My Dilemma

Cross ref: www.awanginvest.com

My personal Mind-map as follows:

HOW to Multi-task was my dilemma

I must thank my mentor for pointing the best way to keep track of our day’s routine. He has always been advocating the use of Mind-maps ; it has rubbed off on me now. Whenever I do not know how, when ,where to proceed, I will resort to a mind-map.

Lately,as most readers are aware, I have been assigned to act as Moderator for my mentor in view of his THR. With my own busy schedules as per Mind-map attached, I find that by thinking through my added responsibilities, using a Mind-map , helps me to crystallize and implement my plans for the day.

Even with the help of a Mind-map, there are still sub-functions which come to mind as we go through the day. For example, I am constantly thinking of a topic for his blog for the next day. I do not want to presume to write too much on technical analysis being a newbie myself on his blog which is being visited by advance traders as well. So, this compounds my scope of topics which will be fine in my own newsletter IDkit but to cross reference my articles to STC/blog, I need to weigh on the target audience which is more advanced than mine. Since I need to write for my weblog too, I kill two birds with one stone by cross referencing my posts to STC/blog. The only thing that bothers me is I have to factor in the more sophisticated audience that will be reading STC/blog. So, I decided to take a break this morning, and go for my séance de toilettage.

Like Archimedes, my sharp senior moment hit me when I was in my salon de toilettage, like some kind of echo of perception. Often, my mind seems to go over whatever problems I have while I am grooming myself . This morning is no exception: I cried out: Eureka! I will write my post about how to multi-task which will help busy newbies as well. Unlike Archimedes, who was so excited about his Principle of Displacement, and oblivious of his whereabouts, I did not rush out to the streets in my birthday suit!

In the case of Archimedes, he was so excited about hitting the principle in his bath, that he screamed: ‘Eureka’ and shot through the streets in his birthday suit, one story went.

BACKGROUND HISTORY OF ARCHIMEDES

Archimedes’ principle : states that a body immersed in a fluid is buoyed up by a force equal to the weight of the displaced fluid. The principle applies to both floating and submerged bodies and to all fluids, i.e., liquids and gases. It explains not only the buoyancy of ships and other vessels in water but also the rise of a balloon in the air and the apparent loss of weight of objects underwater.

In determining whether a given body will float in a given fluid, both weight and volume must be considered; that is, the relative density, or weight per unit of volume, of the body compared to the fluid determines the buoyant force.

Archimedes Heat Ray & Eureka

KISS – Keep it simple, student (stupid was the orginal). While this is generally the way to go, it cannot be too simplistic.

There are those who think too much details in our plans can confound and complicate. I feel personally that at best, we cannot be 100% sure of what events will turn out, but we have at least a roadmap to show us what to do for the day.

We learn at the early stage of trading that the Formula of Success is:

Plan x Money Management x Winning Psychology

With a Mind-map, we can integrate not only plans, but also how to manage money and to know our psyche to succeed in trading.

It does not mean that we should go into social paralysis just because we left out some events that we do not foresee easily.

Being a human being rather than a robot, we still have our Right Brain to guide us through a solution if we can see the big picture with the help of a Mind-map.

CONCLUSION – my thinking:

The advantages out-weigh the disadvantages of having a detailed plan; so using a Mind-map gives us a roadmap to base our day’s routine effectively.

As you can see from my Mind-map, I do need one with all my commitments to my trading, my continual education, my other investments portfolio, my added civic responsibilities, my social obligations, not forgetting accepting new assignments as a freelance Feature Finance Writer.

I am at my desk at 8 am, with morning coffee as breakfast, and by the time I finish the day, it is not facetious if I say I work 16 -18 hours each week day, leaving weekends for indulgence in shopping and recharging.

This is to clarify to some friends who cannot understand why I am so busy when I am not being gainfully employed. To them, I say: when you work from home, for yourself, and being a one-man show, you do work longer hours.

ANA aka IDKIT

Ag Moderator

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From James of DT   independence_day_2008_schedule.xls

DT - Sponsor of Fx Comp:

 http://tradingsuccess.com/blog/trading-and-new-experiences-315.html

cross ref :http://awanginvest.com/?p=475

June 25, 2008 – 12:00 am

I refer to my recent article on the Holy Grail which prompted James Of Daniels Trading of Chicago to send me this article written by Chris Tate which I reproduce hereunder. This document says a lot about understanding the Holy Grail in order to follow its relevancy to trading.

The Search for the Holy Grail

Chris Tate of The Trading Game

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When traders talk about trading system design and its pitfalls they often talk about the search for the Holy Grail. They talk about the obsession of finding one specific indicator that will guarantee them continual success in the markets. Some software packages even come with indicators that are known as the Holy Grail and this only adds to the mythology of an ultimate indicator. Unfortunately whilst all traders talk of their search for the Grail few actually understand the legend behind this search and even fewer understand its relevancy to trading. And most importantly how understanding the legend can improve trading performance.

Most are familiar with the Christian myth surrounding the Grail and the search for it by knights of the round table. This myth itself first appears in written form in a 12th century French fable entitled Conte del Graal (Story of the Grail), this tale is also known as Perceval and is believed to have been written in about 1180. The myth itself revolves around a vessel from which Christ is supposed to have drunk at his last supper and which was also used to catch some of his blood during his crucifixion. The Grail was then carried to Britain by Joseph of Arimathea, where it lay hidden for centuries. The search for the Grail became the principal quest of the knights of the round table. It was thought that the Grail was guarded by a custodian known as the Fisher King. King Arthur believed that the finding the Grail would cure Camelot of its ills and restore its glory.

Given its supposed history it is easy to understand the importance of the Grail to Christian mythology but the question remains as to why this is important to traders is less obvious. Most traders look merely at the external features of the legend, the fact that it was a fruitless search, the grail was never found. Traders associate this with their quest for the perfect indicator yet this is only half the legend. Being a parable the legend of the grail requires a bit of interpretation. King Arthur send his knights on the quest to enable Camelot to recover. At the time of the quest Camelot was racked by both internal dissent and an external threat. Arthur thought finding the grail would fix these problems. The meaning of the parable is clear it is about the individual not the situation. It is about individuals looking for an external solution to what is an internal problem.

Such a situation manifests itself in traders. How often has the lament been heard, if only I had a better system, or if only I had different data, or maybe if I tried Fibonacci numbers for my moving averages. Many traders have even believed that if they change the colour of their indicators that this will somehow improve their trading. As if altering these external variables will alter their trading performance.

It is undoubtedly true that we need entry signals or setups to enter the market but their importance in trading is vastly overrated. Tomes have been written about signal generation, indicators move in and out of vogue, the current trendy indicator appears to be the moving average ribbon. Charts of price action are now being buried beneath layer upon layer of coloured lines. It is as if by obscuring raw price action traders somehow hope to divine its intent.

Yet Charles LeBeau author of The Technical Traders Guide to Computer Analysis of Futures Markets claims to have tested every possible combination of moving average conceivable and found their performance to be little better than random probability. In any serious testing trend following indicators struggle to have a reliability of above 50%. The MACD histogram, which is thought to be among the best of all indicators, often has a reliability of below 50%. I have personally run a test trading the SPI on an intraday basis by tossing a coin in the morning and found it to be profitable. It is extremely difficult for traders to accept that the tools they use may not be as effective as they thought, or that their methodology may have a reliability below that of simply tossing a coin.

If your trading breaks down then it is more than likely due to some psychological block not your indicators and finding new indicators will not improve your trading. What will improve your trading is an understanding that trading is far more than a search for the ultimate indicator. What has been demonstrated from interviews with top traders is that methodology or the means by which they engage the market is largely irrelevant. What is important is their underlying psychology and how they apply this to the market, it is not what number they use for their moving averages.

Top traders have numerous features in common, they are organized, disciplined, self reliant, analytical. All of these are characteristics of individuals who excel in any endevour but there is one characteristic that truly sets them apart. They are all grown ups, this may seem like a somewhat facetious remark but top traders realize that ultimately their success or more importantly failure comes down to them as individuals. Traders who look for the Grail are looking for an external crutch to lean on and to blame when things go wrong, these are the same sort of people who blame their broker when a trade goes wrong. If you have chosen to take someone else’s advice or you believe that indicators are all there is to trading then that is your problem no one else’s. No magic indicator will save you from yourself and your own folly.

What will save you is an understanding that internal problems such as a lack of discipline or an inability to accept personal responsibility for your trading cannot be solved by some external solution such as downloading hundreds of indicators for either your Supercharts or Metastock packages.

This is the lesson of the Grail.

ANA aka IDKIT

Ag Moderator

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FOR A QUEST OF THE HOLY GRAIL IN THE TRADING WORLD, PLEASE GO TO

http://awanginvest.com/?p=431

post on : June 15, 2008 – 11:41 am

For fascinating stories of the Holy Grail, please read hereunder:

In Christian mythology, the Holy Grail was the dish, plate, cup or vessel that caught Jesus’ blood during his crucifixion. It was said to have the power to heal all wounds. A theme joined to the Christianised Arthurian myths relates to the quest for the Holy Grail. Christian revisionists insist that the Holy Grail is not to be confused with the Holy Chalice, the vessel which Jesus used at the Last Supper to serve the wine; various vessels have been put forward as the Last Supper chalice. Other legends featured magical platters or dishes that symbolize super power or test the hero’s worth. Sometimes the items generate a never-ending supply of food, sometimes they can raise the dead. Sometimes they decide who the next king should be, as only the true sovereign could hold them.Old French, san grial means “Holy Grail” and sang rial means “royal blood”. Since then, Sangreal is sometimes employed to lend a medieval air in referring to the Holy Grail. The early Grail romances centered on Percival and were then woven into the more general Arthurian fabric. The Grail romances were French. We even have best-sellers of the Holy Grail in celluloid and in the trading literature.Recently, there was a cup that fetched instant riches for a rag and bone man: The 2,500-year-old item was acquired by a rag and bone man who handed it on to his grandson.

NEWS:

HERE is a Cup older than Holy Grail sells for £50,000

An ancient gold cup that dates back to the 3rd or 4th century BC but has spent the last 60 years under a bed has sold for £50,000 at auction.

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As traders, we are also familiar with the Holy Grail - the miracle all novices seek for quick and instant success and RICHES in trading, which alas, is non existent!

ANA aka IDKIT

Ag Moderator

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When I post, please bear with me as my contents are targeted more at newbies, for obvious reasons. However, I hope the contents serve as good reminders even to experienced traders, who may find time to scan through my post and offer some advice as a follow-up. In this way, the advanced reader-traders could add more value to my post, which is written from a perspective of a novice trader.

I wish to write about the common distorted logic traders or investors tend to base their analysis on, when entering a trade , and this practice is very real.

Distorted Logic one encounters often is as follows:

1. What goes up must come down?

An instrument or stock that rises steeply in price and makes new highs are often viewed as expensive and overpriced. Yes and no. In a rising market, as long as the risk reward ratio is good, one often can find real winners here. Also what goes up is more likely to be a winner than those going down!

2. What goes down must come back?

When the price falls steeply, making new lows, this is often seen by novices as cheap and good real value. Again, yes and no. In a waterfall downtrend, the instrument may never recover, as the saying goes: Dead cats don’t bounce!

Then there is bottom-fishing, searching for undervalued stocks ,for example. This is best left to experts who has armed himself with lots of research and expertise.

3. Averaging down

The common misconception is if a stock is a good buy at the higher price, it must be a real bargain at the lower. So the novice will embrace a strategy to buy more as prices keep falling and lower than the initial higher price. The danger here is that if the market keeps falling, this stock or instrument will disappear from the radar screens!

Jesse Livermore in Edwin Lefevre’s book: Reminiscences of a Stock Operator has put it succinctly:

Let him buy one-fifth of his full line. If that does not show him a profit he must not increase his holdings because he has obviously begun wrong; he is wrong temporarily and there is no profit in being wrong at any time.

Lastly, a novice trader is susceptible to tips and rumours. The quality of market tips is usually poor, but traders often become attached emotionally. They keep holding on, losing their objective about prospects. They often talk their stock/instruments up, more out of wishful thinking or ‘into-wishing’ rather than’ intuition’ or conviction.

Hope this topic of distorted logic will be a helpful reminder to us all when we enter or exit a trade. It is tragic to have a distorted logic!

Being aware of fundamentals is just as vital, and newbies may find out why at IDkit: www.awanginvest.com or URL

http://awanginvest.com/?page_id=414

ANA aka IDKIT

Ag Moderator

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Yesterday I spoke about a new format for learning. Today I’d like to run through some of  the content.

Years ago, my process for teaching was to explain the theory and then proceed to the practical. I found, however, that this was not the most elegant approach. Too often the seminar attendee would become obsessed with something he could not understand; that obsession would prevent him from proceeding to the practical. In other words, his lack of understanding barrier blocked further learning. It’s important to bear in mind that often ‘we don’t understand’ because we can’t see how something would work in practice. If we allow ourselves to perform without conceptual restraints, more often than  not, we’ll experience an ‘aha’ moment.

Nowadays, I focus on the practical first. For example, in my seminars,  I show the participants how to construct the Excel spreadsheet and how to manually produce the reports needed to monitor their trading results. Once they learn that, I explain the rationale behind each sheet and report. I find that doing it this way results in greater understanding.

I do the same for the psychological journals. I show how to construct the ratings system; then I show examples where the ratings pin-point areas of weaknesses that need attention; only then do I explain the rationale.

Teaching the trading plan follows the same line. Firstly I show the practical steps. For example I say: ‘you identify the trend in three steps: X, Y, Z. ‘  Then I show examples of the three steps and  I say: ‘once you have your strategy, you need to take a low risk entry. This has 3 steps….’ etc. It’s only after we have completed the practical aspects of  trading the plan that I explain the rationale behind each step.

Finally, I run a series a simulations starting with one done entirely by me and ending with one done entirely by the class.

I have taken the trouble to set out the process because you can use it for your own learning. Start with an idea e.g. identify the trend and then sort out the tools that will allow you to do that. Once you have assembled the tools and rules, test the logic (i.e. test the rationale, the premise of the idea). Remember that most trends move from Bull-to-Sideways-to-Bear, and vice versa.  Very rarely do trends go from Bull-to-Bear.

Once the logic is tested, you are on your way to a robust plan.

But as I said yesterday, to succeed in the markets, you need to execute consistently. This implies you need to be aware of the conditions that lead to a breach of discipline and the conditions that lead to superior results (the rationale for psychological journals). You also need to be aware of the optimum position sizing, portfolio sizing etc (money management); finally, you need to be aware of how to manage a trade beyond placing a stop loss (trade management). Master these aspects,  and you have the foundation for your success.

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Except for an announcement I shall make on Friday June 6 2008, this will be my final pre-op post. I have asked Ms Ana Wang to take over editorial and writing duties while I am convalescing. I hope to be up and about on July 21.

All the best with your trading!

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