Tuesday, March 14, 2006

Quote of the Week

The Six Kase Behavioral Laws of Forecasting

Law Number One: Remember that the objective is profit, not ego-stroking.

Law Number Two: The objective is profitable trading, not proving a thesis or world view.

Law Number Three: When wrong, move on.

Law Number Four: Have confidence in your own intuition. Do not rely on the advice or opinion of others, no matter how well respected they might be.

Law Number Five: Do not read newspaper articles or watch newscasts that discuss the markets in which you have an interest.

Law Number Six: Plan your strategy when the market is closed - when you are rested and thinking clearly.

The above Quote of the Week comes from a new book I'm reading...Trading With The Odds: Using the Power of Probability to Profit in the Futures Market by Cynthia A. Kase.

No doubt, one of the all-time best books I've read on Trading...but I'll warn you...for the experienced system trader only. In other words, I would not have understood many of the fantastic insights offered in this book just a few short years ago.

In fact, while reading this book I was struck with how incredibly difficult it is to become a great system trader. Flourishing as a system trader requires two very different and conflicting mindsets:

#1) A Rule-Follower. Must be a logical thinker willing to break down the most complex of things into a set of rules to follow. And more importantly, be willing to follow the rules you have set. The latter being the hardest part for yours truly.

#2) A Rule-Breaker. In order to grow to higher levels in system trading...you must be willing to break conventional wisdom [rules] in regard to all things people including yourself take for granted. And this where the conflicting mindsets truly come into play. It's very hard to program a set of rules for a system and then allow yourself to see the ways rules can be broken to improve the system. Sounds easy...but very hard. Thinking about this one some more...I believe our true task as a trader is discovering the "real" rules versus the rules we traders have created and hold as "real".

That's what I believe Kase is uncovering in her book...the "real" rules.

Special thanks to Eric for pointing out the Variance Stop technique discussed in Kase's book. Eric's contribution has triggered several exit ideas that I'm currently testing across my systems.

Later Trades,


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