Developing Jin

BarroMetrics Views: Developing Jin

A friend sent me some words from “Developing Jin” by P Starr (see Figure 1).

I thought the words appropriate to trading and trading education.

I see trading as both the most rewarding and difficult profession we can engage in. Most rewarding because in what other profession do you have over 90% of your competitors giving you money?

Most difficult because to be successful we need to take action against our hard-wiring.

We are hard-wired to look for certainty and avoid uncertainty, to seek immediate gratification rather than the long-tem prize, and we have been educated to suppress rather than accept our emotions during times of stress.

As Ultimate draws to a close, we see all students (except for the two who dropped out) having made massive strides towards success. But their education is only just beginning. While all have mastered the basics of  the first step, analysis, they now have to move towards the basics of trading. At the most fundamental level, trading can be fined down to five questions:

  1. Where do I enter so that the trade has a high probability of success?
  2. How do I manage the initial risk?
  3. What is my position size for this trade?
  4. Is the reward:risk large enough to warrant taking the trade?
  5. How do I manage the subsequent risk?

The first four are relatively easy to learn. Managing subsequent risk is what separates the men from the boys. As a trade moves in our favour, we are constantly being asked: has this move ended? Or do can I earn more? In short do I exit now or wear the retracement for the possibility even greater eventual gain?

The problem most newbies grapple is they fail to identify what ‘this move’ means.

In Figure 2, let’s sat you entered at the black arrow, 1.5525.

Where will this move end? To define that, we need to define the trader’s timeframe. Armed with that, we can then define the end of the move as the first higher time swing extreme. For example, if our trader’s timeframe is the 05-day swing (weekly trend), then our long trade would end at the 18-day (monthly) swing high.

By defining the ‘end of the move’, we have an objective way of assessing how effective are our exit techniques.

All of this takes time to learn and learn to apply: ‘there are no silver bullets to be found…..no “quick and easy” training routines that will turn you into a supreme trader before your next birthday. What you will find, however, are trading concepts and routines that will, through seemingly endless and sometimes painful repetition, enable you to dramatically improve your bottom line results. But you must resign yourself to the fact that it is going to take time’.  (with apologies to P Starr)

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FIGURE 1 Finding Jin

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FIGURE 2 GBPUSD 18-day and 5-day Swing

13 thoughts on “Developing Jin”

  1. Hi Paul

    There are as many ways of managing subsequent risk as there are schools of technical analysis and methods of trading.

    But for methods, the basic principle remains the same: how to balance the possibility of future loss against the possibility of a move having ended.

  2. hi Ray,
    “But for methods, the basic principle remains the same”

    If it “remains the same”, everyone could be very successful trader!? 🙂

    True for learning to drive, to cook, to play soccer …

    But prices don’t obey or follow any rules.

  3. Hi Paul

    Perhaps that’s where we differ……

    ….I believe that free markets, over a large sample size, do exhibit patterns of behaviour because price action reflects the underlying pathology of the participants.

    The reason why most fail is not because they can’t learn investing/trading skills – they can:the Buffets, Tudor Jones’ etc of the world are proof of that.

    The majority fail because they lack the processes and mindsets of successful investors/traders.

  4. The majority fail because they lack the processes and mindsets of successful investors/traders.

    And,
    processes and mindsets of successful investors/traders can only be CAUGHT, not LEARNED!

  5. Hi Paul

    Not sure what the sentence below is seeking to convey:

    “processes and mindsets of successful investors/traders can only be CAUGHT”

    Caught?

    If you mean that theoretical knowledge is not enough. then we have no argument.

    Certainly as traders we need to learn to apply the knowledge i.e. we need to acquire the skill set….having the knowledge is the first step, then comes acquiring the skill set.

    If that is not what you mean, then you will need to elucidate.

  6. hi Ray,
    Do you agree that vision can only be caught, not taught?

    When Singapore gained independence in 1965, PM Lee K. Y. has his vision for Singapore.

    He could give the details of his vision, explain, provide the necessary information …
    – but if his fellow cabinet Ministers, civil servants, the voters do not catch his vision, Singapore may not be what it is today!

    For soccer, we witnessed many many times how great managers made a great difference to the football clubs.

    Many managers went through formal coaching courses, with all the necessary knowledge, but very few “caught it” to become great managers!

    All the footballers went through formal training, with good knowledge, but only a few have the abilities to become great players.
    – Here, we have to acknowledge that some abilities are born, not learned!

    Also, many great players are lousy managers!

    Even when 2 teams have exactly the same players, it is the manager who make his team win
    – by his game plan/strategy.

    Game plan/strategy changes, according to the situation
    – just as the Master Trader will know what method/strategy to use according to the current market condition.

    Every trading method/strategy is profitable
    – if it is in line with the market condition.

    Many can master the trading methods/strategies, but only Master Traders know what methods/strategies to use for that market condition.

    Ultimate students may master the trading methods/strategies as taught by Ray
    – but no trading methods/strategies work every time
    – but there is a time for every thing
    – a time to trade, and a time not to trade
    – a time take profits, and a time to let winners run
    – Ray, who “caught” the art of trading know the timing, like the football manager, could help his graduates successful by telling them when to trade, when not to trade, when to …

  7. Hi Paul

    I’d agree with you when we are talking about ‘vision’ that seeks to include others – like my vision to found the Harvard of the trading world.

    I need to bring others into the vision if it is to become a reality.

    So yes in my case the vision needs to be ‘caught’.

    But the vision for traders is personal – it is the individual vision that counts. So, for that vision, the individual needs to bring it forward. The process for bringing it forward can be taught.

    The great thing about trading profitability is you don’t have to be a master trader to do that. You just need to become competent at the basics.

  8. Flowing water can be seen, touched, felt by many.
    But who can catch the flowing water?

    “Dead”, “Plain” knowledge can be learned.
    “Revelation”, “Enlightened”, “Living” knowledge can only be caught through “truth understanding”, internalized, and becomes the “flesh” and dwells in the person, giving him the art of leadership, trading …

    Can Ray’s discretionary trading art be learned?

  9. hi Ray,
    I fully agree with you,
    “The great thing about trading profitability is you don’t have to be a master trader to do that. You just need to become competent at the basics.”

    after adding the words:

    “but at all times follow and listen to a Master Trader
    (for those who are not Master Traders)! 🙂

  10. Hi Paul

    You mean trade exactly like me? Probably not. Nor should you want to.

    After all, a discretionary will produce optimal results when the method suits the personality.

    Best is to take what I have to offer and make it your own.

    Two students come to mind. One a long-time student from Australia trading the 18-day timeframe and the other a graduate from the last Ultimate class. The latter is a day trader.

    Both showed excellent trading results over time. Not the one-week wonders we read about, but the sort of consistent success that suggests lessons internalised.

    But both traders have their own style and timeframes; rather than being Ray Barros clones, they are successful within their own personalities.

  11. hi Ray,
    But as market conditions change, and their methods/strategies do not work for a while, do they know what to do?
    – believe history will repeat?
    – believe the teaching of large number?
    – know that the methods/strategies do not work work anymore?

    I am referring to the trading wisdom that Master Trader has to make the right decision/judgement.

  12. Hi Paul

    I cannot be sure. But I would suspect that in both student’s cases, they would work from first principles and come to the conclusions that are beneficial to their trading.

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