Tag Archives: frustration

There’s always an answer

I firmly believe there’s always an answer available to any problem that you might face. However the challenge lies in actually asking the right question or being able to see the problem correctly. You can spend an awful lot of time pursuing what you think is the answer to a problem only to find out the question which first arose was the wrong one. That’s slightly opaque so I’ll try to use a (short) real world example to illustrate what this post is about.

I’ve recently found huge problems going to the gym during the week.

Frankly the last thing I want to do at 7-8pm is drag my ass to the gym. I’m just too knackered and the whole experience wakes me right up so my body doesn’t calm down till midnight by which time I’m a corpse 8 hours later when I should have already been up at 7 a.m. to go to work… Ugh…

I’ve spent two months beating myself up for only going to the gym once or twice on the weekends and given what I’m trying to achieve physically that’s not enough. What happens is you go in on the weekends and destroy yourself (too much weight) and are a wreck the rest of the week… it’s no fun.

I thought this failure was related to self-discipline/laziness and so on but taking a bit of a step back from the problem recently I figured out that if I joined a gym close to work I could spend 40 minutes in there each lunchtime, save money (on Costa lunches) and be more productive in the afternoons also. Bonus!

The problem wasn’t ‘not going to the gym in the evenings’ but actually I should have been asking ‘How can I train every day?’ If you ask the right question then the answer seems easy.

With respect to trading (yes we got on topic eventually) I’ve been looking at the problem which is that since I’m working full time it’s very challenging to gain trading experience that is useful and which I can learn from.

What I mean by this is to learn a new skill you need to be able to repeat it over and over under the same/similar conditions before you can internalize it, before it becomes truly ‘yours’. However if your exposure to the market is haphazard/piecemeal and under pressure that’s nothing like how you should be trading. Also given the fact I miss opportunities to learn/set-ups intra-day the actual number of potential learning experiences I’m exposed to is actually very small…

Now I began approaching this problem by looking at radically changing my work life (not currently possible) then at the hours/markets I could trade (yes, to a certain extent) or simply mothballing the whole topic till I’ve gotten myself into a position where I can trade full time. This last sentence is hugely ironic and contradicts all my reasons for learning to trade.

It hit me that, since there are no shortcuts, what I’m looking for is chart time. The right question to ask is actually ‘How do I get more experience in front of the market?’

Happily I stumbled across this program which allows you to ‘trade’ from historical (live recorded) data at an accelerated pace. Since I’m not back testing a robot but learning to trade ‘price action’ in a discretionary way (that suits my psychology) I can now do this evenings and weekends to improve my competence in a structured way. The alternative being attempting to ‘read’ the market and place a trade having glanced at a chart in between doing actual work…

You can hopefully see how what I was doing before simply led to frustration, losses and a very haphazard learning experience!

Back way off topic again but to wrap up properly… If there’s an issue you see in your life then you need to check yourself.

  1. Are you trying to solve the right problem?
  2. Are you asking the right question about what you’re trying to fix?
  3. Are you simply scared of making the change you know you need to?

So my friends, onwards and upwards!

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2011 summary 2012 heads up and ‘secret weapon’ insight :D

So I’ve managed to procrastinate at olympic levels on writing this post but feel the need to draw a line under 2011 before moving into 2012. This kinda comes under the same category as tidying up, sending un-used clothes to the charity shop and filing paperwork but lets go for it 😉

First off – I’m continually surprised by how much I actually got out of blogging both as a way of kicking my own ass but also the comments, feedback and great people I ran into during the last 12 months. This ‘ere humble record received 6480 views last year and more astonishingly I gained >160 followers on the twitter. I have no idea what to do with the twitter side of things btw but thanks for the interest!

I’m entirely amazed by this and would like to say ‘Thank You’ as well as wish everyone an awesomely successful 2012.

I’m painfully aware that this ‘media’ (?) success is completely un-reflected in my trading results however and since this whole blog thingumy is entirely peripheral to the main point I’m not going to say much more other than bits of the site here need bringing up to date (esp. books) which I’ll do as and when. (honest)

So I’ll break 2011 down into quarters to give the whole thing some structure and take it apart from there…

Q1, Q2, Q3 Jan-Sept

I guess looking back this is really the ‘no freaking idea phase’ where not only did I not know but essentially everything (including myself) could have killed me. The bit where the caveman walks out of the cave in the belief that velociraptors are actually cuddly, kind creatures that are simply miss-understood.

On the plus side (possibly out of desperation) at the end of June I began to learn vipassana meditation which I’ve not mentioned anywhere in this blog previously. Now, I’m sure some people will take the piss 😉 and if you’d have told me in the beginning of 2011 that I’d now be doing this every day I’d have laughed my ass off too. No really. I’ve done stand up comedy about Jesus beating someone to death for driving in the centre lane of the motorway so don’t start on this, ok? K 🙂

The reason I mentioning this now is to say doing this has had a ridiculously positive impact on my life outside of trading which has fed back into how I view what I’m doing on this particular (trading) area…

So vipassana is ‘looking at things as they really are’ which, if you know any psychology at all or understand perceptual bias is very worthwhile getting your head around with regards to trading. Now hopefully you’ll follow me on this…

People (the majority of retail traders) look at trading (imho) because they are un-happy with their existing situation and being a trader will ‘solve all their problems’… doesn’t look hopeful eh?

This means that when trading they are extremely attached to the outcome and that will inevitable cause them to NOT see what’s actually going on in the market – they will be too anxious, too scared, too fearful and too everything. They will do everything wrong. Take profits too early, trade emotionally (revenge trade) and also pass up opportunities to actually do things properly.

Their trade will represent how they see themselves in the market. Overconfidence on one side (possibly) without the required actual knowledge versus fear on the other side also compounded by lack of knowledge.

Now to come back briefly to this – I’m writing this blog to prove to all the retail traders out there that have got sucked into the FX hype that it can be done and it would be pointless to pitch up out of the blue running around shouting ‘I did it – I’m consistent’ without being able to contribute to the rather sketchy (i.e. shit) path worn in the road by the travellers before. I’m talking about lack of ‘proper’ methodology about how to master this skill but I’m also digressing a whole hell of a lot. Sorry!

Anyway the psychology will kill you if you’re looking for success in the market to ‘fix’ an issue you have out there in the real world. One of the ironies here for me is that if I wasn’t going after this goal then I’d likely never started meditating in the first place and I’d not have seen what a powerful tool this has been at every level.

Here’s a hint at what’s happened outside of the trading arena.

  • No longer dealing with people that just sap my energy
  • Now getting on better with friends/colleagues in a job role that (while stressful) I really enjoy
  • Have resumed running in addition to the usual gym stuff I do
  • Haven’t had a cold or any sort of illness for the last 6 months
  • Eating better and sleeping better
  • More ‘level’ emotionally

Now, is my life suddenly perfect? Hell No 😉 but I’ve realised that all the solutions are actually locked away in my head and that they will absolutely NOT come from getting really good at trading in order to solve problems by being able to throw money at them…

So what does this mean for trading? Like a dog with a bone I still want to become very proficient at this skill. However, all the reasons for doing so are now subtly different because they’re no longer keying in to all the negative emotional and psychological debris that massively gets in the way of any kind of decision making. The emotional ‘tie’ between me as an individual and my position in the market isn’t going to screw me over (as much – lol) whenever I’m looking at what’s going on.

Now, am I suddenly a ‘super trader’? No because I still have some un-helpful character traits that I need to sort out.

1) I’m way too impatient. By this I mean I close good trades far, far too early. This is just going to take some new ‘rules’ and self discipline for me to stick to them

2) I’ve been trying to trade 5min intra-day bars when my work commitments make this virtually impossible. Putting myself under this kind of pressure has had a negative effect in the last few months. I actually like this timeframe a lot but it’s not workable in my current circumstances

3) Still crap at record keeping. Which essentially points to laziness on my part and currently have one and a half days before the end of tomorrow to write a proper trading plan for 2012. We’ll see how much coffee I can consume tomorrow eh?

Before I get into Q4 here’s another observation… The ‘goal’ of becoming a consistently profitable trader isn’t the actual goal at all. A goal is nothing more than an end point and when you’re at the foot of the mountain it’s entirely the wrong thing to concentrate on!

The goal is to master the process of executing good trades and managing them well. Concentrating on the ‘goal’ is simply going to be the most massively frustrating thing you’ve ever tried and you will more than likely give up. It’s the process that is 100% more important than the goal. Some obvious examples

Trading
goal – money etc. you’ve seen the spam too so I won’t elaborate 😉
process – simply learn to execute good trades one after the other

Diet
goal – lose 12kg
process – keep in mind what you eat, track it, don’t over-eat, exercise

Learn a language
goal – chat up anyone (LOL)
process – learn the grammar, structure, vocabulary and practice, practice, practice.

So you see, it’s the goal that’s sexy in the beginning but the PROCESS is way more important. This is why (to a certain extent) all the ‘positive thinking/affirmation’ crap gets on my nerves. Be mindful of the process and forget the goal 😉

Q4 Oct – Dec

Here I think things actually improved. I got some proper tuition and possibly found the humility to listen and focus on the process of becoming proficient at a skill using my own eyes/brain rather than expecting coin to fall from the sky like some sort of manna from heaven… Yes, it’s taken my 9 months (well more like 12+) of bashing my head on the wall before I realised I didn’t know anything about what I was really trying to learn…

People I’m learning from…

  • Jimmy Young – absolute 1st rate tuition/value for money/pull out all the stops so you ‘get it’ however intra-day (5 minute) so kinda challenging for me and the j.o.b.
  • Chris Lori – price action, price action, price action (1hr-4hr-Daily)
  • Nial Fuller – as above with a different slant

On this basis I’ve been making a fair fist of trying to trade during the day while working and let me be clear about this – it absolutely doesn’t work 😉 The amount of ‘mental’ required to get into the flow of what the market is doing on a daily basis isn’t compatible with staying employed. So I’ll be moving up to 1hr/Daily charts while keeping on with Jimmy’s excellent course as we progress through 2012.

So there we have it. I’m gonna head out to get a coffee and write a trading plan framework

Thanks again for all the comments, support, suggestions and especially criticisms

All the best to everyone for 2012

Namaste

Rob 😀

Finally 2012 can’t really start properly without some of the following because we must all be a bit ‘loco’ 🙂 Kickit! INsane in the BRain 😀

Step away from the assumptions!

This has been by far the most challenging blog update I’ve had to write…

Having procrastinated in an olympic fashion for the last three weeks I’ve given myself the deadline (today – Saturday) to get the following out of my brain and into the real world.

Maybe this proceeds an incoming mid-life crisis or is just the symptom of a frustrated trader not taking the opportunities that present themselves.

Not to make light of the facts but really my performance to date does pretty much suck. This has led me to question a number of assumptions about trading (as presented by numerous organisations, books and courses) as well as my own biases and why people take certain paths to try to conquer the mountain.

I apologise in advance for the length of this post. I’d also like to point out in advance that I’m not ‘down on trading’ even though some of what follows might sound slightly negative 😉

It’s been a couple of weeks and of course we’re in the midst of a full on ‘lizard brain’ attack in the financial markets. While I did short the Dow at one point the volatility gave me a significant pain in the neck and I decided to stand on the sidelines 😉

Another reason for doing this has been that I’ve not had the opportunity to watch this type of market before so have very little appreciation or understanding of what’s happening. At the moment I’d reckon that putting my toe in the water could get me my leg bitten off!

Also I’m un-satisfied with how I’ve been approaching trading and have been looking at some ways to improve my overall performance. What’s contributed here is that I’ve been reading the book ‘Thinkertoys’ which outlines some creative and different ways of solving problems.

The main question I’ve been asking myself is: –

How do I become a profitable trader?

Looking at the amount of stuff I’ve already waded through in pursuit of this goal as well as the outlay I’ve begun to wonder if I’m missing a significant piece of the puzzle somewhere?!?!

I’d suggest that 90% of the information about trading, certainly related to technical trading, is pretty much the same or variations on a theme which goes something like this: –

Strategy (entry/exit), Risk:Reward, Money Management, Psychology is all… etc.

Now, maybe I’m being somewhat unrealistic but I still suck at this subject after more than 9 months and a great deal of time, money and emotional investment. I don’t think I’m retarded or particularly slow on the uptake.

Either I’m over-thinking it or my approach is flawed… so I’ve been looking for flaws by asking different questions about what I’ve been doing to see what sort of answers I come up with. Thinking sideways through a problem which encompasses trading but includes some of my own biases and the way I approach life/finances in general.

Let’s take a step back from strategy, entry/exit etc. and the specifics as I try to break this down into easily manageable pieces.

In it’s most basic form a ‘trade’ is an idea. If I’m shorting the FTSE then my ‘idea’ is that confidence is leaving the market, people are moving their money out of stocks into safer havens (cash/bonds) and the index as a whole will fall.

Now, here’s another question… How can I be certain my idea is correct? In other words when I enter a position how do I know what my odds are that the position will come good? What is my percentage chance of being right? If you are a professional card player then you will know the odds. How is it possible to take a trade and decide based on the odds what amount of capitol to risk if you don’t know what your odds are?

Here’s where I believe there’s a significant issue with the information that exists out there in the land of trading education… Very few trading strategies seem to be taught or promoted that include data about their relative level of success (win/loss ratio) in a given market. If we define ‘retail traders’ as people with <£10K in a trading account then it’s no wonder that 80% (average figure I’ve heard quoted) don’t make any money!

They (and me) are tossing a coin in the air.

Now in an earlier post I mentioned that Richard Farley had spent some time looking at ‘trend following’ and calculated the odds are 55/45 in favour of this type of approach. I’d like to have at least an idea of the chances of being right in a given set of circumstances before placing a trade. Am I asking too much?

Back to the idea – again, making it as simple as possible… Shorting the FTSE based on a bunch of technical indicators (moving averages, trend lines, broken support or pick something more esoteric) implies that you believe confidence is lacking and buyers are leaving the market.

Let’s look at it another way… Going short because the 50MA crosses under the 200MA isn’t strictly following an idea. It’s more like following a cue for action based on a number of other ideas which are collected together and the symptoms result a chart on which the price is dropping/EMA cross over.

If you do this then you’re not trading based on the primary idea (cause) but on the effect or result as described on a chart.

Doing anything when you’re one step removed from the primary data means there’s a lot of room for error and miss-interpretation. You’re going to always be playing catch up with the market. It’s certain that more informed parties are acting on information you don’t have access to and your action is happening right at the death of a particular move.

Here’s the leap… Using only technical indicator movements to trade from charts (as most ‘retail’ traders do I think) is hoping that you have the the ability to judge the prevailing wind about a stock/index in the moment when you’re divorced from the idea that is already driving the price in a certain direction.

Now, this is where the argument breaks out between technical traders and fundamental traders and I’m going to attempt to avoid engaging with it too much except to say that if you have an idea you want to base a trade on which is backed up by a good chart then I’d suggest that it’s more than likely your trade will work out.

If you have an idea based only on a technical trade setup without understanding the environment it will be less likely that your trade will work.

Here’s why I think ‘retail’ traders rely so much on and are emotionally attached to technical trading (charts) and indicators… It’s an excuse to trade in a lazy way without having your own ideas about the world and what’s going to happen.

Talking to people about charts, Gann, Elliot waves and Fibonnacci turns something that is rather pedestrian into something different, difficult and challenging. It also means you can hint at a ‘magic’ formula which needs to be understood in order to actually come good as a trader. This makes ‘selling the mystery’ of trading good business 😉

Now, let me emphasise here that I’m not going to suddenly stop looking at charts! I reckon they’re extremely useful to help visualise what’s happening but expecting to make money from a technical system without reference to context is (I think) unlikely to come good.

Phew!

Here’s an example… I believe that economic and social conflict will escalate in the US during the next decade driven by the disparity between the rich/poor, the failure of the US government to lead, politics moving from debate to fixed faith in ‘fact and sound bytes’, competition for resources and disillusionment fuelled by unmet expectations.

This will be further compounded by China’s expanding sphere of influence driven primarily by having to secure the resources it needs to ensure internal social unrest is kept to a minimum. The communist party will try to maintain control through creating happy citizens who are economically better off.

Ironically they are now pursuing the model that the US has followed in the last 60 years but maybe they can avoid the hangover that the United States is currently experiencing 😉

Now, there are a whole bunch of trading ideas here. Long companies making riot gear, CCTV or providing security services. Find a way to invest in companies specialising in exploration for resources. Invest in sectors engaged in or producing the ‘shiny thing make it all better’ products of the future for a growing Chinese consumer base…

I’ve not looked at a single chart yet but I feel more confident about these ideas because these are backed up by beliefs rather than some technical voodoo (sorry, overstating the technical downer there a little!)

When financial confidence melts down then perfectly good companies also get punished – Google dropped last week and they’re an amazing company (IMHO) so it’s obviously important to pay attention to the environment.

So… Ideas? There are probably millions of them.

I’d not posted anything for two weeks because I was really having a quiet moment to look at what I was doing. As with many things in life you then stumble onto something that helps turn the tiny spark of an idea into something concrete…

When did this change of thinking really come into focus?

See my next post – Ooh! Cliff-hangar!!