Thursday, September 20, 2012

Discipline- Truth, Desire and The Trading Way.

Why is it that so many find it hard to "be disciplined"?? I'm sure I'm not the only one who has felt it is like driving with the hand-break on when it comes to trying to enforce this elusive state of being on myself!

Above, there are some boxed-off definitions that give us a clue as to why that might be. Words like "corrects", "molds", "enforcing" my opinion, you will ALWAYS come up against opposition- both from yourself and others(and the market!!)- if you try to force a behaviour. 

The alternative to trying to fight yourself or others into doing what's necessary, is to evoke a sense of desire to do the right thing, because we only consistently do what we want to do, not what we feel we need to do.

Whatever gap exists between what you know you should be doing and what you currently are doing can usually be attributed to a gap between what you want and what you really need. Working on liking/wanting what you need, rather than keeping likes and needs separate, is, for me, the real secret to maintaining discipline long-term.

Monday, September 17, 2012

Thursday, September 13, 2012

Only The Momo- Trade Room!

Still languishing at about -2.5% on the account, having been up to +5%. Suffering from a nasty case of trigger lock as I've found myself entering orders just a split second too late as I second guess myself before the trade goes on to be an eventual winner.
It'd help if I put my finger OVER the trigger!

 Of course, the losers always get filled as they are going against the direction you are trading in...

Given the above, why try my hand at a Trading Room?!?

Well, the reasons are many :). Roughly in order of importance:-

1) Accountability/Verification- If I'm able to give entries, stops and exits live in repeated fashion and end up net profitable at the end of the week, I really ought to be taking every trade- by talking out loud and committing myself, I avoid half-ideas and concentrate on the expectancy of the verbalized trades. I want to prove to myself, in a live public setting, that my ideas are (or, as the case may be, are not!) actionable AND profitable.

2) Passing It On- Lots of people have helped me (some for free!) to be able to reach the level I'm currently at in my trading. So, if I can be of any help to somebody still trying to find their way, I'm more than happy to do so.

3) Being Social/Having Fun!- Trading is lonely and can even be boring when your setups are few and far between. It'd be nice to share some stories- trading or otherwise- while looking for those few pips.

As I've mentioned before, there is a strong element of discretion in what I do. I have little doubt about the long-term profitability of my personal approach but, apparently, enough to make pulling the trigger in a consistent fashion difficult. Number 1) will either strengthen my resolve, or show me where the holes are in my real time decision-making. I'll welcome either outcome.

PLEASE read the disclaimer before doing anything stupid!!! If you have the time/desire and feel like playing along, I encourage you to SIM trade the calls.

Due to the points covered in 1), It is very possible that I won't be taking all of the ideas vocalized. Although highly unlikely, it is possible that I may not take any of the trades.

The room will be open as my schedule dictates between 07:00 and 23:00 CET. The most active hours will likely be 10:00 to 13:00 CET - Just click on the link entitled "ENTER OTM TRADE ROOM!" at the top right of the homepage.

Sunday, September 9, 2012

Trading Without A Compass- Revisiting Past Posts.

As I suspected in my last post, the winning streak has been followed by a losing streak.

If we define "draw down" as the peak-to-trough decline in equity after the peak has been surpassed by new equity highs, then this incomplete draw down is currently the second smallest of the six that stand out on the chart (because there is a very large number of DDs if you look at every decline followed by new highs compared to the previous peak...intra-day, intra-trade etc etc). So nothing to become alarmed about there.

It is, however, joint 1st place for steepest DD among the 6 on record. It was preceded by the largest winning streak on record. Emotionally-driven variance.

Luckily, I think I have the solution :)

"Borrowing & Lending VS Ownership."

"Fear Of The Future?"

The key paragraphs are the 1st and 2nd in the first post and the 1st in the second post. I've used these concepts before whenever the need arose. Eventually, I'd like to grow out of them but I'm more than happy to use it if it betters the bottom line!

The "glass ceiling of profit" comes at an arbitrary point whereby you're no longer trading to trade well, you're trading not to lose. This inevitably blunts your edge due to the cognitive bias "loss aversion" and, well, you lose!

The above idea ties in with the fear of reversing success obtained or gains accrued. The solution is simple: start at the beginning. Beginning of the next day, week....beginning of the account.... As long as it's a new chapter in your mind. Of course, this assumes you know yourself well enough- and you are honest enough with yourself- to be able to identify, in real time, when you switch from plain trading to trading not to lose recently acquired gains.

Logically, we should just be able to trade without these arbitrary points of reference as a loss is a loss regardless of when/where it occurs. But, for most, that isn't the case. So why not just work solutions around our biases rather than try to eliminate them?

Wednesday, September 5, 2012

End Of Winning Streak

Had to come sooner or later! What's most important is how I conduct myself- win, lose or draw- in the coming trades as this is where traders sometimes run into trouble.

As covered on the above charts, I basically waited for a confirmation of a lower time-frame setup on a weaker larger time-frame setup (see hourly for why I thought it was weak).

This time I was the one who got trapped as the following price action pivoted nicely off of the two ZoA before breaking above the important 560 area.

The trade was within my trade plan guidelines. The two subsequent entries that were not taken were too. But, for now, my trade frequency guards against this type of quick-fire trading. I'd rather miss those entries than take 2-3 losses in quick succession and ruin things going forwards.

Somewhat incidentally, I also had an order for a short on the books at 560.5 just before 2am. The fact that it reached 560 then fell away bothered me a bit and that's another reason why I need to refrain from high frequency trading at this time.

Tuesday, September 4, 2012

Activity Around Bar Closes- Pt 2

Another example of how AABC can be used in conjunction with a bias &/or method for added confirmation/conviction.

The pattern to go short was against the failure of the one to go long (see 1 min chart). It had some internal price action which made the pattern slightly weaker but the overall picture was strong. It very nearly got my stop but I would have got back in anyway given the scenario.

Price got above the 590 action zone (where the two patterns horizontal line on the chart) then wondered up into the close leaving the Bullish Harami behind. My bias was short at the time. A strong trigger of the hourly reversal would negate that bias. A trigger and immediate reversal meant trapped longs. Especially as it occurred at the turn of the hour.

The false trigger of the two-candled (word?!) reversal, with the context of the bigger picture and timing of the setup, created a continuation pattern.

Noticing these kind of situations real-time allows you to run that winner a little further or, if you happened to be on the other side of the trade, manage your money a bit better- i.e take off contracts, move stops or just exit the trade.

Monday, September 3, 2012

Activity Around Bar Closes

Profits would be nice, but my main goal is just to keep the account moving without doing too much damage in the infancy of my return to live trading.

So far, I haven't noticed any discernible drop off in my trading volume (which would be a dead giveaway that FEAR is raising it's ugly head). At least not since moving to the live account. August as a whole has seen lighter personal trading due to holiday volume and me being half present while enjoying the summer season.

Back to the title. Here are the hourly and 1 min charts from the first trade of the week.

I won't go into the details of the trade as that's not the point of this post (there are enough notes and doodles on the chart to get a good idea anyway).

Instead, I want to focus on the price action around the turn of the hour. It fell through my pattern, held the "Zone of Action" (< where a prior situation occurred) then fired away from there after breaking the low of the hammer by a tick. That hammer was also the low of the weak hourly close, which happened after the break-down, marked with the white arrow on the above hourly chart.

The market drove prices down to a significant level and then moved up away from that level with speed right at the turn of the hour. This, to me, was a clear indication of a pending up move as we now had trapped shorts liquidating.

I could have played it better by taking off my usual ~ 1R gain then repositioning when it came back down to those lows on lower pace. Final target was 583, which has just about been hit at the time of writing.

Saturday, September 1, 2012

Negative Gains.

Once again, another marginally profitable week. No obvious errors. So I'm avoiding the seductive forces of Outcome Bias and declaring this week a good one.

So many people are focused on "making money"- busy comparing pip totals with the next person, or their personal goals. I've learned, through trial and error, that you can't force or expect the market to do anything for you in any one trade. Trying to do so dismantles any edge you might have. The best we can hope for is a statistical probability over numerous interactions with the market.

With that in mind, I do my best to place my focus squarely on risk management, on trying to lose as little as possible when things aren't going my way, because that's how we stay afloat for the times when making money comes "easily".

You can't sail if you sink!

How will I feel if I lose this trade? Will it throw my subsequent decisions off track thereby making it unwise to continue trading? Those are the types of question I ask myself to control my emotional risk. Especially important for Discretionary Trading.

When you don't lose money, you gain what you didn't lose. So congratulate yourself for that loss that didn't occur! It results in the same positive change in equity as a gain of the equivalent size. The same idea is also true for the age-old trader vice of needing to do something. I've found that a simple change in choice of words/thoughts does the trick: instead of saying, "I'm not doing anything" try "I'm doing nothing". That way, you make it an active choice to exercise a passive action.

"Don't just do something, sit there!" ;)