|
02/13/01
|
09:24:42
|
<Chris>
|
Training
In Session
|
|
02/13/01
|
09:24:42
|
<Raven>
|
doesn't
Alan ever have to go to the bathroom?
|
|
02/13/01
|
09:24:46
|
<Chris>
|
Room
is Moderated. Send questions to Larisa.
|
|
02/13/01
|
09:25:03
|
<Raven>
|
test
|
|
02/13/01
|
09:25:08
|
<Chris>
|
Okay
gang, let's do another one of our ""Wisdom of the Best""
sessions
|
|
02/13/01
|
09:26:15
|
<Chris>
|
For
those new with us today, Threei and I have been through great trading
literature over the past couple years.
|
|
02/13/01
|
09:26:51
|
<Chris>
|
Many
of these books/articles, etc. offer great passages within them, that struck a
chord with us, and we'd like to elaborate on how they do, in these sessions.
|
|
02/13/01
|
09:27:33
|
<Chris>
|
Real
quick, thank you to those that offered questions for Mark Douglas, author of
Disciplined Trader and Trading in the Zone. I sent them off to him last
Friday.
|
|
02/13/01
|
09:27:55
|
<Chris>
|
When
he replies with answers to your questions, I will post them for all to see.
|
|
02/13/01
|
09:28:23
|
<Chris>
|
Today,
I'd like to go back to ""The Way of the Warrior Trader""
by Richard McCall.
|
|
02/13/01
|
09:28:50
|
<Chris>
|
I
personally like books about trading, that don't necessarily talk about
""methods"", but rather provide some lineage to trading
by what is spoken about.
|
|
02/13/01
|
09:29:16
|
<Chris>
|
Meaning...applying
fields of physiology or psychology to what we experience everday.
|
|
02/13/01
|
09:29:33
|
<Chris>
|
Reason
being, we all realize that simple trading methods to provide success to
anyone.
|
|
02/13/01
|
09:30:06
|
<Chris>
|
Trading
resides within you, and therefore, finding out ways to see who you are, on
any given day, provides a much better chance to progress in this business.
|
|
02/13/01
|
09:30:22
|
<Chris>
|
So
let's take a few passages and elaborate.
|
|
02/13/01
|
09:30:38
|
<Chris>
|
Page
74:
|
|
02/13/01
|
09:30:56
|
<Chris>
|
How
""you"" Perceive Things is Everything
|
|
02/13/01
|
09:31:50
|
<Chris>
|
...I
would encourage you to always remember is that your ability to accept risks
and losses is very dependent upon ""your"" personal
perception and appraisal of risk versus reward, and no one else's.
|
|
02/13/01
|
09:32:11
|
<Chris>
|
First,
let's take the word ""Perception""
|
|
02/13/01
|
09:32:30
|
<Chris>
|
Perception
is what makes the market work.
|
|
02/13/01
|
09:33:17
|
<Chris>
|
There
is an enormous base of capital and individuals putting this capital to work,
either in putting on a position or taking one off, given perceptions of what
they believe to happen next.
|
|
02/13/01
|
09:34:09
|
<Chris>
|
Newer
trader perceptions are often distant from true market reality as they let
emotional issues affect this perception.
|
|
02/13/01
|
09:34:20
|
<Chris>
|
i.e.,
every uptick is great (assuming long), every downtick is bad.
|
|
02/13/01
|
09:34:41
|
<Chris>
|
While
the market many times shows you an uptick or downtick, it doesn't create this
perception.
|
|
02/13/01
|
09:34:49
|
<Chris>
|
It
just goes up and down.
|
|
02/13/01
|
09:35:00
|
<Chris>
|
What
is in you, what you are used to seeing, experience gained, feelings of the
day, etc.
|
|
02/13/01
|
09:35:11
|
<Chris>
|
This
is what creates the perception of that ""one
uptick/downtick"" means.
|
|
02/13/01
|
09:35:29
|
<Chris>
|
At
""x"" price level, there is an agreement on price.
|
|
02/13/01
|
09:35:40
|
<Chris>
|
At
""x"" price level, there is a disagreement on value.
|
|
02/13/01
|
09:35:53
|
<Chris>
|
If the
latter wasn't true, the market would cease to work.
|
|
02/13/01
|
09:36:07
|
<Chris>
|
We
need aggregate shifts in demand and supply to make stocks move.
|
|
02/13/01
|
09:36:20
|
<Chris>
|
Trader's
perceptions of future events allows this to happen.
|
|
02/13/01
|
09:37:04
|
<Chris>
|
Realize
please...perceptions are based on things sought by you, not a creation of the
market itself. The market just moves...you decide what it means and act
accordingly.
|
|
02/13/01
|
09:37:32
|
<Chris>
|
As you
act accordingly, you assume risks.
|
|
02/13/01
|
09:37:57
|
<Chris>
|
The
risk can be as simple as monetary, i.e., the capital loss possible for the
trade or
|
|
02/13/01
|
09:38:20
|
<Chris>
|
it can
be as detrimental as ""mental risk"", creating a negative
attitude for continued loss with no lessons learned.
|
|
02/13/01
|
09:38:34
|
<Chris>
|
How
much risk, in both cases, will need to be realized by you.
|
|
02/13/01
|
09:38:49
|
<Chris>
|
Both
before you begin trading at all, as well as, taking on an individual trade.
|
|
02/13/01
|
09:39:05
|
<Chris>
|
In a broader
sense: How much risk capital do I have to learn trading?
|
|
02/13/01
|
09:39:25
|
<Chris>
|
In a
narrow sense: How much of my port am I willing to risk on this trade.
|
|
02/13/01
|
09:39:45
|
<Chris>
|
In a
broader sense: Over the long haul, are short term losses going to hurt me
mentally?
|
|
02/13/01
|
09:40:01
|
<Chris>
|
In a
narrow sense: Will this loss result in a negative reflection upon myself?
|
|
02/13/01
|
09:40:20
|
<Chris>
|
If the
risk in these matters are too great, then it's wise to back off trading.
|
|
02/13/01
|
09:40:36
|
<Chris>
|
Realize
what your risk is, evaluate it, accept it, and then move in which ever
direction is best.
|
|
02/13/01
|
09:40:56
|
<Chris>
|
On a
stock to stock basis, we realize risk assumption by way of stop loss.
|
|
02/13/01
|
09:41:46
|
<Chris>
|
Our
style of trading entails participating in stocks with minimal stop loss risk,
with the ability, through your progression, to trade larger share lots for
profitability.
|
|
02/13/01
|
09:42:23
|
<Chris>
|
We
evaluate risk, as we showed you yesterday in the execution class, by such
things as:
|
|
02/13/01
|
09:42:25
|
<Chris>
|
1.
Tight levels
|
|
02/13/01
|
09:42:31
|
<Chris>
|
2.
Reasonable sizes at each level
|
|
02/13/01
|
09:42:47
|
<Chris>
|
3.
Tight spreads between levels below inside prices.
|
|
02/13/01
|
09:42:58
|
<arled>
|
02/13/2001
[ TERA ] TeraForce Technology Lands Major Networking Technology Contract
|
|
02/13/01
|
09:42:59
|
<Chris>
|
This
allows our ""slippage"" to be minimal if anything at all.
|
|
02/13/01
|
09:43:05
|
<Chris>
|
sigh
|
|
02/13/01
|
09:43:35
|
<Chris>
|
If our
evaluation of risk is too great for personal abilities:
|
|
02/13/01
|
09:43:40
|
<Chris>
|
We
simply do one of two things:
|
|
02/13/01
|
09:43:45
|
<Chris>
|
1.
Decrease lot size
|
|
02/13/01
|
09:43:56
|
<Chris>
|
2.
Elect to watch it only
|
|
02/13/01
|
09:44:25
|
<Chris>
|
1. This
allows us to participate without added risk to the portfolio if wrong.
|
|
02/13/01
|
09:45:05
|
<Chris>
|
2.
This allows us to create experience in our learning curve, developing a
database of information, that moves into our inner self for a foundation of stock
action, that may or may not reveal itself at a later time.
|
|
02/13/01
|
09:45:48
|
<Chris>
|
While
I feel that participating is much better than watching for the long haul,
meaning, you have to trade to progress eventually...I have no problem many
times simply watching stocks
|
|
02/13/01
|
09:46:19
|
<Chris>
|
to see
how they behave, to create more experience, that creates the larger database
of information that my inner self collects and evaluates for later times.
|
|
02/13/01
|
09:46:44
|
<Chris>
|
To
summarize the points, there is different kinds of risk in a broader sense
down to a narrow sense.
|
|
02/13/01
|
09:46:58
|
<Chris>
|
My
risk tolerance is not the same as yours always.
|
|
02/13/01
|
09:47:31
|
<Chris>
|
You
need to evaluate it as it pertains to your personality, makeup, abilities,
etc.
|
|
02/13/01
|
09:48:38
|
<Chris>
|
Embrace
your risk tolerance. Don't try to beat it or trade outside of your risk
parameters ntil you are ready to accept the possible consequences with
confidence and objectivity.
|
|
02/13/01
|
09:48:46
|
<Chris>
|
Next
passage:
|
|
02/13/01
|
09:49:03
|
<Chris>
|
Page
132
|
|
02/13/01
|
09:49:13
|
<Chris>
|
The
Three Instinctual Fears
|
|
02/13/01
|
09:49:52
|
<Chris>
|
If you
were attacked by an alligator, it's not so much that you would be afraid of
being ""killed"" as you would be
|
|
02/13/01
|
09:50:07
|
<Chris>
|
1.
afraid of the pain you would feel being chewed
|
|
02/13/01
|
09:50:19
|
<Chris>
|
2.
afraid of losing your identity as your being digested
|
|
02/13/01
|
09:50:36
|
<Chris>
|
3.
afraid of not knowing where you'll end up in two days later
|
|
02/13/01
|
09:50:55
|
<Chris>
|
Comical?
maybe...relation to trading..very important.
|
|
02/13/01
|
09:51:10
|
<Chris>
|
People
associate loss of money with ""pain""
|
|
02/13/01
|
09:51:25
|
<Chris>
|
The
bully beat me up and stole my lunch money.
|
|
02/13/01
|
09:51:37
|
<Chris>
|
I lost
my wallet, it had 100 bucks in it
|
|
02/13/01
|
09:52:06
|
<Chris>
|
I took
a 1/2 point loss worth 250 bucks on top of my commissions
|
|
02/13/01
|
09:52:34
|
<Chris>
|
Traders
tend to trade in fear of this loss, not focusing on the action of the trade
itself.
|
|
02/13/01
|
09:52:42
|
<Chris>
|
Earlier,
I discussed risk.
|
|
02/13/01
|
09:52:57
|
<Chris>
|
You
already have made the concious choice to embark on a trading career.
|
|
02/13/01
|
09:53:10
|
<Chris>
|
You
accepted this risk, you accepted the possibility of loss.
|
|
02/13/01
|
09:53:37
|
<Chris>
|
You
can't chicken out now by not pressing the buttons when the signal says to out
of ""pain of losing money"".
|
|
02/13/01
|
09:53:44
|
<Chris>
|
You
will lose money, we all do.
|
|
02/13/01
|
09:54:16
|
<Chris>
|
Our
rates of profit to loss aren't anywhere near 100%%.
|
|
02/13/01
|
09:54:42
|
<Chris>
|
Meaning,
out of 100 traders, I""m personally happy to have 70 of them
profitable that outweigh risk/reward 1 to 1.
|
|
02/13/01
|
09:54:53
|
<Chris>
|
traders
= trades
|
|
02/13/01
|
09:55:23
|
<Chris>
|
Realize
that a trade loss is not a reflection of your worth as a person.
|
|
02/13/01
|
09:55:39
|
<Chris>
|
The
trade simply didn't work out and you lost a portion of capital because of it.
|
|
02/13/01
|
09:56:06
|
<Chris>
|
Going
back to risk...we already assumed a small risk in the trade (the narrow
sense) so anything at or above that predetermined risk is quite okay.
|
|
02/13/01
|
09:56:46
|
<Chris>
|
Realize
that the belief of loss of money is ""pain"" must be
switched to ""part of trading""
|
|
02/13/01
|
09:57:02
|
<Chris>
|
Don't
feel as if you are not right all the time, you aren't a good trader.
|
|
02/13/01
|
09:57:35
|
<Chris>
|
I've
read numerous examples in cases where traders are right 30%% of the time, yet
make a living.
|
|
02/13/01
|
09:58:22
|
<Chris>
|
Switch
this belief and you will find yourself becoming less emotional about losses
taken.
|
|
02/13/01
|
09:58:40
|
<Chris>
|
2.
Afraid of losing your identity.
|
|
02/13/01
|
09:59:36
|
<Chris>
|
There
are all types of people. Successful ones, disgruntled ones, lazy, ambitious,
etc.
|
|
02/13/01
|
09:59:52
|
<Chris>
|
The
market will give you a gut check about who you really are, versus who you
think you are.
|
|
02/13/01
|
10:00:26
|
<Chris>
|
I've
seen quite a few traders talking of themselves being aggressive and
successful.
|
|
02/13/01
|
10:00:38
|
<Chris>
|
Succesful
in this sense as making ""lots"" of money in some other
avenue of life.
|
|
02/13/01
|
10:00:55
|
<Chris>
|
Yet
they come to the trading arena and unfortunately were not able to make a
living trading.
|
|
02/13/01
|
10:01:31
|
<Chris>
|
They
seem to believe that this failed attempt at a living for trading is a
reflection on them as a failure.
|
|
02/13/01
|
10:01:41
|
<Chris>
|
Not
so!
|
|
02/13/01
|
10:02:18
|
<Chris>
|
Identities
about who you are and what you believe yourself to be is not a reflection
about whether you can trade the market or not. Far from it.
|
|
02/13/01
|
10:02:40
|
<Chris>
|
Your
identity resides in something that goes way beyond your ability to trade
stocks.
|
|
02/13/01
|
10:03:13
|
<Chris>
|
Don't
feel that any one trade, series of trades, etc. will cause you to lose your
identity as a person in the greater scheme.
|
|
02/13/01
|
10:03:56
|
<Chris>
|
You
are still a friend, husband, wife, father, mother, etc. Your identity as a
trader may never come to light..but don't be afraid of this possibility.
|
|
02/13/01
|
10:04:10
|
<Chris>
|
Remain
in the light that you are other things as well.
|
|
02/13/01
|
10:04:41
|
<Chris>
|
3.
Afraid of not knowing where you'll end up
|
|
02/13/01
|
10:04:52
|
<Chris>
|
If you
are afraid of this, join the club.
|
|
02/13/01
|
10:05:10
|
<Chris>
|
Who
knows where any of us will be 1 day, week, year from now.
|
|
02/13/01
|
10:05:26
|
<Chris>
|
You
need to focus on the present, the moment at hand.
|
|
02/13/01
|
10:05:38
|
<Chris>
|
Exist
to control this very second, because it's the only thing that we can control.
|
|
02/13/01
|
10:05:53
|
<Chris>
|
I
can't change 5 seconds ago, nor can I control what happens 5 minutes from
now.
|
|
02/13/01
|
10:06:06
|
<Chris>
|
So
don't be afraid of it.
|
|
02/13/01
|
10:06:12
|
<Chris>
|
Plan
for it, but don't be afraid of it.
|
|
02/13/01
|
10:06:22
|
<Chris>
|
Taking
it to a narrow sense of stock trading:
|
|
02/13/01
|
10:06:32
|
<Chris>
|
You
take a trade iwth an uncertain outcome.
|
|
02/13/01
|
10:06:59
|
<Chris>
|
We are
always watching trades we own positions in, wondering where it goes next.
|
|
02/13/01
|
10:07:16
|
<Chris>
|
However,
Tape Principles allow us to exist in this uncertainty with some structure.
|
|
02/13/01
|
10:07:30
|
<Chris>
|
This
structure allows us to release ourselves further from the fear of hte
unknown.
|
|
02/13/01
|
10:07:38
|
<Chris>
|
If the
stock goes to stop price, I exit.
|
|
02/13/01
|
10:07:50
|
<Chris>
|
If the
stock goes to some profitable target area, we exit.
|
|
02/13/01
|
10:07:57
|
<Chris>
|
Price/volume
spikes, we look to exit.
|
|
02/13/01
|
10:07:58
|
<Chris>
|
etc.
|
|
02/13/01
|
10:08:09
|
<Chris>
|
You
can't control the future, but you can plan for it.
|
|
02/13/01
|
10:08:38
|
<Chris>
|
If you
are confident and able, when the time comes to execute the plan, there is no
reason to be afraid of the ""unknown"".
|
|
02/13/01
|
10:08:57
|
<Chris>
|
Risks
are assumed, trades are taken, profits and losses are made.
|
|
02/13/01
|
10:09:02
|
<Chris>
|
This
all happens by us.
|
|
02/13/01
|
10:09:12
|
<Chris>
|
We
choose to do these things during each trading day.
|
|
02/13/01
|
10:09:24
|
<Chris>
|
I'll
go with one more passage and then end it.
|
|
02/13/01
|
10:09:42
|
<Chris>
|
Page
142
|
|
02/13/01
|
10:09:51
|
<Chris>
|
The
Five Parameters of Committment
|
|
02/13/01
|
10:10:01
|
<Chris>
|
1. You
must know what you want to accomplish
|
|
02/13/01
|
10:10:14
|
<Chris>
|
2. You
must possess a real desire to accomplish it
|
|
02/13/01
|
10:10:24
|
<Chris>
|
3. You
must develop a workable plan with which to accomplish it
|
|
02/13/01
|
10:10:39
|
<Chris>
|
4. You
must set a reasonable timeframe within which to accomplish it
|
|
02/13/01
|
10:10:49
|
<Chris>
|
5. You
must never second guess yourself if you fail
|
|
02/13/01
|
10:11:13
|
<Chris>
|
This
book is written in the context of Japanese Samurai warriors.
|
|
02/13/01
|
10:11:22
|
<Chris>
|
It
applies to trading as you can see very well.
|
|
02/13/01
|
10:11:39
|
<Chris>
|
Samurai
faces death at any one moment in battle.
|
|
02/13/01
|
10:11:48
|
<Chris>
|
They
prepare for this fact.
|
|
02/13/01
|
10:12:12
|
<Chris>
|
We as
traders prepare for something less morbid.
|
|
02/13/01
|
10:12:20
|
<Chris>
|
But we
do prepare ourselves for each trade.
|
|
02/13/01
|
10:13:08
|
<Chris>
|
Everytime
we take a trade, this response should come from a sound plan derived from
trading education, participation and mental preparation.
|
|
02/13/01
|
10:13:28
|
<Chris>
|
You
know what you want in trading, in each trade.
|
|
02/13/01
|
10:13:51
|
<Chris>
|
You
obviously want to succeed. I'm not sure I know someone that came into trading
with the purpose of failing.
|
|
02/13/01
|
10:14:21
|
<Chris>
|
You
develop a plan that includes, capital,time, effort, etc. All the aspects of
trading for a living entail.
|
|
02/13/01
|
10:14:36
|
<Chris>
|
Learning
the trade, practicing the trade, living the trade.
|
|
02/13/01
|
10:14:57
|
<Chris>
|
You
give yourself enough time to what I just said.
|
|
02/13/01
|
10:15:30
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<Chris>
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Traders
that feel this will be learned in a week, a month, will be disappointed.
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02/13/01
|
10:15:53
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<Chris>
|
I'm
still learning everyday..it never ends. Profitability consistenly comes after
much time of successful learning and participation.
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02/13/01
|
10:16:11
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<Chris>
|
And
because trading resides in you, this timeframe will be different for
everyone.
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02/13/01
|
10:16:29
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<Chris>
|
We
aren't in market where you buy YHOO and AMZN and it flies 1000%% in 3 months
anymore.
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02/13/01
|
10:16:58
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<Chris>
|
Learn
to trade consistently so you have a slow uptrend, not a crazy rollercoaster
looking portfolio.
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02/13/01
|
10:17:08
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<Chris>
|
Never
second guess yourself.
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02/13/01
|
10:17:24
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<Chris>
|
To
learn to trade successfully, you need to trust yourself, both right and
wrong.
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02/13/01
|
10:17:39
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<Chris>
|
If you
can't trust yourself, who can you trust?
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02/13/01
|
10:18:13
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<Chris>
|
Keep
control of your trading by continuing to identify who you are, strengths,
weaknesses, areas of improvment, etc.
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02/13/01
|
10:18:54
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<Chris>
|
Developing
the proper mindset on top of a sound trading philosophy will allow you a
greater chance for success going forward.
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02/13/01
|
10:19:49
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<Chris>
|
I'll
end it here and take any questions if you have them.
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02/13/01
|
10:19:55
|
<Chris>
|
This
room is now unmoderated. Everyone may speak again.
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02/13/01
|
10:20:00
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<Chris>
|
Thanks
for your attention gang.
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