Читать книгу The Way to Trade - John Piper - Страница 11

The next level is commitment. Trading is a tough business, in my view one of the toughest. And that is only right as it is also the highest paid in the world for the high flyers – so you would expect it to be tough. If you are going to battle your way through then you are going to need to be committed. But even if you get as far as reading this book then you are probably already committed. That means that you have already accepted that it is not going to be easy.

Next comes discipline, a key factor in trading markets. You have to learn about your own emotions and control them. This takes discipline. You need to develop a methodology that gives you an edge, and if you are going to use that you will need the discipline to do so. This brings in another point, because there are some things we can do and some we cannot. We do not need to make it unduly difficult for ourselves, so our methodology should be one to which we are suited, it should also be one in which we become expert. Once these two conditions are in place the ability to exercise discipline and to follow our systems becomes a lot easier, although the discipline itself remains essential. But this is an example of how the various levels of the pyramid inter-relate. Also this illustrates how the structure is organic and evolves as our trading skills and experience grows. Our methodology is, in part, a function of our experiences of different market strategies and our knowledge about ourselves and our own emotions. So as we (you) evolve, this creates a feedback loop to our system/methodology which also has an impact on the discipline level, and all other levels.

We have so far looked at the first three levels and these levels may be categorized as the “Personal” levels; they contain what we bring to the party. For the purposes of these three levels, we may never have looked at markets, may never have taken a trade. The next five levels have to do with developing our methodology. There are many books on trading which only deal with system design. Some only deal with analysis techniques – yet this is a tiny part of this game, forming merely part of one of the levels within the pyramid – that level being System Parameters.

Money Management (MM) is the first key feature of any methodology. Without appropriate MM policies nothing is going to work. A system with a 99 per cent success rate (which sadly does not exist other than in the physical sciences, an airplane with that success rate would not be very popular!) would still wipe you out if you risked 100 per cent of your capital on each trade. Similarly risking too little on such a system would produce much less than you might otherwise expect. Getting your risk parameters right is the first step, and this also has to be personalized. Most people fail because they put themselves under too much pressure, this produces excess emotion, and emotional trading is a losing occupation. There are two types of pressure of particular importance. The first is financial pressure; if you risk too much cash then you become “a fugitive from the law of averages”, and you will be wiped out, that is guaranteed. The second is psychological pressure, maybe as a subconscious realization of the financial pressure. Both of these must be avoided. Partly this has to do with experience, and partly with your risk parameters for each trade. I think that 1–2 per cent per trade is about right. You can still make lots of money but you need not feel pressurized. One of the “market wizards” said that almost all traders should immediately halve their trading size, that is good advice.

Next we have Risk Control (RC). MM and RC are interlinked. MM is essential, as set out above, but often MM policies include RC. For example using a stop loss point (mental or “in the market”) controls risk, but the amount of risk is an MM matter. To be a successful trader you must minimize risk. It is for this reason that we often see sharp moves after a news item, often in the opposite direction to that suggested by the news item itself. This is because the big traders, who got that way by minimizing risk, wait for such risky items as news to be out of the way before taking positions. But what the news actually says is rarely of import – See Chapter 25 on Market Myths. Higher risk times include around news items, overnight and over the weekend, among others. Unexpected news items are something we can do nothing about except minimize risk at all times. We can never eliminate risk and we don’t really want to because without the risk there would be no reward. Traders have to be like tightrope walkers. Many people think that tightrope walkers learn to balance, but they don’t. Instead they learn to live with imbalance, in the same way a trader must learn to live with risk.

This takes us to the three simple rules, which I often call “trading secrets.” You see the best place to hide anything is out in the open where everyone can see it. You see such things all the time but do not realize their value. This is completely true of the three simple rules. You know these well:

1 Cut your losses.

2 Run your profits.

3 Trade selectivity.

These correspond with the three stages which traders go through, although these stages can be described in different ways. The Evolution of a Trader (see Chapter 2) describes these three stages as “greed-orientated,” “fear-orientated,” and “risk-orientated.” These three stages can be linked to the three simple rules. Another way of describing the trading experience can also be linked to three simple rules. This is Emotional to Mechanical to Intuitive, but we are getting a little ahead of ourselves.

In my view any methodology which does not follow the three simple rules is not going to be effective. Having said that, some purely mechanical approaches are reputed to do well, but they would perform much better if you get the trade selectivity right (see again Chapter 25). Only now do we get to talk about market analysis, as we must now look at system parameters. But all the key features are already in place, and once they are in place we will have no real difficulty with system parameters because we will better know ourselves, know how we want to trade, know what we need to trade that way (rather than merely buying the software package with the glossiest brochure or the best sales pitch), and be able to do so – and this final stage should not be minimized.

In my opinion the purpose of analysis is generally misunderstood. It is not for market analysis, it is for putting your system in place. You must decide how you want to trade; futures, options, hedging, long term, short term, are all factors which relate to this. You may decide that you want to trade with the trend and hold trades for between three days and three weeks depending on market conditions. You may decide that some form of trend indicator would be useful within your approach. Alternatively you may prefer to observe market action and draw appropriate conclusions from that, as I do. But whichever style you adopt you need to decide what triggers you into a trade and also how to get out. Personally I leave some of this to intuition, but I am far from perfect in this. But the point I am making is that there is some flexibility at this stage and the key thing is that the system/methodology follows the principles laid down in all the stages of the pyramid up to this point, that it is in accord with your trading personality and what you are trying to achieve.

Once this is the case you have your system and it merely comes down to operation. Now the real problems can start. There is a trader in the USA called Joe Ross. Among many other things, he has said “Trade what you see, not what you think.” This is the key phrase when it comes to operation. So many trades are taken because traders become convinced of what might happen, they imagine the riches which would flow from that big fall, or that big rally. Wisdom lies in sticking with what you can see.

Some traders develop blocks on their trading. I will deal with this in Chapter 13 on Operation. But to introduce this topic, some of these problems have to do with complex thought processes which need to be unravelled, some to do with confidence which can be built through practice, and some to do with past experiences which need to be properly dealt with. Sometimes a trading psychologist can be helpful and there is a chapter on this as well (see Chapter 16).

The top of the pyramid is the result: profits or losses. Sadly most make losses, but this is inevitable. It is one of the conundrums of trading that if everyone was perfect no one would make any money because it is a negative sum game (see Chapter 25). But this is not going to happen because people are emotional animals and many do not want to change that. They provide the fodder for the winners. This book is about how to join that select group, I hope you enjoy it.