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David Cicia wrote:
> I also took the B. Williams tutorial. He told me that using any kind of
> money management was "coming from fear, not confidence." In my opinion,
> listening to anything he has to say is a major threat to your equity, and
> you SHOULD be afraid. None of his trading ideas are based on sound
> principles - just "confidence" (if you know what I mean.) Risk control and
> money management are the most important aspects of playing this game!!! Run
> away quickly and steadily from anyone who tells you differetnly!
>
Hi David,
I'm sorry that this response is so late but this thread is
important to all traders. I agree with all your assertions but must point out
the fact that FEAR IS THE ENEMY of all traders. Fear is the main (only?) mover
of the market. Everyone has heard that fear and greed drive the market, but
what most people do not realize is that they are both the same emotion! We
have all experienced fear (fear of taking a loss, fear that the market has
turned, etc.) to some degree. More subtly we have experienced fear of not
being in a big move, fear that the market will go higher after we get out,
etc. We call this fear greed, two sides of the same coin.
Fear is the GREAT PARALYZER. Have you ever seen or experienced the
following situation: the market is going against your trade, you are both
afraid of taking a loss and afraid of not being in if the market should she
turn your way. The inexperienced trader will often just stand there, frozen in
place, at the time when action is most critical. I have seen traders let
options expire worthless because they where frozen with fear, when appropriate
action, applied at a critical time would have prevented some of the loss (or
even made a profit).
As you correctly pointed out the key to conquering fear is
discipline. Many people make the mistake of thinking bravery is the opposite
of fear. This is not correct. Bravery is a "mask" people put on to cover
over their fears. Some psychologists might even suggest that bravery is also a
form of fear, fear of being a coward. Only discipline overcomes fear and only
discipline can concur the market. Unfortunately this is the easiest concept to
expound and the hardest to practice. We simply bring to much baggage to each
trade. I learned much of this in the Army: Fear leads to defeat, bravery may
lead to victory but at to high a personal cost, discipline allows you to defend
yourself while destroying the enemy, which is the ultimate victory.
Unfortunately, I had to relearn much of this when I started trading.
> At 10:11 AM 6/2/98 -0500, Peter Timaratz wrote:
> >>Bill Williams also talked about "trading the market not your wallet" in
> connection with stop >>placement.
> >
> >I was a student of Bill years ago. Back then I had a fairly small account
> and I told him I thought it >was too risky for me to trade bonds with this
> size of account. He said I should trade the market >and not my wallet. I
> agree that stops should be calculated based on market considerations.
> >But if a stop entails too much risk relative to your account then you
> shouldn't take the trade. It's a >simple money management principle, but Bill
> didn't agree with it.
The truth is that you should set stops (and targets) based on the
market you trade and chose the market you trade based on your wallet.
Unfortunately to many people try to trade S&P futures with $5-10,000 when they
should be trading 1 E-mimi contract. The Indexes have done a good job of
creating a verity of product sizes. What's wrong with the rest of the
markets? How about a mini-bond future contract?
Good luck and good
trading,
Ray Raffurty
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