Discipline

Trading is often about how to take the appropriate risk without exposing yourself to very human flaws.
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spreadbetting
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iambic_pentameter wrote:
Tue Apr 30, 2019 4:19 pm


SB - good advice and thank you for sharing.

Given that you've been doing this for some time now, how long did it take you to get to that point?

Iambic
Think I only really got there when I started taking it seriously to make a living from trading, prior to that I think it's hard to maintain the discipline needed when you're doing it for fun and the money means little.

The fact I was running unmanned bots was a help as that lets you see the bigger picture with regards to losses but even now it's hard to avoid those 'sod it' moments especially when you hit a big loss from a stupid error. For me the only way is to remove myself from the markets and do something else til I'm ready to get back on board. Probably only takes me a race nowadays but you've got to stop yourself from going off plan at all costs because in the long run it just reinforces bad habits as some will always go your way. Unless you're consistent with your approach you'll never really know where you're winning or losing money in the long run and taking a short break is very easy to do.
iambic_pentameter
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Great advice again - thanks, SB.

Iambic
trader44
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Great thread discipline is one of my favourite subjects in trading ..i think after a loss or series of losses defo better to take a break walk and get some space if you have a tendency to implode :oops you have to be mentally strong to cope with the ups and downs of trading

you might found this interesting

Becoming a consistently profitable trader seems to defy the traditional rules of achieving success. You know the drill - create a positive state of mind and energy each day. Then develop winning visualizations and affirmations - ready to engage your trading day with a success-imbued mind so that you can stay positive even in the midst of drawdowns. The result should be that, day after day, you are ready for the trading day. Nothing can stand in the way of this powerful positive success thinking. You have seen this formula work before. Your job is to keep it up until the changes occur.

This is where trading success and the rest of life seem to part ways. In trading, all that high positive energy stuff hits a wall. No matter how positive you are that success is on the horizon and within your grasp, the truth as revealed in your trading account tells a different story. The harder you try to create positive outcomes; the harder success seems to elude you. But why?

Self-Mastery and Conquering the World with Positive Energy Are Different

Trading requires a degree of self-mastery of the dark side of your human nature that prosperity thinking does not acknowledge in its focus on the positive. In trading, your demons come seeking you out - whether you are willing to acknowledge them or not. Those demons come in the form of your fears and your impulses (when exposed to uncertainty) that positive thinking cannot cover up. In Jungian Psychology this is called your Shadow. It's there in all human beings, and as long as you don't deal with it effectively - your Shadow nature comes stalking you just when you are most vulnerable...when the mind you bring to trading engages the all-too-real threat caused by the uncertainty of having capital at risk.

It is here that your Emotional Brain snaps into survival mode. And it sweeps all that positive stuff away like a tsunami. Instead of making things happen by sheer positive will, the primitive fears that are part of man's quest for survival have to be dealt with. This is a time for emotional state management. It is a time for discipline to see through to self-mastery. It is time for courage to stand in the face of danger. It is time to calm the power of fear that can sweep your mind away. And it is time for clear thinking about how to minimize losses - because they will come - and how to let profits run when the trading gods favor you. Notice positive thinking is not part of the trading mind. But a positive faith in your edge over time is required. It is a mind that accepts both the positive and the negative as simply parts of a greater whole. And as you learn to act from your faith in your probability edge, you discover there is no need for either fear or over-confidence. The trader's mind is not trying to make things happen. Rather it is patient and waits to see what the markets will give.

Mastering Your Primal Fears is Simply Part of the Trader's Journey

The moment that your trust and your faith (humble confidence) in your edge is shaken, short term survival instincts of the emotional brain kick in. This is where trading psychology plays a huge role. Until you can master the emotions of fear and aggression, you cannot have tested faith in your edge. You cannot trust your performances to deliver your edge. The point here is that the edge is both in your systems and in the mind you bring into the moment of performance. That is what you can control. Until you master your trader psychology, there is no sustainable edge in which you can have faith, trust, and confidence.
arbitrage16
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trader44 wrote:
Wed May 01, 2019 5:25 pm


you might found this interesting
Interesting post, who wrote this? Chimes a lot with Rande Howell's ideas.

Frustration I have with this is that it nicely outlines the what, identifying the issue, but not the how of a solution.
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cmuddle
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Thanks a lot to everyone who contributed.

ShaunWhite I hope you are ok.
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ShaunWhite
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cmuddle wrote:
Thu May 02, 2019 3:09 pm
Thanks a lot to everyone who contributed.

ShaunWhite I hope you are ok.
Yep, good thx. I'm enjoying all the tea and sympathy while it lasts. The words "you sit down and take it easy" are sweet sweet music ;)
It's got me out of mowing the lawn too so that's a bonus. I'm glad I just click a mouse rather than digging holes for a living though.
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Crazyskier
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ruthlessimon wrote:
Tue Apr 30, 2019 4:04 pm
What massively helps me remain disciplined, is knowing roughly what I'm expected to lose; & this removes huge amounts of pressure.

Having knowledge that - If the edge performs as expected, I will be down -£XXXX.XX (at some point) - fact - unavoidable.

I know my number inside out; & I am mentally prepared to lose that amount of money (possibly a bit more) - before I start trading anything

Very recently, this allowed me to push through a pretty substantial drawdown (lost something like 10 trades in a row); but I was well inside the expected drawdown - I continue executing unchanged - & then I hit 10 winners in a row (one of the many pains of a 55% strike rate :roll: )

But having the drawdown stats, forces me to be disciplined.

Objective; none of this self-help shite!!
Excellent advice and preparation here.
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ruthlessimon
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Crazyskier wrote:
Thu May 02, 2019 3:34 pm
Excellent advice and preparation here.
Here’s step 2 - & this is where we kinda merge into that nasty discretion territory.

Let’s say we have a yr’s worth of data.

Image

The strategy will pump out a max drawdown figure (assuming the strategy is +ve).

However, going into the future – intuitively - the max drawdown will not be the same again. Therefore, it makes sense to randomise the equity curve, & work out what the max drawdown could have been, in the last yr.

(btw, as caveat, to me, this is modelling – but I know this is far different to what Peter does – I’m still confused lol!!! – cos this is all backtesting!).

But do this process enough times, & we’ll get a histogram of potential max drawdowns. & this is where it gets challenging to interpret

Image

The real max drawdown was: -£11.99

But the potential max drawdown (given identical data) was between: -£25 & -£28

Meaning in theory, the strategy cannot be turned off until that -£30 is breached. It would be very unlucky, but the risk is there. Cos if that strategy gets turned off incorrectly – we lose all the recovery potential, & that’s what keeps me disciplined.

When I’m suffering; I have got to hold out – I’ve gotta keep executing through the pain, through the 20 losses in a row (all in the same vigour) – because the 20 wins in a row will come, & some.

Hopefully :roll: ;)

Lots of caveats, lots of assumptions there (i.e. having the ability to perform various backtests etc, have a love for spreadsheets etc) - & also, during any drawdown I’d be constantly trying to hack out/beg for objective improvements after market hours – reducing the max drawdown potential by finding new stuff
CallumPerry
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Location: Wolverhampton

Really nice explanation there Simon! I think I'm just one stage away from doing this kind of stuff so, as always, you've given me plenty to think about and add to my system.

What I'm thinking of doing next is creating Monte Carlo charts to visually see where I am. If I have a few months work of data so I have a decent size sample then there should be a decent amount of variance as my current strategy triggers quite frequently. I'm thinking of tracking my live results on top of the Monte Carlo line chart as some sort of confidence indicator for myself...

As Simon said a +ve strategy which is just over 50% ROI is expected at times to have a succession of losing trades that really hurts you mentally but my defence strategy is to plot my live results so I can visually see at any one time that I'm actually still within the expected parameters to make a profit longterm; I think it will be good for self reassurance for any manual trading I do as I try to transition my strategy into semi-automated and then fully-automated.
foxwood
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Monte Carlo always seems a bit wrong to me since, given your edge is not random, then randomizing multiple outcomes is not really reflecting the real world. Might be ok with small samples but not if you have enough data.

There is a simple well-known formula for longest sequences that I have found stacks up quite well - one usage is explained nicely at https://www.flatstats.co.uk/horseracing ... cle&id=154

I use it as one factor when gauging minimum bank size for a strategy so that it will accommodate worst case drawdowns and have headroom to recover. Helps identify level of risk better.

Mind you, if it ends up wiping that bank limit then you know you didn't have an edge after all :lol:
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ShaunWhite
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As well as the settled amount drawdown the temporary exposure can sometimes be a factor, especially if you're automating both the win and place markets and there's an overlap due to delayed races. You might just find yourself with a dozen open positions and although each might only win or lose a few pounds, you might have a buttock tightening exposure for a few mins if they all happen to be one one side of the book. Depending on your attitude to risk due to outages, you might find that uncomfortable. I guess that's all more applicable to staking rather than drawdowns but it's all part of working out if a particular strategy is doable and the risk you want to take to try it.
trader44
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Joined: Wed Oct 29, 2014 1:28 pm

" I think the only thing you can do is take yourself out of the situation after any losses that might trigger your chasing then come back when you've calmed down. Missing a few races isn't a big deal and you may find those 'time outs' start getting shorter each time."
Great advice spreadbetting .if you dont have the mouse in your hand you cant overstake and a little break/walk gives you space to reflect
trader44
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" Speaking of holidays, all that mophine was a response to a mini heart attack." hope your on the mend shaun :D
iambic_pentameter
Posts: 443
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Shaun,

I'd missed bit earlier in the thread were you mentioned your current health scare.

Hope you are resting up and look after yourself.

Best wishes

Iambic
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ShaunWhite
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Cheers guys, yep I'm firing on all cylinders again. Almost like it hasn't happened. The more I think about it the more I've got my doubts that's what it was. I had something called pericarditis donkeys years ago and it felt exactly the same, like being crushed and suddendy no blood pressure (inflamed heart muscle, agony but not dangerous). Its quite rare especially that painful so the ambulance guys said heart attack, hospital trace saw nothing special. Worst part was waiting 50mins for an ambulance (although 1st repsonders where here in 20) and then a one hour drive to the hospital via diversions and pea soup fog. I was either going to be better, or dead. As it was I just arrived nicely toasted on A-grade pharmaceuticals 8-)

Anyways, that's all tmi but thanks for the concern. The BA family isn't bad bunch as workmates go. ;)
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