Showing posts with label Mark Douglas. Show all posts
Showing posts with label Mark Douglas. Show all posts

Sunday, March 19, 2023

Backtesting ICT 2022 Mentorship Trading Setups | Hannah Forex

A Trading Setup is an indication of a higher probability of one thing happening over another.  

Reference:
Hannah Forex (Mar 9, 2023) - I take these trades over and over again ... | ICT mentorship model.
 
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Anything Can Happen | Mark Douglas

The semiretired chairman of the board of the brokerage firm was a longtime trader with nearly 40 years of experience in the grain pits at the Chicago Board of Trade. He didn't know much about technical analysis, because he never needed it to make money on the floor. But he no longer traded on the floor and found the transition to trading from a screen difficult and somewhat mysterious. So he asked the firm's newly acquired star technical analyst to sit with him during the trading day and teach him technical trading. The new hire jumped at the opportunity to show off his abilities to such an experienced and successful trader. The analyst was using a method called "point and line",  developed by Charlie Drummond (HERE).
 

One day, as the two of them were watching the soybean market together, the analyst had projected major support and resistance points and the market happened to be trading between these two points.  As the technical analyst was explaining to the chairman the significance of these two points, he stated in very emphatic, almost absolute terms that if the market goes up to resistance, it will stop and reverse; and if the market goes down to support, it will also stop and reverse. Then he explained that if the market went down to the price level he calculated as support, his calculations indicated that would also be the low of the day. 
 
As they sat there, the bean market was slowly trending down to the price the analyst said would be the support, or low, of the day. When it finally got there, the chairman looked over to the analyst and said, "This is where the market is supposed to stop and go higher, right?" The analyst responded, "Absolutely! This is the low of the day." "That's bullshit!" the chairman retorted. "Watch this." He picked up the phone, called one of the clerks handling orders for the soybean pit, and said, "Sell two million beans bushels at the market." Within thirty seconds after he placed the order, the soybean market dropped ten cents a bushel. The chairman turned to look at the horrified expression on the analysts face. Calmly, he asked, "Now, where did you say the market was going to stop? If I can do that, anyone can."

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The Probabilistic Mindset of Successful Traders | Mark Douglas

How can someone produce consistent results from an event that has an uncertain probabilistic outcome? To answer this question, all we have to do is look to the gambling industry. Casinos make consistent profits day after day and year after year, facilitating an event that has a purely random outcome. Shouldn't a consistent, nonrandom outcome produce consistent results, and a random outcome produce random, inconsistent results? 
 
"I just wait until there is money lying in the corner,
and all I have to do is go over there and pick it up.
I do nothing in the meantime."
Jim Rogers

What casino owners, experienced gamblers, and the best traders understand that the typical trader finds difficult to grasp is: events that have probable outcomes can produce consistent results, if you can get the odds in your favor and there is a large enough sample size. The best traders treat trading like a numbers game, similar to the way in which casinos and professional gamblers approach gambling. It's the ability to believe in the unpredictability of the game at the micro level and simultaneously believe in the predictability of the game at the macro level that makes the casino and the professional gambler effective and successful at what they do. 
 
 
Their belief prevents them from engaging in the pointless endeavor of trying to predict each individual outcome. They have learned and completely accepted the fact that they don't know what's going to happen next. More important, they don't need to know in order to make money consistently. Because they don't have to know what's going to happen next, they don't place any special significance, emotional or otherwise, on each individual hand, spin of the wheel, or roll of the dice. In other words, they're not encumbered by unrealistic expectations about what is going to happen, nor are their egos involved in a way that makes them have to be right. As a result, it's easier to stay focused on keeping the odds in their favor and executing flawlessly, which in turn makes them less susceptible to making costly mistakes.

A probabilistic mindset pertaining to trading consists of five fundamental truths:
  1. Anything can happen.  
  2. You don't need to know what is going to happen next in order to make money.  
  3. There is a random distribution between wins and losses for any given set of variables that define an edge.  
  4. An edge is nothing more than an indication of a higher probability of one thing happening over another.  
  5. Every moment in the market is unique.
 
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