Thursday, February 11, 2010

Chasing Greatness In Trading

I haven't written a blog post for many months now, but recently something caught my attention that I felt I had to comment on. Dr. Brett Steenbarger of Traderfeed, whom I greatly respect and admire, wrote a post about being conservative and not having an "all-in" attitude so that you can weather the inevitable trading setbacks with ease and keep moving forward. While I generally agree with most of what Dr. Brett writes about, this time I have quite a different opinion. As such I wrote a comment to his post, and I'm reproducing it below as a post of its own as I believe it has something worthy to say. I hope someone out there can benefit from it.


I think it really depends on who you are and what your objective is when it comes to the issue of your attitude towards loss in trading. If you're just trying to make a safe, smooth, decent return on your cash, then yes conservative is the way to think. However, if your goal is to be a world class trader- among the best- then such a conservative attitude won't cut it in my opinion.

I think where traders get it wrong is confusing account volatility with risk. This isn't "risk" in the truest sense of the word. Risk, to me, is risk of ruin. If you have a demonstrated positive edge to your trading across varying market conditions, and you have a risk of ruin that is virtually nil, is it truly "risky" if you have large account volatility? I would argue otherwise. The only risk here is emotional risk. That's what account volatility is to me when a trader has a persistent edge and no risk of ruin due to correct overall position sizing. It's only emotional risk because under such conditions the drawdowns will be recovered and new equity highs will be made. Just like you recovered 2.5% in no time, an aggressive trader can recover 15% or more in no time. Same thing, just amplified. The only issue is whether the trader can stomach the drawdowns.

And so if you think in this way, then you also realize that to be a true world-class trader, you must train yourself to stomach the drawdowns that come with pushing for the big returns. That's what it's all about. All the greats we hear about were aggressive. They didn't become great and make countless millions by being conservative and being happy with small rates of return to avoid account volatility. Later on when they created hedge funds they may have started really caring about minimizing drawdowns because you can't raise investor money with big drawdowns, but in general most of these guys weren't afraid to risk big when they had conviction, and that's what made them the huge money and that's how they became legends.

As for the skier mentioned in the NY article, I think the message from that article is distorted in this context. He had exactly the same attitude as all the greats have in all sports. Not afraid to put himself on the line and risk painful failure to achieve great things. However, he was also immature and had drinking problems, and those were his real vices- not his all-in mentality in his sport. If he had landed that jump, he would have been called a hero and been exalted for his great boldness and skill. And rightly so. It wasn't this that was his downfall, it was his lack of self-awareness and maturity.

As is with traders. The greats that make millions have an all-in mentality, but this is tempered with prudence and self-awareness and isn't the same as being careless and risking ruin. All-in in this case means being willing to bet big and stomach big hits in going for stellar returns, while at the same time keeping true risk- the risk of ruin- at an extreme minimum.

That, to me, is the essence of trading in the big leagues, or being in any kind of big leagues. You don't get there taking the cautious comfortable route. You get there by being willing to handle adversity that others can't, while doing it with an air of prudence. And THAT is what I'm aiming for, and what I think every trader chasing greatness has to aspire to.



  1. Great porst Ziad !!! really u said it all...

    The only problem could be developing an edge and having the guts to trade it...

    I have some questions that are not related to your post but i hope you can help me with.

    1) Do you use RTH for charting and finding the LEVELS on the daily and 60 min chart OR do you use the continuos globex session? I Have seen that the pit session levels with gaps is the one that set the levels the best...

    2)Do you consider that a 5 min chart is good for trading in the e-mini sp 500 since it is the only futures where i have seen that levels that form in the 5 min chart would hold sometimes compared to other futures

    Thanks a lot


  2. Hi Ziad,

    Great comments! Been a long time not seeing your comments, good thing you were able to spare your time in sharing your trading insights. Thanks a lot.


  3. Thanks Douglas... hope ur trading is going well!


    1) Yes I use the RTH, but I always have the current overnight high/low marked on the chart as on many days (especially range bound days with lower volume) they become good reference points.

    2) I think any chart is good... the timeframe just depends on ur style. The key is thinking contextually whenever looking at a chart. For instance I trade off of 1 minute charts because I like to get the most amount of detail possible, but over time I've developed the skill of being able to visualize the bigger time frames in my mind quickly, and depending on the context I may consider some stuff in the 1 minute chart just "noise" if I'm looking at a bigger picture, or I might consider important if I'm really zooming in on a smaller type set-up. So it's all contextual and depends on what you're looking at. Don't try to make it a science and believe that one chart is better than the other.... they're all showing the same thing but with less or more detail.

    All the best....

  4. Thanks a lot for the help ziad I really appreciate it...I am still having trouble setting up my pre market analysis and levels for the day since I am not using market delta or volume profile,I believe that a daily chart,weekly and 60 min chart can be enough to find those areas of supply and demand...ziad do you think that is enough? you mind I find send you by email 2 or 3 days with my levels so that you can give them a quick look and tell me of you agree with them? I know you are pretty busy but if you can help me around that for a couple of days I will really appreciate it always thanks a lot ziad


  5. Hey Daniel,

    I don't know if my input on your levels would be that beneficial, as I believe that there is no "objective reality" out there in the market. i.e. there are no right or wrong levels per se. It depends on how one views the market, his beliefs on how it works and what matters, as well as his timeframe. It might be meaningless for one trader to comment on another's levels when they view things differently and have different ways of using the levels.

    Having said that, what I will do is tell you what I personally find important to my trading in terms of levels. For me the major levels come from the daily chart, and the smaller ones come from what I think is important to the picture. i.e. even levels are contextual and more art than science. But in general, most days the previous day's high or low matter (unless you're getting good volume and some real institutional participation and longer-term money... these guys couldn't care less what the previous day's high or low was). The edges of ranges also matter. This can be seen on any timeframe chart. don't get stuck to a "60 minute" or whatever. Just look at where you can see a range best. Zoom out and in until you see such areas no matter at what timeframe and mark them off. Finally, i find the places where strong moves started from to be important areas. Since I'm day trading, I often find these levels from 1 minute charts. For example, if we had a big afternoon sell-off, then the place where that started is an important level for the next day and maybe several days. The same concept can be looked at on a bigger timeframe for bigger moves.

    And that's it man... it's not really complicated, and it's definitely not a science. So trust yourself and just learn from experience which areas matter. It won't really help you if I comment specifically on what you're doing because I don't know how you look at markets. The best way to learn is through experience and not being afraid to do it your unique way and adjust appropriately over time. Trust me, there's no right answer.

    All the best,


  6. Thanks a lot ziad...i really appreciate your cleared to me a lot of things...I can also see levels on a 5 min chart,then I zoom out to the 60 min chart and see that they are the same levels

    I ask because you are a professional and I am not yet,just learning,but also I ask right now because I am working at a prop firm and they dont want me to look at anything else but the 60min chart and daily..and i cannot simply do that,the boss says that the 5 min chart is useless and that levels don't work there but I can only disagree since a 1 min chart constructs a 60 min chart for example...I can only understand the market looking at everything,but I have been warned at the firm that using 5 min charts or even 15 min charts won't make me a great trader,anyways...I agree totally with u ziad ....again thanks for the help and you time


  7. Any time Daniel.... what the firm is telling you is not true. It's all the same information, just seen with more and less detail. Now of course you don't want to focus on every little mini peak and trough, which is probably why they don't want you to use a 5 minute chart. i.e. they want to keep you focused on the big picture, which does make sense. But it's not the 5 minute chart itself that is wrong or useless, but rather using too many small levels from it would be wrong. Like I said, the places where major moves (even if only intraday moves) happened are important, and sometimes you gotta drill down to see those. Other than that you can see the important places from the bigger charts if they want you to use just those.

  8. Thanks a lot Ziad...i really appreciate it...True, maybe they dont want me to use any peak and trough from a 5 min chart....maybe i am just going to limit my levels to what you just told me...daily charts for the most relevants and then scan for other levels which could pop out from the chart, let say from a 60 min or 5 min chart or any timeframe where i could spot a strong move or gap either up or down....i will try to limit to 6 levels 3 up and 3 down as the most relevants...we´ll see how it goes...i´ll let you know, if you dont mind, any other question i could have

    Thanks a lot Ziad


  9. Great post Ziad, thanks for sharing! Also great additional comments to the questions above. You always post the most relevant, pointed, no BS facts about trading.

  10. Thanks for the comment Steve. I think there's too much BS about trading out there... definitely way too many myths, and sometimes some misunderstood issues. So whenever I can set something straight I try to do that. Glad u enjoy the occasional posts!


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