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Hi all!
Discipline is step one of trading. No discipline, no results, however you look
at it. Try whatever you want, if you don't apply discipline, it cannot work,
period.
Now, why then is it so difficult to achieve? Usually when one knows you get a
reward by respecting a discipline, it works. So why doesn't it work for
trading? Because, you never know for sure whether it will indeed pay off, and
there is nobody to complain to. Your "system" may have been the best, but in
the next four years, it will be dead. Just dead. And when you stop it, it will
come alive again for one year. Then you start again, and it starts losing like
never before... Change the timeframes, but that is what happens to everyone,
with every system, and I mean EVERY SYSTEM.
So you know:
- that to make the money the system produces, you have to have the winners, all
the winners. But to have them all, you have no other choice but to take all
trades, including all the losers, that is incur all the drawdowns.
- that doing so, may or may not generate positive results, in the next 6/12/24
months.
What to do then?
- You will never know if the system is going to do fine, even though it may
have done fine, including in real time. You have then no choice but to pick one
or several that are most promising in terms of stability, ie, these behave OK
under most circumstances. Usually, these are not the best performing, but
fairly easy to understand, and therefore, you can trust them more.
- Next you have to be able to trade without making money. If you need the
money, you'll be dead. Accept to tread water for nothing.
- Next you have to get the "Banzaï" spirit. You trade without thinking, just
like you jump into cold water. After a while, you get used to it, and best is
to develop some pleasure in it. The reward for trading the system must notbe
the money but the sense of pride you derive from being 100% disciplined. I mean
100%, not 99.9%.
- Important is to reward oneself regularly for remaining 100% disciplined,
whether you made money or not. Positive reinforcement should be focused on
remaining disciplined.
What else?
- Once you are 100% disciplined, and could not think of doing things otherwise,
you can start thinking of using intuition which you will have noticed along the
way.
- Intuition is just another system, for which you also need 100% discipline. So
don't start using that until you can trust yourself you are 100% disciplined NO
MATTER WHAT. This is the hardest part of all. Most fail because they start
here. Start with the easy part first, which is follow a mechanical system which
is easily verifiable.
Conclusion:
- Once you have the discipline and master intuition, you are in business. It
does not mean you will make money, but it means you know what you are doing.
- For making money, you need to master the system quality, money management
etc, and you need to be adequatly capitalized. If not, however good you are,
you risk running out of money before you reap the benefits.
- If you have all that, you need also business savvy, to make your business
grow, and put you out of reach of occasional hard knocks...
- In other words, successful trading requires the sum of ALL qualities, not
just a few...
Best to all of you!
Gwenn Ael Gautier
BrentinUtahsDixie a écrit:
> John,
>
> May I ask are you a pure system trader? In other words taking only system
> signals in your trades? I have no axe to grind regarding whether to system
> trade or not. I personally trade with a plan not a true system. I’d just
> like to know if anyone at all is a pure system trader out there. Reply
> privately if you like.
>
> Brent
>
> ----------
> > From: John Cappello <jvc689@xxxxxxx>
> > To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> > Subject: Re: SYSTEMS/Discipline
> > Date: Saturday, May 02, 1998 8:28 PM
> >
> > Dear Paul and Realtraders,
> >
> > The post by Paul is the best I have seen on this subject to date.The only
> things I would add are:
> >
> > 1.Discipline is made easier when you know you have capitalized your
> system properly so that even its worst drawdown will keep you in the game.
> >
> > 2.Discipline is made even easier when you really know your system and its
> quirks.
> >
> > 3.Discipline is the easiest when you are playing with the "house's"
> money.
> >
> > I am a neurotic, consistent and happy system player.Of the 8 systems I
> have used only 2 failed mainly due to 1,2and 3.Looking back I failed the
> systems.
> >
> > John
> >
> >
> >
> > ------------------ Reply Separator --------------------
> > Originally From: Paul Cote <cote@xxxxxxxx>
> > Subject: SYSTEMS/Discipline
> > Date: 05/02/98 08:22pm
> >
> >
> > A system is what is used to assure discipline in the face of random
> > reinforcement. You don't get the food every time, and sometimes maybe
> > not even most of the time, therefore you need a system so that you can
> > repeat what works on average over a long time.
> >
> > What do you think of taking a system trade and getting your teeth kicked
> > in? What would the chicken think when the light comes on he gets his
> > teeth kicked in?
> >
> > A system helps you to repeat actions when you are getting killed. It
> > also frees your mind. A really good article on this is in a little book
> > by Larry Williams from Windsor Books. He says the system is your God.
> > You don't know what to do, so you just take the systems trades.
> >
> > If you don't follow the systems rules, you may not get the results the
> > system seems to promise. If you try to beat your system, the market may
> > beat you. To follow a system is a great relief for the trader. It is
> > the holy grail of repeating actions that in the past have brought
> > success over the long run.
> >
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