have modest financial
goals on a weekly basis. Which isn't the same as what you are
suggesting.) But Al Tag and your comments are leading me to believe that
I should try to put some thing together based upon daily range (Average
True Range - ATR) to try and determine the size (points) of a possible
move over several days. Not that it would be a hard and fast rule but
more as a rule of thumb to look at. Another problem I have is trusting
any security for going long. I am learning. This will help me in the
long run when I overcome this problem. I find it easy to find a local
neighborhood around a top. That local neighborhood at the bottom I feel
uncomfortable with. I do feel that as my account grows I will loosen up
some.
The trap about second guessing as you mention above I have been able to
manage by taking a small position when I enter the market. That way
there is less pressure to be so right. It allows me to take a look at a
bigger picture if it goes against me. Also my lose is smaller. But if I
believe in my system, and I do, then I will average into the position if
the price goes against me.
>
>
> If your second-guessing is consistently right, you may be a rare
> intuitive trader, in which case you don't really need systems. Or
> you may be responding to additional input which should be incorporated
>
> into the system.
I need the structure of some type of technical analysis that has been
placed into a systematic means for trading. Without it I am the biggest
chicken you could ever imagine. My guess is that there are many that
have good intuition (at times) when they trade. My intuition is only
based upon observations (charts, speed of trades / price movement) or
news. Things that I have seen before in another situation. For example,
CSCO Cisco Systems was in the news the other day. It was $59 something
and I thought gee I'll buy that at that price. So I looked at the chart
and saw that it 'jumped the creek' (Wychoff) and would go higher. Did I
jump on board. No not me. Before I had even looked at the charts I had a
very good feeling about CSCO. My intuition. But my fear exceeded my
intuitive feelings.
> It's hard not to hope that the trade you're in works, but it's
> misdirected, because the greatest plan in the world will have some
> losers, and it doesn't matter if this is one of them. The other
> side of the coin is to not be afraid this trade will fail. You
> don't want to change your plan because of current (fleeting) hopes
> and fears. Instead, hope that you will execute your plan flawlessly,
> and fear that you won't. Direct them at yourself, not the market.
Many words of wisdom in your above paragraph. I do understand that my
mechanical trading system can go wrong to produce a losing trade and I
accept that risk. However, to me it is extremely important that the
subjective part of the trade is correct. I know that I can and will be
wrong but it is up to my due diligence to prevent me from being wrong on
the subjective side of my trading. It is my internal battle. When it
comes to being afraid whether my trade will fail is a subjective
decision that actually requires some amount of fear. I have put together
a trading system to help reduce that fear, but while in the trade it is
health to be scared that the trade can go against you. It is that fear
that I have to overcome through experience. It is the fear that tells my
subjective trading that is is time to get out when my mechanical system
(or plan) is failing me. I also think fear keeps me from jumping into a
trade foolishly.
> Your plan already states what you hope. No additional hope is needed.
I will have wait for this one to come to me. But I think I do know what
you mean.Again thanks for your word of wisdom.
Harley
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