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Ещё мысли об обстоятельствах и успехе

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#1 Николай Степенко

Николай Степенко

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  • Интересы:трейдинг, биржа, обучение трейдингу, технический анализ, фундаментальный анализ, велосипед, море, путешествия

Отправлено 29 Январь 2010 - 18:52

The article I wrote last week on cause and effect in trading the markets covered a subject that many wrestle with judging by the large number of e-mail responses. Many were complimentary (thanks to all of you—I’m blushing). Several were also very introspective describing the personal struggle that can result from unexpected or unpleasant results in spite of doing the right things.

In last week’s article, I mentioned three responses that tend to occur when expected results fail to follow correct actions. Whenever we sense a disconnect between cause and the expected effect, it’s common to question the rules or guidelines that were supposed to direct the process. That questioning often leads to the following sentiments:
The rules really aren’t good and don’t serve me.
I no longer need to follow the rules exactly, or at all.
At least I can tweak the rules to feel like I have some sense of control.

Let’s look at these individually. As you read, consider if any of them are issues for your trading or investing.

The rules really aren’t good and don’t serve me.

This one is pretty easy to identify and is quite common. This thought process leads people to dump one system and jump to another or do the same with market gurus. These folks are looking for the system or guru with “THE answer.” This also leads people to jump from trading stocks to futures to forex to options and then back again, searching for the instrument with the right characteristics. This same reasoning causes people to abandon good solid strategies in search of the Holy Grail. EVERY system or strategy will go through rough patches leading to drawdowns.

What to do about it! We need to understand our system’s strategies more deeply and then we have to understand statistical randomness just a bit. Just because a system has traditionally won 61% of the time in the past with winners 15% bigger than losers doesn’t mean those characteristics will apply to every 3 trades. Or every 10. Or every 50. Van’s Definitive Guide to Position Sizing does a great job of emphasizing the importance of understanding variability, especially the amount of scatter that exists in a given system’s trade results. Systems with more scatter produce a wider variety of results over a given time frame. If we understand that statistical concept and couple it with an understanding of how our individual systems work in different market conditions, then we can experience the expected variation in results without the desire to drop the system and look for another.

I no longer need to follow the rules exactly, or at all.

This is an advanced stage capitulation that usually comes after believing the rules don’t work and that tweaking them won’t really help either. At this point, the trader or investor decides that they might as well do what feels good because following what were supposed to be the “right” rules didn’t work often enough to matter.

What to do about it! This one is easy: if you find yourself in this “throw your hands in the air” mode, stop for awhile. Do a bit of introspection. Have you given your strategies a long enough time to work? Are you using proper position sizing that will allow you to stay in the game long enough to let your strategy’s edge take effect? It’s far better to re-evaluate than to flail at the markets! If a plan didn’t work (and some of them won’t), that doesn’t mean every plan will fail. Evaluate what was useful and what was not, then correct and continue.

At least I can tweak the rules to feel like I have some sense of control.

I don’t know anyone who has avoided this trap! Making changes too early, too often and to too many variables are mistakes that almost all traders make at some point in their careers.

What to do about it! Stop tweaking! Seriously though, when you start using a new system or strategy, write down the number of trades you’ll make before doing any tweaking. The bare minimum should be 30 to 50 trades; 100 is better, especially if the system has more than a few variables. It’s okay to review performance more frequently, say monthly or quarterly (or every one to two weeks for day traders). But if you do these more frequent reviews, only use them to assess performance, not to make changes. Always be sure to take into account the overall market environment and market type when assessing performance or contemplating changes.

Once again, remember that no one trade is important (as long as you position size properly and honor your stop loss)—it is just useful data as part of the larger whole. Allow yourself and your strategy the luxury of time. Cause and effect in trading and investing does exist—patterns repeat themselves, and the psychology of buying and selling will make sure that they do. But seeing those patterns repeat may take more samples than we expected initially. Understand this going in, and you’ll be way ahead of the game.

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