Ensuring Trading Success II

BarroMetrics Views: Ensuring Trading Success II

Yesterday, we ended with a question. Essentially I asked: how do we make the transition from knowledge to skill?

In Ultimate’s case, it’s the format of the twelve-week webinars – webinars that follow the videos and 2-day seminar. Their format is my contributional to educational theory.

Anders Ericson found that effective learning needs a format and feedback.

The format:

  1. Set goals for the lesson.
  2. Plan action to effect the goal
  3. Act
  4. Provide feedback on the efficacy of the action.
  5. If the action furthers the goal, continue. If not, loop steps 2-4.

He also found that more immediate the feedback to the action, the more effective was the feedback.

Using this format, in the twelve weeks, Ultimate seeks to inculcate habits of Mind, Money and Method.

The numbers that have gone through Ultimate, at this point, are not statistically significant (less than 30). But, the results are encouraging. For me, the test is whether the attendees will be able to continue with the results they attained in Ultimate. So far, that seems to be happening.

For example, in Ultimate II, we had two attendees that ended with a negative expectancy return. One is re-taking Ultimate III and the other, Gavin, knew what he needed to do.

Yesterday, out of the blue, I received this Whatsapp:

“Hi ray
Did 7% return for may
73% success rate
Thanks for your assistance again’.

Now Gavin is a -5minute trader. And, as such, needs a high win-rate. He has always been a successful trend trader; his difficulty was to find a way to distinguish early in the day whether the SPI was going to be a sideways or trending day.

For me, the May stats would mean Gavin had improved if his trades in May took place in sideways markets. So, I dropped him this line:

Hi Gavin
Congrats on your results.
I hope you don’t mind a few questions:
* For May was the SPI moving sideways or trending?
* If you consider what you were doing, say March, April, what are you doing differently now?
* If you had to select a single, repeatable behaviour that has made the difference in May, what would it be?
I ask so you can focus on the game changer”.

His reply was that the SPI had been trading a sideways mode. For that reason, his May trading is a significant breakthrough. Still early days, but if he keeps on his current track, he’ll be another of Ultimate’s success stories.

Here’s the Course content….

Barros Swing Content

Ultimate Syllabus

Are You Procrastinating to Fail?

BarroMetrics Views: Are You Procrastinating to Fail?

This week I had an opportunity to face up to human mortality.  It gave me a chance to face the question: am I satisfied with the way I have lived my life? Is there something more I’d like to accomplish?

At 20, I felt I had an eternity before me. At 70, one of the rarer resources I have is time.

We filled the seats we needed for Ultimate III, the last beta class I am running. (Commercial program to be launched in the first quarter of 2017). The new program runs for seventeen (17) weeks. Interestingly, the objection to the course from prospective attendees was not one of price but time. The lament I most often heard was: “I don’t have the time for the course! Can’t it be a two or three-day seminar?”

Interestingly, the objection to the course was not one of price, but of time. The lament I most often heard was: “I don’t have the time for the course! Can’t it be a two or three-day seminar?”

Let’s see:

  • You are being offered a low-priced, 17-week course; that comes with a money-back guarantee.
  • You are mainly in the ‘group I’d classify as “not quite as successful as I’d like to be”.
  • The course would help you reach your goals.
  • Sure, you would have to work for the result and there would be some chance you would fail. (Of the 18 that attended Ultimate I and II, 2 failed, 16 continue to succeed).

So, does the time objection make sense?  Not to me.

Perhaps it’s the perspective of age.  At 70, my tomorrow’s are limited. I have to achieve what I can now. At 30 or 40, you have another 30 or 40 years to spare; and at 20, you have 50 or 60 years to spare.  Thirty to sixty years sound like deep moats; but, it’s easy to while away the time. Then, at a blink an eye, you suddenly are a septuagenarian and time is no longer a luxury.

Evidence says that ‘regret’ is the strongest sentiment the older generation articulates. Among the top five is;

I wish I’d had the courage to live a life true to myself, not the life others expected of me“. I read that as including the feeling – ‘I should have gone for what I truly wanted”.

So, here’s the bottom line: don’t postpone what you truly want. Whatever it is, won’t come easily; but work for it. The joy of attainment is worth the effort.

 

Observations: Success and Failure (Success Series)

BarroMetrics Views: Observations: Success and Failure

Four days to go…..to the end of my new group coaching approach. April has been the ‘exam’ month: the traders were off on their own. I was asking myself whether the sessions would produce the change they had set for themselves back in late January. We had ten in the group, five institutional (3 Yanks, 2 Canadians) and five retail (4 Singaporeans, 1 Aussie).

We had ten in the group, five institutional (3 Yanks, 2 Canadians) and five retail (4 Singaporeans, 1 Aussie).

Although there are four days to go, the results look fairly settled. In this blog, for contractual reasons, I’ll focus on the trading results of the retail traders. As I said, we had five retail traders……

  • Three showed a strong positive expectancy. These established a routine for analysis and review. I’d label their process secure.
  • Of the two that did not show a positive expectancy, one showed a noticeable drop in losses. He needs to find and establish a process for analysis and review.
  • The other with a negative expectancy had a firm routine for analysis and review but failed to execute consistently. His ‘average-dollar-win ‘ was excellent (2nd highest of the group). But, his lack of discipline contributed to a high loss rate (15% win; 60% loss). His saving grace was the excellent way he kept his journals, allowing us to formulate a plan for future development.

What did I learn?

The sample size is small, but I can make a few preliminary observations:

  1. Having a clear ‘why’ was common to all the successful attendees (three retail and five instos).  Traders need to dig deep and find the core value that drives their quest for successful trading. Money is a measuring stick i.e. it tells us how well we are doing, it is, on its own, not a sufficient ‘why’.
  2. Another common factor: practising mindfulness daily contributed to success. I was surprised that the instos were more ready than the retail traders to incorporate the practice.
  3. The ACT model proved effective in guiding me identify the causes of poor results and in coming up with solutions. This was especially true in the case of the instos.
  4. Finally, it’s clear that keeping equity and psych journals is a must. At the very least, they provide the necessary material to identify the strengths and weaknesses of a trader. And, they also provide insights and data for improvement.

Questions still to be answered:

  • We know that a method needs to suit a trader’s personality. But is it best that a retail trader start with a mechanical system?

The question pops up because, in the retail group, the top results were garnered by the two mechanical traders. (All the instos used a degree of discretion in their trading). The small sample size makes the question impossible to answer, but it’s a question I’ll keep in mind.

  • What is the effect of group learning?

Research shows that properly setup (i.e. allows for accountability and support) groups are an aid to learning. The Singaporeans formed a group; the Aussie was alone. The results were mixed for the group i.e. three achieved their goal and one did not. The Aussie did not, but he has shown enough progress to suggest that he will, given time. Again this is a question I”ll keep in mind.

So, if you want to turn your trading around, what need you do:

  1. Establish your clear ‘why’ for trading.
  2. Set value goals and a well-defined action plan – review the plan daily.
  3. Practice mindfulness daily.
  4. Keep an equity and psych journal.
  5. Learn from successful and unsuccessful trades to improve.
  6. Have a process for analysis and one for review of trades.

Larry Williams

BarroMetrics Views: Larry Williams

The to-and-fro between Paul and Steve has created quite a storm of interest. So much so, that I have decided to add my comments.

Like trading, in this sort of situation, I seek to establish the facts. For this reason, I shall be separating my observations into two parts:

  1. Whether Larry Williams can trade?
  2. Whether his trading systems produce a profit?

Can Larry Williams trade?

We have no information after 1990. But, before that, we have the following:

  • ‘In Winner Take All’, William Gallagher documents that, in 1987, while Larry was winning the Robins Trading Championship (profit USD $902,599), his managed account lost – USD $6,122,281. He was fined by the CFTC (See http://www.jurikres.com/snake/lawsuits.htm).
  • In July 1988, Larry commenced the Larry Williams Financial Strategy Fund. By October 1989, Futures Magazine reported that the fund had lost more than 50% of its equity.
  • In March 1989, Larry commenced the World Championship Fund. By May 1990, the fund also lost more than half of its original equity. (see http://www.jurikres.com/snake/lawsuits.htm)

Do His Trading Systems Produce a Profit?

This question is harder to answer. The reason is, the profitability of a system is dependent upon the trader as well as the system. Consequently, we need to look at the indirect evidence.

From me, indirect evidence is provided by Larry’s peers. In this regard, there is no doubt in my mind that the best minds in our industry support his systems.

In Larry’s Hall of Fame page, we see testimonials by well-known traders. I am acquainted with some of the personalities on that page. From personal experience can say that their testimonials are .genuine.

Are there other suggestions to the contrary?

Yes, we have the very vocal assertions by David Burton. (See http://www.schoolofgann.com/frauds.aspx).

However, if you read through David’s writings, there is little evidence in them pertaining to the viability of Larry’s systems. The feud between David and Larry seems to have been started by Larry’s comment in the May 2004 issue of Traders Magazine:

“”I am not wild about the technical stuff. I believe that most of it is not useful and some of it actually fraud – like Gann and Elliott.”

Evaluation

So far as trading is concerned, it is difficult to state whether or not Larry can, today, trade. After all, his disastrous venture into funds management occurred 28 years ago. On the other hand, there is no evidence that his venture today would succeed.

So on the balance of probabilities, I would say that I would not invest, without fresh evidence of success, in any public funds started by Larry Williams.

This is not to say that his personal account would not be profitable.

Some traders find the pressure of fund management so great that they are unable to duplicate the personal trading results. All we can say is, in the area of personal trading, we have no evidence one way or the other.

So far as the systems are concerned, the testimonials by some of the trading great in our industry are enough to sway me to say that his systems probably do have an edge. In this regard, I want to make special mention of Tom Demark.

Tom is a highly respected creator of systems. (See http://www.bloomberg.com/news/articles/2012-11-13/demark-fibonacci-charts-embraced-by-cohen-lure-investors). For those of you that are unfamiliar with the names in the article, just know that they represent some of the world’s best hedge fund managers.

It’s worth noting that Tom does little trading, but yet his systems are in heavy demand.

Summary

For me:

  • If I were a systems trader, I would be interested in systems produced by Larry Williams.
  • If I were an investor, I would not be interested in subscribing to his fund, unless there is evidence that he has overcome the problems he faced in 1988-1989.

 

Does it Work?

BarroMetrics Views: Does it Work?

I received a couple of emails asking how my beta group was going. You remember I posted a while back about a group coaching course I was testing.

The short answer is: “I don’t know”. But, I will know by the end of the month. You see, the group is ‘sitting for its final exam.’ The members are on their own for April, and we’ll know by the end of April whether they have had a breakthrough.

You will recall that I had invited the members to take part in the beta because:

  • They had all attended some my courses, 
  • Had worked hard at integrating the knowledge, but 
  • Had little to show by way of profitable results. 

Qualitatively, I can sense a quiet confidence, but the proof of the pudding will be how consistently they execute their rules when trading alone. Interestingly, I also learned a lot:

The most important lesson was that except for the very motivated, the seminar/webinar instruction model will probably not produce successful traders. Some of the reasons why I say this:

  1. Traditional education fails to pay enough attention creating a vision, and a set of value-driven goals and plans. For one attendee, this aspect was the most important. It was knowing the reason he wanted to trade, gave him the motivation to keep to his rules. I don’t know about the others; but on thing is clear: all are keeping to the processes established in class. That’s a huge plus!
  2. The group coaching also showed that there was some gap between ‘what I meant’ and how my instruction was interpreted.
  3. And, while the members understood the material, at the beginning they failed to appreciate the importance of a framework in the application of their rules. Once they created their framework, consistent execution became the norm. Perhaps because……
  4. ….the group meetings provided an environment of accountability – it was easier to keep to the rules than explain why they did not.
  5. Finally, for as long as I can remember I have asked seminar attendees to keep psych and equity journals; and for as long as I can remember, this request was honoured by its breach. This time, the members kept their journals and learned from them. Amazing!

Let’s see what the end of April brings. I am looking less at the profit and loss, and more on whether adhered to their processes.

Platforms and Services (Success Series)

BarroMetrics Views: Platforms and Services 

I received emails from those who are trading newbies and techie neophytes. As such, they were unable to search the net for platforms and services. So, they asked for assistance.

I spent around 90-minutes searching and found:

  • In the software sphere, there are advanced, intermediate and novice offerings. The difference is the research you can conduct. For example, most novice platforms do not perform Monte Carlo simulations. The trade off is the novice platforms are reasonably easy to program.
  • In the service field, I found only one broker offering this service. It uses the MT5 platform (novice platform).

If you are interested in the report I prepared, please drop me a line either here or at ramonbarros@tradingsuccess.com. I am not offering it as an attachment because I am happy to pass it on to only those who express an interest in the subject.

The US Elections

The US Elections

Can’t help it. I normally don’t blog twice a day, especially when the second blog has nothing to do with trading. But, there are some matters more important that trading and the coming US elections fall into that category. If you don’t care to read a political rant, then wait for Monday’s blog…….

All day, I have been hearing and watching CNN’s and Fox’s claptrap responses to the horrendous bombing in Brussels; and I wonder what will be left of the innovative steps taken by the US Founding Fathers. I shudder as I watch the US public respond favourably to ‘waterboarding’ suspected Muslim terrorists. In one show, the FOX anchor berated a guest (Democrat) because she said she would not waterboard a suspect whose bomb would kill her child. How could she be so callous!!!

Here’s the point. Most times all we have are suspects, as with our trading, all we have is a high probability event – nothing is certain. If a suspected terrorist is accidentally killed during interrogation, and then later it’s discovered that he was totally innocent, what do we say, ‘collateral damage’?  If so, what makes the US different to any totalitarian state – including Nazi Germany.

In 1963, Ayn Rand wrote a fabulous piece, Man Rights’; it’s about the relationship between Government and the individual. I’d make it compulsory reading for all TV anchors, especially the ones I have been watching.

For those interested, I have attached a pdf of the essay; you can find the original in the Virtue of Selfishness. I read the book when I was in first year Uni some fifty years ago. The ideas have served me in good stead, especially in times of crisis.

man-rights.pdf

Psych Journal Entries

BarrosMetrics Views: Psych Journal Entries (PJE)

PJEs are intensely personal documents. As such, I have found that showing examples of what I wrote is less useful that providing suggestions for a template.

The key to a keeping an effective PJE is to identify the ‘why’ for keeping one: to identify strengths and weaknesses in the application of our Mind, Money and Method to our trading; we are looking for lessons from our failures and success so we can improve.

My PJE has two components,  Mind and Method (includes Money).  I have no problems with my Money rules – the only question that arises there is “did I apply the optimal position to this trade”? The answer leads to improving my ebb and flow analysis.

The Mind component records my feelings before, during and after a trade, as well as recording any event that may have impacted on my emotional health.  Since I am predominantly visual, this entry takes the form of visuals and to a lesser extent, script. For example, if I have been in a prolonged ebb state, I’d note that – the beginning date – and show my emotion from anxious to fear to very sad (See Figure 1).

I’d also describe my feelings, using sensory specific language. In other words, the visual is the conclusion while the script describes my condition. For example, let’s say I choose the ‘sad’ face. My description may run: Since Mar 1,  when I have initiated a trade, it has proven to be wrong – if long, the market goes down, if short, the market does up. Right now, my heart feels like lead – my thoughts travel to less than desirable results…….

My objective with Mind is to feel the feelings and not allow them to affect my reasoning; if possible, I seek to combine my left and right brains in the decision-making process. So when in ebb stage, I look to balance my negativity with positive counter balances. Similarly, when in flow, I seek to counter the excessive optimism that tends to accompany that trading phase.

Method next blog…….

I’ll not be posting again until Tuesday, March 29

A Process for Achieving Goals 4 (Success Series)

BarroMetrics Views: A Process for Achieving Goals 4 (Success Series)

I was going to start on Method today; but on the way to Singapore, I read Charles Duhigg’s ‘Smarter, Faster, Better.’ His chapters, ‘Motivation’, ‘Goal Setting’ and ‘Focus’ add to our discussion.

Charles suggest two practices stimulate our motivation for goal achievement. Firstly, reframe our actions from chores (‘must dos’) to choices (‘want to dos’).

This simple reframing provides us with the sense of control our brain seeks. Add to this the well-known practice of ‘I’ll just take one small step – just to start, and see what happens. I can also stop if I don’t feel like continuing’, and you have a fab strategy against procrastination.

Secondly, Charles suggests that we remind ourselves that the small steps are steps to goals supported by our values. He gives a personal example of a heading to his ‘to do’ lists: the reason for the actions he is taking. He suggests grouping actions for one goal for a single ‘to do’ session.

In his chapter on ‘Goal Setting’,  Charles recommends using SMART (SMARTER in our case) to create the tactical plan to attain our goals. For example ask:

  • What step that is specific, can I take to attain my goal? 
  • What step can I take that is measurable? And so on.

His other relevant recommendation (in the ‘Focus’ chapter is to create a vivid picture of what our day would be like if we were to execute our plan for the day. To this I would add a review of the day:

  • What went well?
  • What needed improvement?
  • What actions to take next time to create the needed improvement?
  • How much closer did today take us to our goal? 

Next Monday, METHOD; tomorrow, I’ll review Gold…..

A Process for Achieving Goals 3 (Success Series)

BarroMetrics Views: A Process for Achieving Goals 3 (Success Series)

This is the easy section to write. Much has been written about goal setting and goal review.

Vision relates to our right brain, goal setting to our left, and so, we need to set SMARTER goals:

  1. S: specific e.g. I’ll abstain from sugar and go to the gym three times per week to lose 10 lbs in Mar 2016
  2. M: measurable e.g. Losing 3 lbs per week will mean I am on target
  3. A: attainable e.g. you need to change mindsets, acquire habits and skills that will lead you to your goals.
  4. R: realistic e.g. goals that are slightly out of reach so you need to stretch but not so far out of reach that we feel we’ll never attain the goal. 
  5. T: time-bound e.g. a calendar end point for assessment.
  6. E: evaluate e.g. adjust in for changing circumstances and determine what is or is not working.
  7. R: redo  e.g. after evaluation come up with new actions to replace those that are not working.

Goal setting is necessary but not sufficient. To succeed, we need to plan what action to take and then take action – action that leads towards our goals. Without action, all we have are pipe dreams. And it’s not any action, it’s action that we change with deliberative practice.  

Any worthwhile activity needs deliberative practice; and yet, through the years,  the advice I have given that is most honoured by its breach is my exhortation to practice deliberatively trading two or three hours a week. Done well, this practice hones our intention and integrates appropriate market responses so they become second nature.

So how about you? Did you say you want to become successful? Perhaps very successful? How time do you spend in deliberative practice?

This post wraps up the ACT Hexaflex. The next blog, we’ll look at METHOD.