a post for andrew 4k on w.d.gann , page-21

re: a post for arfur on w.d.gann ... arthur G'day (again) rem,

Very very interested to read your post. I believe that the trading strategy that you are espousing is not dissimilar to where I will end up with the many thoughts that I am slowly dragging together.

In essence it seems that your trade management (not necessarily entry/exit criteria) is along the lines of the "trend followers" or "Turtle Traders" that I have used as some inspiration. I.e. plan for and accept small losses (ruthlessly) but run with the winners.

I am coming to the conclusion that it is a common mistake to concentrate on how many times we get it right rather than how much profit we are making. It sounds simple when said but there is a big psychological barrier to overcome to get that understanding and the intestinal fortitude to actually trade in that way. Human nature is to want to always be right - hence the temptation for people to allow their stoplosses to be overrun because "I am right, the market is wrong and it will turn around". Anybody that says they have not done that is either fibbing or has never traded.

I think that when we first come to trading we start by asking the wrong questions. We generally spend all of our energy working out an entry criteria, rather than building a plan to manage what we are going to do with the trade. I have seen it said (and am inclined to agree) that any reasonably decent entry/exit criteria can give profits if an appropriate risk(money) management system is used. ie the entry/exit criteria is relatively unimportant (as long as you actually have one!).

While I am dribbling on I have a comment re charts. A lot of people are not going to like this but I have come to the conclusion that we often use charts to fool ourselves (probably unintentionally). The human brain is very very good at spotting visual patterns and tends to find the most obscure patterns even when they really mean nothing. Havnt we all at some stage looked at a chart and said something like "Hmmm...last time it did an X followed by two Ys and a Z it then did A" (conveniently ignoring all the times in between that it didnt.) It is partly for this reason that I am developing my system intentionally with no charts. I am working purely with the numbers. That doesnt mean I don't calculate and represent the same indicators (if I want), just that I will leave them as numbers and use the numbers (mechanically) to make trade decisions - I wont represent them as charts as I am doing everything to avoid letting my "wisdom" override the system.

Anyway, running way ahead of myself here. As I said earlier, I am a long way from having a working system.