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[PipMeHappy]

http://bettersystemtrader.com/188-why-trading-can-be-so-challenging-adam-grimes/

[Kaitsu]

This is a very long youtube, over one hour, but I did listen to most of it, at least up to the questions at the end. Although Adam Grimes does appear to wander in, out, and around, the topics being discussed, there were some interesting points being made.

I was pleased that although the title describes forex trading as "challenging", in the actual video they use the more realistic terms "hard" and "difficult"

His answer to the question was actually refreshingly different to the usual reasons why traders fail. Normally failure is put down to the traders' own mistakes, such as a lack of experience, or training, or discipline, or patience, or adequate funding, etc ,etc.

But he identifies the cause of difficulty in trading as being a characteristic of the market itself, in particular its randomness, which he claims is present in all timeframes including longer time timeframes like weekly. And he describes the edge in any trading method as being extremely small.

However, what I found very revealing was that he didn't say that markets are random all the time. He says that they are random for much of the time and that there are times when one can expect randomness to be very much less present. In particular, he uses the example of when markets have moved to the outside of the extremes of normal movement and are not likely to remain there - I kind of think of this as contradictory trading and is something that I have been exploring myself a little in connection with S/R horizontals and which ones are most likely to hold.

Whilst I am a doubter of the randomness theories in general, I do accept that, as the speaker says, there are very many different reasons and size and timings why people enter the market when they do. And because the market is huge and free moving, its reaction to all these inputs will appear on our screens as the familiar ups and downs, spikes, and reversals. But I believe that within the apparent randomness there is an identifiable core baseline that provides us with a reliable edge. And that only leaves us:

a) the concrete issues of when to enter and when to exit
b) the behavioural issues of patience and discipline
c) the financial issues of controlling R:R and protecting our account equity

Just my thoughts on it

 

 

 

[PipMeHappy]

Thanks, it is a long file and
not everyone can spare the time...
I tend to listen to these in full
because it is a mark of respect
to someone giving up their time,
in a way, at least not skipping
through the interview.

Adam Grimes has been on my
radar since his Chat With Traders
interview a few years  ago, where
he also talked more about his days as a
classical musician prior to trading...
I was glad to  hear you mentioning
his approach to answering the
question of why most people
struggle with trading: this is
where he uses music to
explain how you have that
consistent feedback loop
between your fingers, your
instrument,and your ears,
with the instrument and the ears
being the constant element
against which the fingers' ability
is measured; in trading.your
apprenticeship is reversed,
meaning your tools are fixed
(e.g. your indicators etc.) but
the market is constantly changing
- seemingly at random, though
we know that behavioural finance
has challenged the random walk
concept of the efficient market hypothesis.

Great points,indeed, those three factors
you list are crucial. I would add
that systematic trading is still
reliant on discretionary elements,
even though there are plenty of
fund managers investing a lot of
effort to systematize every decision-making layer:
in the end, though, if machines crash
and your money is on the line, it is still
you - the human - who has to pull the plug
on the machine.

Thanks for reporting back and I am
glad you found it interesting. I hope
others will too.

[Kaitsu]

he uses music to explain how you have that consistent feedback loop between your fingers, your instrument,and your ears,

Yes, I thought this was an interesting comparison. When I first realised that he is a musician I thought it was a strange combination (as with you, too!). I have always considered artistic temperament and a logical, analytical mind to be two opposite ends of a spectrum, and with TA being very much at the latter extreme.

But it struck me that the role of ears in music is rather similar to the function of a journal in trading if it is used properly. I try to always journal my motivation for entering a trade and, more importantly, why I exited and were my decisions right or wrong (i.e. what would have transpired if I had not reacted at all or reacted differently). In this way, my journal is giving me feedback on my performance and highlighting weaknesses or areas to still work on.

I have always considered charting (or as I prefer to call it, mapping) as an entirely analytical function. But I also have a significant discretionary element in my trading. Listening to Adam made me realise that in fact I am balancing both analytical and artistic elements in my trading process. If fact, so much so that I decided to take a look at his blog website and discovered that he wrote a book in 2012, which actually looks really interesting!

I like the fact that he is a concrete experienced trader/author and not just a theorist and I like the concept of the book, which is stated even in the title: The Art and Science of Technical Analysis. So I downloaded a Kindle reader free sample from Amazon and will buy the book if it lives up to its expectations. Here is one extract from the introduction:

"Science without Art is sterile; Art without Science is soft and incomplete. Nowhere is this truer than in the study of modern financial markets."

This reflects your own comments that:

I would add that systematic trading is still reliant on discretionary elements,

Upon reading further into the sample I came across the attached extract which I again thought is so gritty and true about how the self-directed small-time retail trader can make a profit in these markets, which are really the home of the institutional players, by knowing what are their advantages of their own specific circumstances.

In fact, in this extract he also inadvertently offers an explanation why price is not random and why there are trends in the timeframes usually frequented by the retail trader:

"Many large firms...enter and exit positions over multiple days and weeks". This is what we see as imbalance between supply and demand and creates a directional move in price to a new balance point. This is not randomness at all.

Once I have read through the whole sample (mainly the first 2 chapters of the book), I will let you know if I then decide to buy the entire book (which right now seems highly likely)

Thanks again for the interview. It is rare nowadays to find something that sparks some fresh interest in a positive and constructive way!

[Kaitsu]

I will let you know if I then decide to buy the entire book

I did buy it via Kindle. It is the first book I have bought in years!

It raised an interesting thought. How do we judge what is a "good" book? In many cases we tend to define a book as "good" if it simply echoes and confirms what we already think or do. If someone writes and sells a book that incorporates exactly what are our own opinions and beliefs then it "must be good"!!

This is certainly not the case with Adam Grimes' book! In fact he spends a lot of time denouncing the value and effectiveness of several things that I do (and have done for years!)!!

But with a resumé that reads:

" Adam Grimes has well over two decades of experience in the industry as a trader, analyst and system developer.......His trading experience covers all major asset classes–futures, currencies, stocks, options, and other derivatives, and the full range of timeframes from very short term scalping to constructing portfolios for multi-year holding periods."

....and writes about trading in a manner quite different to my own approach, then it must be worth a read. Also, someone who, alongside being a professional trader, is also a professional standard musician and a classically-trained French chef - must have something to say that is worth listening to!!!!! (makes me feel like a complete waste of space! )

I think book/video reviews on a forum are a very useful means to help others find (and sometimes avoid!) study material. So I will post (in another thread) some thoughts and ideas that I think are good from this book as I go through it (even though my earlier extract only has 2 views!).

Thanks once again to @PipMeHappy for introducing Adam to us.

[PipMeHappy]

@Kaitsu  thanks for the sample pages and for giving us an insight into Grimes's book, it is much appreciated.

Cannot really add more to what you already said, other than
we do have a confirmation bias that is also not helped by
social media algorithms showing us the sort of news we
are likely to agree with - and not the ones that would challenge
our beliefs.

Books are algorithm-free, in the sense that you can read a summary/review
but once you take a gamble you just have to open it and start reading whatever
it is it contains, page after page, and accept that you may like or dislike some or
all of it!

That is the value of books, as well as encouraging deeper thinking
where most 'phone-read news are quickly scrolled and a lot is skipped
as people skim to the main paragraphs, looking for quick soundbites.

I am not sure I have time to read a trading book - I am still traumatised by having
to have read, re-read, an memorised the six-hundred and thirty pages for my CMT Level 1
exam. I am just reading other books at the moment, keeping it light

But I may read trading books again in the future. My main focus is trading, for now, but
at least I have podcasts etc. to find some helpful advice on particular issues. Thank goodness,
as I can listen to these while I am on the go (though there are audiobooks to do with trading).

Aaaaanyway
Hope that others will maybe take a look at your pages and comment, much as I am having fun
talking to you

[Kaitsu]

I am still traumatised by having
to have read, re-read, an memorised the six-hundred and thirty pages for my CMT Level 1
exam.

I wish you every success with that! But I am sure it is well worth the effort in the long run and will open up opportunities far beyond just trading your own account

Hope that others will maybe take a look at your pages and comment

I will be posting thoughts from the book that I find useful and feel worth sharing with others as well. I have asked @Caesar where would be the best place to post reviews and thoughts on trading materials like books, Youtubes, etc. This "Trading Central" is so far down the list of topics that it is easily missed and it would be good if all such materials threads could be under the same topic. So I will await his answer before beginning!

P.S. Actually, now that I am getting into his book, we are not so far apart on issues as I feared. He initially kind of sneers at the use of indicators and MAs in general but he actually uses the MACD and Keltner bands himself! So it is actually more an issue of how these are applied and understood rather than a blanket negative - and in that we seem to be running on fairly parallel tracks (so far!)