Monthly Archives: November 2009

The Greatest Trading Book – Ever!

 

“Repeticio est mater studiorum.”

(Repetition is the mother of all learning)

…Saint Thomas Acquinas

 

If you’ve noticed the small size of this article, you may suspect that this article itself is NOT the Greatest Trading Book – Ever!

And you’d be correct. But don’t worry; there’s a simple explanation. This article will explain exactly how you can create The Greatest Trading Book – Ever!

You see, it’s not a book you can buy. It’s something you create.

Let me explain…

Your “Market Structure Journal”

Over the last decade I have easily read well over a hundred trading books.

And while I consider a small handful of those to be absolute ‘must read’ books (see http://yourtradingcoach.com/bookstore/ for a list), there’s one book that I continue to refer to almost daily which has had a far greater influence on my results than any other book.

That book is my “Market Structure Journal”.

A “Market Structure Journal” is a folder containing printouts of charts, along with notes detailing my observations about market structure and price movement.

Why do I rate this book so highly?

Because one of the keys to trading success, in my opinion, is to develop the ability to read the market – feeling and understanding the flow of price as it unravels at the hard-right edge of the chart.

Simple setups do not work; consistently failing to adapt to the ambiguous and uncertain nature of market price action.

Real opportunity is found through developing a feel for the nature of the market environment and how the current price action is flowing within that environment – commonly referred to as understanding the market context.

Expertise in reading the market doesn’t come naturally, and doesn’t come easily. It’s a skill we must learn through experience. If used correctly, the “Market Structure Journal” can be an effective tool for helping to fast-track your experience and your expertise.

Seeking Expertise

As Dr Brett Steenbarger states below, expertise requires a sustained period of time immersed in market activity.

“Could it be that greatness in trading follows the same patterns observed among artists, scientists, and squash players? If so, one would expect the expert trader to have spent a sustained period of time immersed in the markets, following market action, practicing trading, and maintaining a high level of focus and concentration. These are the very same conditions that generate optimal implicit learning. Expertise appears to be gained by maximizing the number of learning trials and by maximizing one’s focus during these learning trials so as to extract the most learning possible. When this can be sustained over a lengthy period, the result is an internalized set of skills that, like the competence of the violinist, cannot be readily captured in verbal form.”

… Dr Brett Steenbarger, “The Psychology of Trading”

While the ideal learning environment is live trading, or simulation trading, this is just not possible to achieve 24 hours a day.

A Market Structure Journal offers another opportunity to immerse yourself in price action, increasing your number of ‘learning trials’ and your opportunities for implicit learning.

Creating Your “Market Structure Journal”

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Profiting from Trapped Traders – Revisited

We first visited the concept of trapped traders a couple of months ago, in this two part series of articles:

 

While there are other variations of the ‘trapped trader’ concept that we haven’t explored yet, I thought it would be good to revisit this simple concept. Often the most simple trading approaches are the best.

These trade triggers continue to be some of my favourites.

If it’s something you dismissed last time, I encourage you to have a closer look and see if you can find these patterns in your own markets and timeframes.

Here’s a few recent examples from the emini-Dow:

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