The End.

Just moved from a rather modest flat to a not-so-modest house. Now I have the office in the loft/attic (or "mansarda" as they say here in Italy) that I've always dreamed of AND space (3 floors down!) to practice my hobby of the last 15 years and counting, as well as just workout in general. 

It's a beautiful house- it has 4 balconies (of varying size), 3 bedrooms, the loft, 4 bathrooms (!!), a tavern with a fireplace and a pizza oven, kitchen and living room as well as a garage.

I got this by learning to trade....but not from trading profits ;). The secret is hidden within the 218 posts of this blog.

That being said, there's not much more to add. I'd only be delivering the same content in a different way which is a poor use of my time.

So, in the spirit of reduction:

- Cheap clients rejected...? Check!

- Time-wasting satellite television subscription cancelled...? Check!

- Reduced time on the Net...? Check!

- Blog concluded, only to be reignited as a teaching tool should there be demand...? CHECK!

Good Luck for your life and trading. :)

The Mighty Momo! Pt 2- Wood For The Trees.

Below is a recent example of the pattern in play. This time, I've included volume to show how that works with the progressively smaller magnitude waves of selling (See "The Mighty Momo!" for the original mark-up, which was a short)...

Picking out the mass of volume is the idea.

The lower volume on each successive leg of selling compared to the prior one is a sign that the sellers are losing conviction. Add in the "Golden Mean Extension"- which isn't always this clean- and you have something which gives a "trade-able bounce" (subjective: refer to the above link for my thoughts on that) around 80% of the time.

So, at first glance, it looks like volume isn't favourable for the above setup. But that's a case of missing the wood for the trees- just have a look at the body of volume. They do provide the decline we're looking for in order to take a trade. The "trees" do provide us with evidence of short-term trend exhaustion and, as such, give a heads-up as to where you'll find the pivot. Again this is not an exact science and you need to look at recent PA to determine how volume is signalling turns relative to price (at the exact pivots, slightly above/below etc).

Incidentally, I've noticed that the GME tends to also be present in terms of time. IB's charting package doesn't provide that tool, but it's quick to do with a calculator plus the approximate times the lows/highs occurred.

The Three Types Of "Now".

What is "Now"?

The following passage is taken from The TAD principle. I first heard about this concept through TraderX's site some time ago. I thoroughly recommend it.

"The past and future don't exist. Your mind works hard to convince you that they do, but in reality the past and the future are simply thoughts happening right now, in the present moment.

Does that mean you shouldn't enjoy memories of things that happened in your past? Not necessarily, but there is a fine line between enjoying a memory and rejecting the present moment in favor of clinging to times gone by:

"If only things could be that way again."
"I wish we could go back to those days."
"I was much happier then."

It is easy to turn what you label a "positive" memory into something that gives rise to regret, sadness, or bitterness. Such is the reality of past and future thoughts. When you project into the future, you create stress, anxiety, and worry, as well as fears over what "might happen". And reliving the past creates feelings of guilt and resentment, as well as non-forgiveness of others and yourself.

When we are pulled out of the present moment, we create suffering for ourselves. It's ironic, because you are only here now - it is the only moment you ever have. But, if you aren't mindful of your thoughts, you will spend "now" lost in stories of the past and the future."

We spend so much time thinking about the past (a "now" which we have already experienced) and the future (a "now" which we have yet to experience) that we get sidetracked from thinking about the true now.

How many times have you practiced a conversation that you expect to have in the future? Or tried to mentally run through what you did wrong in a past "now" so that you'll be better prepared "next time"? (By the way, it'll NEVER be the way you imagined it!)

Now is so infinitely small that it can't be measured but, paradoxically, it draws itself out in to infinity. 

Mastering the art of doing the best we can with the present moment will, by default, take care of the future we worry so much about because our now will eventually be that future. Likewise, it'll take care of any "past regrets of the future" because your futures' past will have once been the present...and you're always taking care of that.

The Mighty Momo!

This pattern has formed the basis of the vast majority of trades that I've taken over the last 5 years and counting. Whether it be a derivative of the pattern (Pattern Failure or the Appendix) or the pattern itself...

Saying a pattern is "profitable" is, in my mind, completely ludicrous. Simply because it depends on too many factors. The pattern itself is almost irrelevant (but, paradoxically, extremely important in that it has to offer a tiny edge)...it's the framework - both systematic and mental - built around it that's (hopefully!) going to make it profitable for you.

Some of the answers to the many questions which have to be tackled when using this approach have their foundation built upon market dynamics. Some are based on the trader him/herself. Others are a combination of both:-

* What Time frame? The considerations are very different when used intra-day as opposed to swing trading...
* What high do you choose as your anchor? Why?
* How do you trade out of the third high? Reversal candlestick trigger? Channel break? Or do you just trade the level without "confirmation"
* How will the above alter your R:R? Will it alter your WR?? (See below)
* Are you using a fixed stop or a technical stop?
* How accurately can you pick off the highs? *Are you playing the statistical game or analytical one? That is, take profits that work based on R:R and WR or try to get to S/R / target levels based on...whatever?

There are probably more, but it's late and I want cereal!

SPLURGE!

As first alluded to in This post, "Fear Of The Futures" and, most recently, categorically confirmed in "Trading Without A Compass- Revisiting Past Posts." , I fear the loss of accrued "gains" (success, progress, money etc) and so tend to self-destruct by changing the very mechanism that got me the success in the first place in a futile attempt to exert control on the situation.

It always ends in the same way.

So, as proposed in the above and various posts over the last few years (Yikes! It's been that long?!), I've "locked in the success"/"reset the account" etc by withdrawing last weeks' profits and squandering spending them on a bunch of DVDs that I've been meaning to get to add to our collection.

Here are a few of the 18 titles;

My intention is to use any potential profits as a supplement to my current income and/or grow my account (the latter would be a challenge due to my difficulty in building on past successes- any solutions would likely be documented here in a future post) not to be used as pocket money, as is the case with this week.

 I felt this kind of purchase was necessary to highlight the fact that it was made using the fruits of my work in the markets. Those profits will be "secure" in a very visible way here at home which will leave me free to repeat the process with an account that has been "reset". In a cognitively-biased way of course!

Sandcastles- Shifting Thoughts And Supports

"sand·cas·tle  

n.

1. A castle-like structure built of wet sand, as by children at a beach.

2. Something that lacks substance or significance."

Trying to out-think your own logic is stupid on so many levels. 

Firstly, you can't collect any meaningful data about your interaction with the market if you are a neurotic, strategy-changing mess. So stop doing everything and start doing something consistently! Secondly, how can we learn to trust ourselves if we can't define what we are by what we do if we don't actually do any one thing?? 

Slave to a combination of Outcome Bias and Loss Aversion, we have the urge to circumnavigate our own strategies (!!!) in an attempt to avoid inevitable losses- or at least exert some control (there's that word again!) over when they do or do not occur...all we really do is miss the real chance to learn something about our long-term relationship with the market.

If, by your analysis, a pattern/setup was "strong" or "supposed to work", shouldn't that then offer a very profitable trade in the opposite direction of the failed pattern/setup especially if there is some sign of rejection on the other side of the stop zone...??

If it doesn't, then you're likely building on sand, at least on this occasion. The crucial thing is to let the market tell you that with a "failed trade" (Not necessarily an unprofitable trade...) rather than doubting your own train of thought...a sure sign of lack of trust and/or need for control. You can't modify what doesn't exist in the first place.

Incidentally, I'm back on the live account with half-size which has made all the difference. If one is having difficulty bringing practice performance into the live arena, I'd highly recommend trying to trade a part of whatever size was used in SIM forward-testing when attempting to go live.

Feels like SIM...but with tangible benefits :).

You And Your Edge.

First off, let me say that I strongly believe most traders (all?) have an Analytical Edge in the market to some degree...the problem is, that's not nearly enough.

For me, Real-World Edge= Analytical Edge + Emotional Variance.

The EV is always negative, unless you're a robot...then it can be as high as zero. Cue shitty paint drawing for explanation:

Dampen your own mood swings and keep your edge's heart beating!

Everything in the world revolves around cycles and waves. I see the working of an edge as a wave not unlike those you find in the sea or on an ECG. Even the spinning of the Earth can be tied into the Sine Wave. In short, if it's pulsing, it's good. If it's flat, it's dead!

So most/all of us have some degree of AE in the beginning similar to the first green , semi-sine, wave in the above doodle. Then we get in the way with our huge EV, crashing into our AE.... neutralizing it with much the same effect as those anti-noise earphones people use on planes.

The result is a dead edge.

It's my opinion that the easier (much easier!) path to trading success is to try to get that red line as close to flat as possible rather than look to find/create a sharper edge in the market.

Reduction = Greater Efficiency + Focus

I just recently read a fantastic post by TraderRach and it got me thinking....

Years ago, I was a Chef in some of London's best establishments.

We had a lot to do in relatively little time... and it had to be done to a certain standard. The pressure to perform led to some great revelations. Suddenly, I found myself studying things which may have seemed irrelevant to some but really improved the bottom-line in terms of performance, freeing up time and energy which could then be spent in more productive ways.

Wasted trips to the walk-in fridge, to the rubbish bins...unnecessary movements to get to things which could be stored in a more accessible way etc etc. I soon found myself implementing various techniques- strategies if you will- in order to streamline the task at hand.

I later realized that my approach in a commercial kitchen was the main reason for my initial success in the markets.

It's not so much what you are doing as it is how you are doing it. It's all too easy to brush off certain procedures as being unimportant to the point where some people don't even consider them. But those are likely the very things you should be focusing on. Strive to do simple in military fashion rather than fancy done in anything less than.

Jiro is a fine example of this concept.

Reduce. Fewer markets, fewer indicators (which has never been an issue for me personally)

I used to have alarms until I realized that they, well, alarmed me and made me feel as if I had to act straight away or, strangely, should wait for confirmation. I used to have a sound for an order filled until I realized that it heightened my sense of doom (for stops) or attachment to a position (for entries). The same for trendlines and the "position indicator" on IB's TWS. They all encourage you to focus on where you are in relation to the market or what you think the market's doing rather than keeping you inline with what is actually happening.

Fewer moving parts with more attention to detail given to each piece is the way forward for me.