Ayn Rand Quotes

A government is the most dangerous threat to man’s rights: it holds a legal monopoly on the use of physical force against legally disarmed victims.

Achievement of your happiness is the only moral purpose of your life, and that happiness, not pain or mindless self-indulgence, is the proof of your moral integrity, since it is the proof and the result of your loyalty to the achievement of your values.

Achieving life is not the equivalent of avoiding death.

Ask yourself whether the dream of heaven and greatness should be waiting for us in our graves - or whether it should be ours here and now and on this earth.

Civilization is the progress toward a society of privacy. The savage’s whole existence is public, ruled by the laws of his tribe. Civilization is the process of setting man free from men.

From the smallest necessity to the highest religious abstraction, from the wheel to the skyscraper, everything we are and everything we have comes from one attribute of man - the function of his reasoning mind.

God… a being whose only definition is that he is beyond man’s power to conceive.

Happiness is that state of consciousness which proceeds from the achievement of one’s values.

I swear, by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine.

It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.

Man’s unique reward, however, is that while animals survive by adjusting themselves to their background, man survives by adjusting his background to himself.

Money demands that you sell, not your weakness to men’s stupidity, but your talent to their reason.

When I die, I hope to go to Heaven, whatever the Hell that is.

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Don Miller

The need to totally separate the financial implications of your trading activities from the skill. I’m a strong believer in not seeing your P&L during the day, and not seeing your intra-trade P&L while a trade is live because frankly, the market doesn’t care. The market is going to do what it does, and there are going to be signals as to what it’s likely to do at any given point -- the probability is never 100% obviously -- but there’s some likelihood that the market is going to do something, so when one starts making decisions based on his P&L, whether it’s for the day or for the trade, or whether it’s an urge that -- “Man, I need to make so much to make this work” -- totally skews the trading skill. Trading, in my view, is so much like being a professional golfer who is focused entirely on the swing and playing the hole, and what happens when you get in the rough? How do you minimize your loss? And the focus that’s required on every single stroke. If Tiger was out there thinking, “Oh, my gosh, I’m in the woods here. I gotta make a three on this, and the only way to make a three is by going through the darn tree.” He doesn’t do that. What does he do? He chips out, and he minimizes the damage, and he moves on to the next hole. He’s focused on his skill, and he’s also focused on risk management. This is no different. The other analogy I can use is like a surgeon operating on a patient. If the thought of money all of a sudden comes in, whether it’s the risk of lawsuits or how much money the physician is making for the operation, it totally detracts from the skill. You’ve got to separate the two. I went through a rough spot where, for the first time in my life, my ability to generate income was totally dependent on my trading skill. When I got back to focusing on the skill, things turned around nicely.

The other really important lesson I’ve learned is that trading is a business of probability, and the ability to generate an income over time is a collection of a lot of different trades and a lot of different days. Everyone talks about cutting their losers and letting their winners run. I believe this business is all about imperfection, meaning you’re gonna have a lot of days where you make some modest income. You’re gonna have some days where you’re pretty much really in focus, and you’re going to have some pretty decent income. You’re also going to have a lot of trades and a lot of days that don’t work out that are going to be drawdowns, and that’s OK. It should be expected, and it should be part of the business plan. There are times when the market is not conducive to the rhythm that you may trade very well. There may be technical glitches, you name it. There are going to be losses, and they should be expected and managed and budgeted. Small losses, small gains, and larger gains, and what we’re after here is some kind of average of all that which provides an income in a given week or month or year. That’s an important concept. It’s unlike any other career where one has an hourly wage or monthly salary. The income stream in this business is bursty, or spotty, meaning you’re going to have some decent days and some greater days and a lot of days that go against you, and it’s all about managing those times when you may not be in sync. That’s what provides this average over time. People who come to work in the trading world might think, “I’ve go to make this much today.” I don’t think that’s as important as over time. Look at it on a weekly basis, or a monthly basis, what do you need on average to make this work for you. Strive for that average over time. You go into a lot of these chat rooms, and I swear no one ever had a losing trade there, because nobody ever talks about it. This business is all about losing. It’s all about managing and expecting it, managing it, minimizing it, recognizing that it happens, but letting your positive results more than compensate for those activities.

Hitler: Another trade, another margin call

LUDWIG VAN BEETHOVEN - MOONLIGHT SONATA

Almost Home

Cherokee Indian Proverb

"Don't let yesterday use up too much of today."

Risk

RISK is the possibility of loss. That is, if we own some stock, and there is a possibility of a price decline, we are at risk. The stock is not the risk, nor is the loss the risk. The possibility of loss is the risk. As long as we own the stock, we are at risk. The only way to control the risk is to buy or sell stock. In the matter of owning stocks, and aiming for profit, risk is fundamentally unavoidable and the best we can do is to manage the risk.

Risk Management

To manage is to direct and control. Risk management is to direct and control the possibility of loss. The activities of a risk manager are to measure risk and to increase and decrease risk by buying and selling stock.

http://www.seykota.com/tribe/risk/index.htm

Difficult But Easy

“Trading is a tough way to make an easy living.”

The Way of the Archer

But like a well trained Archer, you first have to develop prerequisite skills ... understand the technicals of the bow, the proper execution of the arrow, and ultimately, hitting your target.

What separates the medocore from the gifted is the ability to become one with the bow, which requires letting loose of all inhibitions.

Therefore, I must agree, your psychology is the key to keeping you disciplined, focused, and confident to stalk, execute, and exit the trade ... all with precise perfection.

As such, an Olympian only begins the competition after demonstrating such skills, an Edge if you will, that can be exploited to his advantage.

IMO, only practice, practice, practice, under all types of adverse conditions, will ever keep you lean and mean, like a fighting machine.

My 2 Cents.

On Your Mark ... Get Set ... Go!

Thanks for the detailed reply. In noting your comments, I am curious as to how your current system might simulate the following:

(1) Can you backtest your set-ups in a real-time like scenerio?

For example, when using Ameritrade's Strategy Desk, you can literally go back any two years, and retrieve any stock on any time frame, with bar-to-bar instant replay.

(2) When back-testing your specific set-up, can you convincingly establish, within a 3-6 months period, the expected win/loss probability of the pattern?

For example, if it is consistently greater than a coin toss (ie, +50%), you have a attested to a proven Edge.

(3) When paper trading your set-up, can you develop several money management scenarios to determine the profitability expectation of the system?

For example: do you exit 50% position at 1R, or Fib, and/or 50% at end-of-day? Do you move stop to break-even once 1R is reached, or exit 100%, etc

In summary, you have establish your edge, internalize the confidence to trade your set-up, and ascertain the recurrence of your pattern to meet your monthly minimum R-target.

Like a well trained athlete, your skills as a speculator is to exploit your proven Edge with position size and frequency, thereby maximizing your monthly R's.

My 2 cents.

Thou shalt keep thy religion to thyself!

This morning two Jehovah's Witnesses showed up at my doorstep to share their version of the "holy grail". I set their minds into unrest, by revealing the flaw in their thinking. Basically, this is what I preached to them:

1. Can God create an object too large for him to carry?
   
2. Why is God regional, geographical, cultural, linguistically, nationalistic, egotistical, chauvinistic, etc? All the common ailments that plague ordinary men.
3. Why does God not address important modern moral issues, such as, slavery, torture, human rights, animal rights, women rights, democracy, child abuse, gay rights, etc.
4. If God is all caring and all knowing, why does he allow an innocent child to suffer from a natural disaster?
5. Why did God, the merciful and compassionate, kill all the first born in the entire country of Egypt?
6. If God can cure cancer for the faithful, why not grow limbs for devoted amputees?
7. If all the people that ever lived knew the existence of the humble sun, why did your almighty God escape their attention?
8. How could Noah have saved 10 billion species in a boat the size of a 1800 sq feet home?
9. The universe is too complex to just exit, yet created by someone who just exist
10. Scientific mindset: If a Big Foot exist, he would have to emerge from a population of at least 50 individuals, and from a diverse group of at least 5 tribes. How can the existence of 250 Big Foots elude modern scientific inquiry: bedding, DNA, hair samples, etc?
11. Independent verification: Likewise, how could an important iconic figure have lived without any corroborating evidence from historians, etc?. Even the Chinese, Indians document the birth and death of Julius Cesar.
    
12. Irrational thinking: God stopped the sun, but the earth revolve around the sun, therefore the earth would've fell out of orbit?
    
13. Can a man self-discover God, without any external influences? Or is it a learned experience, propagated from tales of doom and gloom?
14. Why are humans so arrogant to assume that a God, master of the universe, would ever indulge their pitiful pettiness?

If Faith is the deliberate suspension of rational thinking, why should it be revered?.

Free Will cannot be the same as the only choice between two alternatives: hell or heaven. Religion is the seed that sows many sorrow. Hope is the illusion it creates to mask emotional enslavement. The independent thinker is free from this self inflected wound. The future of mankind lies in the devotion to scientific inquiry not the worship of an illusionary space God, or a fairy god-mother, for that matter.

Blessed is he who is free from bronze age tribesmen sensibilities.

Metallica- Enter Sandman

2009 Goals

1. Gaps: will qualify each trade as break-away, run-away, or exhaustion gaps from the daily chart.
2. I will track daily gap trades to determine which hold and trend higher/lower, fill gap, etc?
3. Gap-fades: I will pass on break-away gaps. On a daily chart, a break-out from a consolidation range is sign of a powerful trend.
4. Ultimately, my 2009 goal is to exploit my edge with frequency and size ... to press an advantage when it's there!
5. I will exercise daily - If I push myself physically, I will push myself mentally
6. It is not enough to repetitively practice a skill, I must do so with ever greater speed and accuracy, by creating conditions of extremity
7. I will start thinking like a Trader - this means knowing what traders look at when they assess markets, the economy, news events, etc.
8. My end of day review will finish with my setting a goal for the next day's trade.
9. A balanced life makes for balanced trading.

Why Trading is Difficult

1. Need to internalize lots of trading simulation of specific set-ups in real-time to trade effortlessly

2. Need to trust money management system to weather +10 losses in a row

3. Tuff to internalize that its the 5-6 huge monthly runners that is the big pay-off days

4. Must master +3 trade set-ups to make money consistently month to month.

5. It takes considerable time to mathematically think and act like a trader

6. Trading is a performance skill which requires mastery of every element of trading

7. It requires time capital and considerable effort to achieve the experience to make it effortless and automatic

8. It takes several attempts at different trading methodology to sync with a trader's personality and cognitive strengths

9. It takes time to set and internalize specific rules that embed a sense of mastery

10. To survive in trading requires weathering the lengthy learning curve

Come As You Are - Nirvana (Nevermind)

White Stripes - 7 nation army

Trust

To gain confidence, you must believe. To believe, you must internalize. To internalize you must simulate. To simulate, you must practice. To practice you will master. In mastery, you will gain confidence.

IMO, trading a new set-up, especially under a different time period, should undergo at least six months real-time paper trading.

Only after determining your edge, under various money management scenerious, sholud real money be committed.

Once your edge is determined, exploit it with position size and frequency.

Evolutionary Trading

The problem with "evolutionary trading" is the constant adjusting to the ever changing wind, and, thus, loosing sight of your original port of call. By the time you get to your final destination, you have carved out a new routine.

Knowing exactly, precisley, what your set-ups can deliver, will prevent you from manipulating your original system. This internalization of singular vision, can only come from tirelessly backtesting.

A Trading Lesson From My Daughter

Here is an interesting insight I learned from my 15 year old daughter:

As a home schooler, we have taught her to spend the time to think and analyze the problem before drawing a conclusion. Now that she is schedule to sit for the SAT March '09, we have just discovered that our approach to her test taking skills are unsatisfactory.

Because she has less than 1.50 minutes to solve a question, she now has to abandon her analytical mindset, and simply absorb what she reads.

Not unlike trading, one can spend too much time analyzing and problem solving, when for the most part all that is required, is to simply trade what you see. For this to become automatic, one has to have confidence in the trade set-up. But this requires re-education and confidence establishment.

Delusional

I am going to play devil’s advocate by disagreeing that this is a necessary part of his “learning curve”.

Your reasoning is tantamount to saying that to learn to avoid getting hit by a truck, you must first experience a devastating collision with one.

This “learning curve” BS was concocted by wall street to keep
“99% of people delusional about trading” … that is, keep em comming back for more.

I am very doubtful that the conditioned ability to trade can be taught. It has to come from deep within, as like a marathon runner! And not everyone is born with this inner calling. This is why 99% of traders are delusional … they overestimate their natural capabilities.

This kid need to learn to be patient, control his emotions, respect risk, and practice, practice, practice. Michael Jordan did not become an overnight sensation because of a single ball game. And he did star in the big leagues because of a few good hoop shots.

I wish you luck on your bold endeavor! Perhaps a psychological profile is the best place to start.

Otherwise you will be a major contributor to your protege being a part of the “99% of people who are delusional about trading”.