Hey everybody, it’s Michael Martin. Thanks for being here. So I got some follow up on my video that I did while back on getting a feel for the market and whether or not you’re supposed to develop a feel or be purely systematic, that’s a very personal decision, right? Because your trading style’s going to be as unique to you as your fingerprints are. And it’s really not for me to say which one is best. I know people who are great discretionary traders, and I know some really good system systematized folks as well. Systematized would be, at least in the modern definition, someone who’s taken data price volume in futures. You can look at open interest change in price, standard deviation, average, true range, this and that, and tries to organize his or her orders by just using those data points to calculate what’s the highest expected value of a trade that they can get.
And so that takes a good amount of time because you need several, you’ll probably need two decades of data. 10 years is good, but then you don’t have oh 7, 0 8. So you really have to go back 20 years from today, take you back to oh three and see how robust your system is. How can it withstand shocks to the system? Because if you’re going to do pure systematic trades, you’re going to let the computer calculate your entries and your exits, your position sizing. It’ll also calculate where your protective stop is based on your predetermined criteria. It can also help you calculate when at what price to add to your winner and how much of it will you add, right? Are you going to double your position or will you do more of a pyramiding style edition? Whereas chart readers are discretionary and they are looking maybe for a particular type of setup.
They might have one chart pattern that they trade really, really well, and that’s all they’re looking for. It can take more time to do it that way because you have to do it by hand. I suppose. Some of you can program it, but then again, you have to have programming skills or at least the wherewithal to go hire a programmer. And again, it’s not to say one is better than the other. What is one that’s best for you? Because I think when I looked at some of the comments, the folks who have a system also have a feel. It’s just that they aren’t going to change their behavior from day after day after day. Whereas I think folks who are discretionary chart readers need to bring a lot of discipline to the table because that’s where if you don’t have hard and fast rules, you can find yourself taking flyers. And that’s really not where you want to be. I think it’s not a cardinal sin because you have to experiment, but if every day you’re taking flowers because you don’t have a system that’s a different
Ball wax. So I would say do what feels best, right? Because you’re not going to be successful at something that doesn’t feel good. The simulators that you would need to back test are, they’re not necessarily cheap, but they’re not expensive. But you also need the data. And the data is typically a monthly subscription fee, right? Because you want to stay current, which brings up, I’ll kind of add this into this episode as well, is that people go indicator crazy. I found that when I was starting out, I didn’t know what I was doing. Probably you might feel, or even if you’re working at an institution and you’re going through a losing streak, you can still have that talk creep up in the back of your mind as if you don’t know what you’re doing. And so when folks send over charts to say, Hey, can you help me understand what’s going on with this chart?
And I see five or six overlays, it reminded me of when I was younger and I was starting out, I used to look at those indicators because I wanted to something to help me take away the uncertainty, right? Because that’s where, that’s what happens. And that can amplify your behavior. If you don’t like what it feels like when you have to feel uncertainty, you might override your rules. You might interject a rule or create a new one on the fly just because you don’t like how you’re feeling in that particular moment. And so as I got older and I got more experience, I was eliminating indicators. I found that the majority of ’em didn’t work, but they made me feel good because they could kind of confirm things that I could already see in the price. But it gave me a reassurance. As I got older, I started to understand that I didn’t need the reassurance because I could see it in the price, and I built more confidence in myself. And so the way I reacted to that was to drop off indicators so that now I don’t even have any, I know some of you like them, some of you swear by them, and I say more power to you. It’s not calling your girlfriend ugly because you’re using indicators. It’s just that for me, I don’t need them.
But I think the less you can rely on those indicators, the quicker you will be to develop your own instincts and your own ability. That’s my experience. The more I stopped relying on other people and out things that were external, I got to hone my own instincts and my own ability in trading the markets that way. It does take time, which can be frustrating because folks want to see success and they want to see it now. They want it fast because the, there’s uncertainty about the trade, but then there’s also uncertainty of how long is it going to take till you make it to hit whatever goal it is that you’re trying to hit. So be mindful of the indicators of why you’re using them. How do they fulfill you emotionally as opposed to financially? Cause I’ve just found that the majority of ’em are not necessarily, they’re mostly lagging indicators in many circumstances.
And so I would just prefer to let the price tell me what I needed to know. But anyway, I hope that gives you some clarity. There’s no judgment. It’s really just two different approaches to the markets. Maybe it’s a budget concern, maybe a, you would much rather kind of figure it out on your own. So I don’t say that one is better than the other just because I’ve seen people fail with both. I’ve seen folks go out and spend thousands of dollars on simulators and then subscribe to data feeds and then work and just they couldn’t get it to work. And it was very, very frustrating. And then I’ve seen folks who with a lot of hard work, but not a lot of the technological stuff, just develop really, really good instincts and trade off the charts or chart patterns. So it’s really, I wish I could remove that uncertainty for you, but that’s part of the joy of it, is that you get to figure it out.
And just remember, the uncertainty could be perceived as risk. And without risk, there’s typically not reward, right? So you don’t want to go taken on excessive risk just for the sake of doing it. It has to be measured, has to make sense. But anyway, those were the key similarities and differences that I saw between discretionary chart reading and folks who were purely systematic and trading with systematized set of rules. The indicators can play a role in both, but in my experience, I haven’t been able to test to see what is the magic indicator that works all the time, very few of them. So I just chose not to use any of them. Anyway, just my 2 cents. Please like and subscribe and keep your comments coming. I appreciate the feedback. Gives me good ideas to create more videos for you. See you tomorrow.
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