6/05/2010

Compliance



Since I've now begun to expropriate other peoples blogs with trading thoughts I guess I should just grow up and return to an open discussion in this blog.

That includes trading.

Either that or just delete the whole thing and go away.

Na.

What has got me talking you may ask?

Since I quit talking about trading roughly 3 months ago I have come to one very important conclusion about this business. It's nothing new or revolutionary, it is a very common issue known by all traders.

Compliance.

"In general, compliance means conforming to a rule, such as a specification, policy, standard or law." Wikipedia

We all know that you cannot trade without a plan. So we make a plan. Then we do not comply with our plan.

Why?

Why indeed.

Jules got me thinking about my Myers Briggs personality type again, and LW got me thinking about my identity as a trader.

These thoughts took me back to my very rational thoughts that should have insured my compliance issues were all taken care of. I wrote about them, therefore they must be "handled".

Know Thyself

Whose Game are You Playing?

Well, they're not "handled".

How do I know this?

I track the trade results of all valid patterns.

IB tracks the trade results of all the "patterns".

In May there was a 91 tick difference between IB's statement and my "statement".

I don't need to tell you that my "statement" was the one with the 91 extra ticks.

So being a rational INTJer I made note of this, I stated this is unacceptable, these are not the actions of a professional trader, this is amateur stuff.

I was going to make this note to self a note to you in a blog at the end of May. State publicly my disgrace and ask you to hold me accountable for the month of June.

Accountable to the plan.

Or

In compliance.

But I didn't write the post, instead I told myself to just do it. Stop being an idiot and only take valid patterns. How hard can that be? Just do it. The math is right in front of you, you are not smarter than the market, you are not smarter than the plan, you made the plan, you traded full time for 3 years building the plan, the plan works, trade the plan.

Right.

June 1.

Traded the plan. I am in compliance. Go eat ice cream.

Good boy.

June 2.

Took non valid trade.

CAN'T EVEN DO TWO BLOODY DAYS!

So, here we are. Once you enter the world of non compliance you lose all sense of right and wrong. You are now an outlaw, living on the edge, all the cool guys in movies live out here, no rules, take no prisoners, go ahead... make my day.

Today is June 5th, we've had 4 days of trading in June, my June IB statement has 21 ticks profit. My valid patterns only statement has 82 ticks profit. Those 82 ticks look nice, but we can't eat them.

My name is Solfest and I'm not in compliance.

I lie here under my desk waiting for the surprise audit. (old bankers joke)

I tell myself I'm an outlaw, women love outlaws, rules, we don't need no stinkin rules.

Except I'm not an outlaw. I'm a trader. Traders have a risk management department and a compliance department. Both are very angry with me.

There is now a letter in my file. I'm on notice, shape up or ship out.

22 comments:

Sandy said...

Ply some Balvenie to that compliance department he he....they'll chill out too...

However, it must be said that I do find myself enjoying said ice cream (single malt in my case) when the plan is properly executed. And when its not....."no soup for you"

DT233 said...

A-U-T-O-M-A-T-E the plan.

You spoken of it before...any progress?

Solfest said...

No.

Four charts all have to be read at the same time.

I should try again.

longandwrong said...

Just to clarify (a useful tactic when unsure of something sensible to say!)...

The discrepancy between Solfest and Algofest is due to .?.

(i) Solfest failing to take valid entries.
(ii) Solfest taking non valid entries.

If both (i) and (ii), which dominates?

Jules said...

Solfest, whenever I find myself breaking rules all the time, I would start eliminating them one at a time and won't stop until I can finally stick to the ones that are spared.

Trading rules are made by humans. Most of the time they are flawed and unnecessary.

What you're facing is an identity crisis (gasp!). You are the sort that CREATES. You can't comply. In the process of creating and innovating however, you're bound to make mistakes. But being the perfectionist that you are, you can't allow mistakes (see how you're beating yourself up now?).

For a change, maybe let the man instead of the machine decide? And eat an ice-cream whenever the man makes a new constructive mistake?

Solfest said...

LW it is me taking non valid entries. The 3 outa 4 chart entry, or the just about there entry.

Also after taking a couple of non valid entry stop outs I exited 2 valid trades early cause I just wanted to get those mut stop outs back. Both then ran to target leaving ticks on the table.

"The urge to trade is stronger than the urge to trade profitably." GB007 (old guy)

Solfest said...

Ah Jules how can two INTJs trade so different. :)

I have to stick to the system. It is rational, proven, and unfortunately requires the patience of Job.

I'm not that far off side (except the last 4 days) and it just irritates me that I don't do what I know is right.

De'Trader said...

June 2.

Took non valid trade.

CAN'T EVEN DO TWO BLOODY DAYS!

Love this quotes....lol
I can't even do One Day with pure valid signal..All mixed up

Solfest said...

De'Trader

Even a small, tiny, miniscule edge will work over time. All you have to do is make sure you never deviate.

Sounds simple enough. :)

Solfest said...

Sandy, had no idea what Balvenie was. :)

http://www.thebalvenie.com/

Sandy said...

Is it ironic that most traders who have already paid their dues often struggle to finality simply because they are too close to the trees....?

Or is it something else?

Aye to the Malt!

Solfest said...

I'll have to think about that one for a while. :)

Solfest said...

I must admit my first thought is to clear cut the trees.

Sandy said...

Ah but...here I must bow to plagiarism...

Adopt the pace of nature: her secret is patience. ~ Ralph Waldo Emerson

or even better (and more apt to trading) -

One moment of patience may ward off great disaster. One moment of impatience may ruin a whole life. ~ Unknown

longandwrong said...

I spent a long time thinking about this issue and came up with a lengthy analysis that got to the very heart of the human condition. But then I realised what the real problem is...

You're an IDIOT.

Would you like Envelope A that has $210 in it or Envelope B that contains $820?

Only an idiot answers 'A please' and you are that idiot.

[ :-) ]

PS Balvenie? Further proof that I am an unsuccessful trader. I'm struggling to maintain my Talisker habit here!

Solfest said...

Emerson, very impressive.

Solfest said...

Thanks for sugar coating it LW. :)

Hopefully you never become a kindergarten teacher.

De'Trader said...

I think the balance between discretionary aka. experience and systematic is the best..But systematic SL is absolute.

Solfest said...

Good morning.

Today is a new day and a new start. Just like June 1st was supposed to be.

So far the advice has varied from drink expensive whiskey, get your system automated, forget all those stupid rules, I am an idiot, and trade a little here and there.

All good stuff.

I will sum it up as, do what is right.

And I will let you know how I did.

Solfest said...

I don't know if anyone will see this, but I said I would let you know how the compliance went for June.

53 ticks difference between the plan and IB.

That's 53 less ticks than the plan trades.

Better but still broken.

I await the wrath of LW.

La Sauciere Folle (The Mad Sauce Chef) said...

This is a great blog, I salute you.

Solfest said...

Thanks, I accept your salutation with gratitude.