Episode 278: Lengthen Your Time Horizon and Share Your Resources

by robbooker on August 6, 2014

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Welcome to The Traders Podcast. In Episode 278, your host Rob Booker and Jason the producer finish listing off the four remaining points of Serge’s 8 Things I’ve Learned From Rob Booker e-mail. Throughout the list, Rob provides some additional insights. For example, in response to the advice to have a long, long-term objective, Rob reads a quote from Amazon’s Jeff Bezos about the power of maintaining a long-term vision. Then Rob talks about the benefits of sharing amongst the trading community. Then Rob wraps up with an article he recently wrote called Ride Your Losses. Then Trade Your Way Out of Them. We think you’ll have a good time. Thanks for listening.

ONLY TWO DAYS LEFT:TRIFECTA 3 TRADING SYSTEM

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{ 4 comments… read them below or add one }

BrianF August 9, 2014 at 1:20 pm

This cast, where Rob discussed not apologizing to friends and family, and Jason kidded about how much Rob loves advice, reminded me of famous last words:

“I got four things to live by: don’t say nothin’ that will hurt anybody; don’t give advice-nobody will take it anyway, don’t complain; don’t explain.”

– the dying words of Edward “Death Valley Scotty” Scott, (d. 1954), American recluse.

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ERik August 11, 2014 at 12:12 am

When you want to succeed as bad as you want to breathe, then you’ll be successful.

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Brian F. August 11, 2014 at 11:14 am

Powerful words, but it sounds like Rob’s caveman results-driven trader. The caveman approach didn’t work out well for me, so I choked the breath out of that caveman, and now I’m all about the process. Based on my personal experience, and virtually every account I’ve received from people who won, I have to believe all the drive in the world won’t produce results unless it’s channeled in the proper direction. You can’t learn trading at the keyboard. Do things the wrong way, even for a lifetime, and receive a lifetime worth of failure. On the other hand, a LOT of winners describe suffering repeated early losses in their careers until they hit bottom, looked themselves in the mirror, and decided to make changes. I think you have to kill the guy in your head that keeps whispering “this is the way it’s done” because in most cases, that’s exactly the way the losers do it.

Therefore, you made me take you fine post and try to concentrate the message it conveyed to me:

“When your desire for success overpowers even your desire to keep thinking what you think you know, when you’re forced to strangle your very self-image and beliefs, then and only then will the journey to trading success begin.”

This reminds me of Episode #179, Shonn and Matt At The Cigar Shop. The give and take shows how they think at this point in their careers, which in my opinion, is exactly who where we have to get in our own trading. Their descriptions of their internal dialogue when they are trading, where they even drop the f-bomb at themselves, made me smile, because it reminded me of my own journey. I’m not “that guy” anymore, screw him, he’s dead, I murdered him because he deserved it. He needed to die for me to win.

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OCtrader August 12, 2014 at 2:33 pm

Rob,

Love the idea of “never losing” (or almost never). I’m intrigued to know more about how you do that. From the little nuggets I can derive from your comments, you add to your losers, until finally it turns around and you start to achieve some profit. That’s great, but sometimes, an instrument never reaches a level where you originally entered. For example, remember when the NASDAQ was 10,000?

Dogmatically, your idea is (of course) heretical because, well trading god Paul Tudor Jones is famous for having a sign in his office “Losers average losers”. See http://bit.ly/1l0m2Rc

But I don’t use stops either, so hit me!

I’ve heard of a concept called “campaign trading” where once a position is entered you can scalp around your entry to lower your cost basis. But does that mean that if I’m long Euro vs Dollar (EUR/USD) then my scalps can only be more longs? Or can you trade long and short, but that would require a second account so as to not close out your longer-term position? And if you’re long EUR/USD then isn’t going short counter to your longer-term thesis and position?

Anyways, I’m just starting to research and look into it. Would love some more thoughts on that.

I like that you enter small, then, I assume, add to it as it works in your favor, so at worse you take a small loss. I’m still pretty much an all-in, all-out trader at this point, and treat every trade as a hand of blackjack: I am the dealer and have the house (statistical) edge, and each trade is either going to win or lose, I just play the odds (read “Trade Like a Casino”). However, I want to look into getting more creative with my position sizing mid-trade.

Also, regarding an “inventory” mindset of trading, I did some programming for a Computational Finance professor who was bulding an algo that did the same thing, but on a very small time frame and was basically Martingale-ing (for Jason, doubling his position size) his positions that were losing money, and then at some point eventually would trade the opposite direction, still Martingale-ing, until he got at least $0.01 of profit. He would often talk about adding-to or taking-away-from “inventory”. The decision to enter, add to losers, and to reverse were based on some game theory algorithms. The fact that he was Martiganle-ing scared the bejeezus out of me and he was hard to work with so we parted ways.

When I started researching systematic trading in 2009 I was much more obsessed about which indicators I was using for exits and entries, but now I obsess about my position sizes, diversification and my money management rules. Good stuff.

Looking forward to hopefully seeing you at the OC Traders Meetup in the coming months.

P.S. If you haven’t read it already, I highly recommend reading “Fortune’s Formula”, it’s entertaining and interesting non-fiction about the origins of the Kelly criterion for betting and position sizing. I love that it weaves together several characters from American history (mobsters, Giuliani, Buffet, Long-Term Capital Management, World War II cryptography, early days of AT&T, random-walk economists vs. you-can-have-an-edge-in-the-market disciples, etc) that had an influence on or were impacted by the success of Kelly criterion, and the pitfalls of those who didn’t believe in it.

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