 |
| 10 pip range for >5hrs=Chop! |
Monday, October 8, 2012
Day's Anatomy- 08th October 2012 (Pt 1)
It goes something like this:
Trade 1- loss. Internal dialogue: "good trade- move on"
Trade 2 & 3- Break even. Internal dialogue: "after resisting the urge to take a strong setup out of context AND taking the other side of the market (the correct side) you STILL have nothing to show for it! I'm getting a little frustrated..."
Trade 4-loss. Internal dialogue: "So, after following my proven plan, I'm one stop away from having to stop for the day. The day has only just begun!"
....Before Trade 5...
"Here's a setup. But I've only just lost (Recency Bias) and it was right here (Spatial Bias). What if I get stopped trading in the opposite direction of the last trade I took? (again recency and spatial biases)...
....what if I hit the day's stop?"
As you can see, I took the trade for 19.2 pips. But the fact that it's a big winner, while nice, isn't the point. It's staying with "process-oriented thought processes" rather than "outcome-oriented thought processes" Being aware of the way we all think (see the above bias links) and steering myself toward the process is probably the single most important change I've made/ am making in my trading.
Focusing on what you're trying to avoid is like a cyclist who looks at the people he's navigating around rather than the place he wants to get to. You just end up flat on your face!
Friday, October 5, 2012
Thursday, October 4, 2012
Monday, October 1, 2012
The Man From Sicily.
So I'm taking my daughter for a walk in the park before lunch on Saturday when I noticed a guy watching me intently from across the way. He didn't have a very amicable look on his face.
"Oh God, what does he want now", I said to myself. (At this point I'll disclose that I am a black man living in Italy. I've had more than my fair share of racially-motivated slurs thrown my way.)
I decided to employ the "eye gazing" technique I had read about in "The 4-Hour Work Week" by Timothy Ferriss, but had inadvertently stumbled upon years earlier whilst trying to expand my comfort zone. The basic idea is you have to hold someone's gaze until they look away.
I failed :)
Several minutes later, he approached me with the little boy he was looking after. He drew the boy's attention to the bubbles I was blowing for my little one. I said, "ciao" and we struck up a half-hour conversation.
It turns out that Francesco from Sicily was quite an interesting guy. He had studied Hotel and Catering like me, but now had a burning passion to return to Sicily as part of the "Carabinieri" to fight the Mafia.
He cited all kinds of reasons for wanting to do so but, when I asked him if he wasn't scared, he quickly answered, "No, because I have nothing to lose".
That stayed with me for the rest of the weekend and, of course, conjured up a whole bunch of trading related themes. The usually greater fear of losing what we "own" over losing opportunity. The fears of what tomorrow may bring instead of living in the moment and doing what's right now. The fears of what yesterday did bring and how we should modify our behaviour instead of just doing what's right now...
The rich (in every sense of the word) get richer because they don't need to. They have enough resources to be able to play the game of risk to reward without actively holding on to what they already have. The poor get poorer because they are afraid to give up what they have in search of more.
Over to you Tyler!
"Oh God, what does he want now", I said to myself. (At this point I'll disclose that I am a black man living in Italy. I've had more than my fair share of racially-motivated slurs thrown my way.)
I decided to employ the "eye gazing" technique I had read about in "The 4-Hour Work Week" by Timothy Ferriss, but had inadvertently stumbled upon years earlier whilst trying to expand my comfort zone. The basic idea is you have to hold someone's gaze until they look away.
I failed :)
Several minutes later, he approached me with the little boy he was looking after. He drew the boy's attention to the bubbles I was blowing for my little one. I said, "ciao" and we struck up a half-hour conversation.
It turns out that Francesco from Sicily was quite an interesting guy. He had studied Hotel and Catering like me, but now had a burning passion to return to Sicily as part of the "Carabinieri" to fight the Mafia.
He cited all kinds of reasons for wanting to do so but, when I asked him if he wasn't scared, he quickly answered, "No, because I have nothing to lose".
That stayed with me for the rest of the weekend and, of course, conjured up a whole bunch of trading related themes. The usually greater fear of losing what we "own" over losing opportunity. The fears of what tomorrow may bring instead of living in the moment and doing what's right now. The fears of what yesterday did bring and how we should modify our behaviour instead of just doing what's right now...
The rich (in every sense of the word) get richer because they don't need to. They have enough resources to be able to play the game of risk to reward without actively holding on to what they already have. The poor get poorer because they are afraid to give up what they have in search of more.
Over to you Tyler!
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"...in 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.
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.
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.
 |
| 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?
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.
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 meet...no 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.
Price got above the 590 action zone (where the two patterns meet...no 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.
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".
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!" ;)
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!" ;)
Sunday, August 26, 2012
Notting Hill Carnival!
I'm in London with the family for a few days to enjoy the Carnival and generally relax with family and friends. However, I just wanted to bring some closure to this week's trading as I was still in the market 10 mins before flying out the door to catch the plane on Friday and, therefore, didn't have the time to do my weekly wrap up (as much for freeing up my mind for the weekend as it is for data-keeping purposes!).
This week was a bit of a special one as it marked my return to live trading! 1 year, 7 months and 6 days after my last live trade at the beginning of 2011.
The week ended profitably overall as well as in each individual account (SIM and Live) albeit by a small amount.
It's a good thing I took my time building confidence and collecting the data because the transition from SIM to Live was as painless as it could be for me, given the fear I've experienced in the past. It was also a great idea to use the size that I intended to use when returning to the live account in SIM. An even better idea might be to use a larger size in SIM so you reduce the fear factor even more by seeing smaller numbers flashing around whilst using real funds.
Will be back in my office on Tuesday and, after wrapping up with this week's review, back to looking for my usual opportunities. Curious to see if my forward-tested results will continue to play out with live trades (I've already had a taste of the difference in fills when one of my trades had it's trailing stop triggered while the market was 15 pips away from the trigger price....two rogue trades with size were responsible for that one as the market re-opened after it's daily 15 min break- something that may not have happened with SIM.)
This week was a bit of a special one as it marked my return to live trading! 1 year, 7 months and 6 days after my last live trade at the beginning of 2011.
The week ended profitably overall as well as in each individual account (SIM and Live) albeit by a small amount.
It's a good thing I took my time building confidence and collecting the data because the transition from SIM to Live was as painless as it could be for me, given the fear I've experienced in the past. It was also a great idea to use the size that I intended to use when returning to the live account in SIM. An even better idea might be to use a larger size in SIM so you reduce the fear factor even more by seeing smaller numbers flashing around whilst using real funds.
Will be back in my office on Tuesday and, after wrapping up with this week's review, back to looking for my usual opportunities. Curious to see if my forward-tested results will continue to play out with live trades (I've already had a taste of the difference in fills when one of my trades had it's trailing stop triggered while the market was 15 pips away from the trigger price....two rogue trades with size were responsible for that one as the market re-opened after it's daily 15 min break- something that may not have happened with SIM.)
Monday, August 20, 2012
Appendix- Common Variation.
The recent post, "The Mighty Appendix!", goes through the basic attributes of the pattern- The Momo Reversal with failure, "V" turn off of Support/Resistance back into the Momo and then "sign of reversal" at the original action zone of the pattern. (see JPEG within that post.)
I call it the "Appendix" because the price deviates from it's path (in this case the Momo, but the concept can be applied to any pattern) before returning. The rogue price action is pinched in a way that makes it stand out from the established PA...much like an Appendix from the small intestine! But I digress...
Sometimes, this "pinched" PA can occur before the culmination of the Momo Reversal, as in the above example. I've drawn in the PA in yellow...
The same principles apply for both variations of the pattern. Regardless of where the deviation occurs, it either allows a Momo to eventually hold, despite a strong-paced move into S/R or tags an important S/R when the Momo forms "too early".
Recognising the pattern (takes practice!) isn't enough. You also have to look at the context of the pattern. Otherwise, you won't know whether to take the original Momo or wait for an Appendix/Pattern Fail (More on the latter...later).
I call it the "Appendix" because the price deviates from it's path (in this case the Momo, but the concept can be applied to any pattern) before returning. The rogue price action is pinched in a way that makes it stand out from the established PA...much like an Appendix from the small intestine! But I digress...
Sometimes, this "pinched" PA can occur before the culmination of the Momo Reversal, as in the above example. I've drawn in the PA in yellow...
The same principles apply for both variations of the pattern. Regardless of where the deviation occurs, it either allows a Momo to eventually hold, despite a strong-paced move into S/R or tags an important S/R when the Momo forms "too early".
Recognising the pattern (takes practice!) isn't enough. You also have to look at the context of the pattern. Otherwise, you won't know whether to take the original Momo or wait for an Appendix/Pattern Fail (More on the latter...later).
Subscribe to:
Posts (Atom)
