Yearly Archives: 2014

Breaks Against Bias – Their Failure is My Success

 

We've previously discussed the idea of fading breaks which occur against the market bias.

Often they're a trap!

If we can anticipate that trap then we can position ourselves for a successful trade by entering at or before the point of their failure.

See here if you missed the prior articles on this concept:

This concept can play out in many forms and on different timeframes. For example:

  • TTF CPB or BOF setups
  • LTF 3SR or Spring/Upthrust triggers

Let's look at two slightly different examples from Wednesday's Crude Oil session (to take advantage of the crazy volatility that CL has offered in the last few days!).

Don't let the low timeframes freak you out. The concept applies no matter what timeframe or market you trade – failed breaks against bias can provide you with great trade opportunity.

(1) Trading timeframe CPB trade.

Breaks against bias - anticipating failure

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WLSR – Not Win%

 

I've covered quite a few topics throughout 2014, but I believe the most important by far has been my attempt to have people looking for success over a series of trades, rather than on any individual trade.

Not every trade idea works!

But that's ok and that's normal. Keep the losses contained. And work to ensure those that do win are larger (on average) than those that lose.

Your aim is to have more focus on the Win/Loss Size Ratio (WLSR) and less on the Win Percentage (Win%).

Your aim is to focus on profits over a series of trades with less concern for results on individual trades (win or lose).

Focus more on WLSR and less on Win%

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Background Music for Focus

Over the years I've traded with various different forms of background music or noise, with the aim of finding that right combination that allows me to work with a positive and confident attitude and laser-like focus.

Not surprisingly, I guess, what works best tends to vary from time to time with my prevailing mood.

I've tried everything…

  • My favourite sing-along playlist – good when feeling a bit flat and needing some "pick-me-up"; accepting that it can at times distract a bit too much.
  • High energy punk and hardcore – sometimes I find that aggression is the only thing that can get me focused.
  • Binaural beats and Isochronous Tones – I can't vouch for the scientific claims, but it certainly relaxes me and I feel that focus improves.
  • Guided visualisations – again they're just brilliant for relaxation and focus.
  • Favourite webinar recordings – make sure they're repeats so you don't get distracted by any new info.
  • Motivational YouTube videos – there are tons of them. Give it a try. The intent is not to actively listen to the speech though – it's background noise only!
  • And of course silence – sometimes there is nothing better!

But more often than not over the last year my default has been ambient music.

You can find some great music via online streaming radio such as provided here: http://www.internet-radio.com/stations/ambient/. My usual preference is for AmbientRadio.org (the first on the list) and Chilltrax (about half way down the list).

But I continue to experiment.

Right now I'm also liking white noise. Try this for example: https://www.youtube.com/watch?v=bNqERBWaJeM

I'll update this page if I ever find anything new.

In the meantime, I'd love to hear what you play in the background while trading. Feel free to comment below if you have any favourites that you use to provide a positive and focused mindset.

Cheers,

Lance Beggs

PS. There were of course some failures as well. In particular I find that background news and TV are just too distracting. They will likely never play a part in my trading room again.


Market Structure and Price Action Study

 

"Fortune favors the prepared mind."

… Louis Pasteur

 

In a recent article I discussed the importance of regular study of market structure and price action. See here if you missed it – http://yourtradingcoach.com/trading-business/a-simple-step-to-becoming-a-better-trader/

After every trading session, find something you can learn from. Perhaps a market structure feature. Perhaps an interesting sequence of price action. Perhaps a trade management insight. Whatever you find to be of most value!

Document it.

Store it in your journal.

Review your journal as often as possible.

The article included two examples of market structure & price action study, to get you started in creating your own journal.

One of these provided an example of the following rule of thumb – A strong momentum drive into the close with no follow through overnight provides an initial expectation of a rangebound environment.

Market Structure and Price Action Journal 

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Expect Imperfection – Part Two

 

I always liked this passage from Street Smarts by Linda Raschke and Larry Connors:

"No matter how long you trade, you'll never do it perfectly. Case in point. A friend of mine is a retired market wizard. This man has made over $100 million trading futures. He told me that his biggest weakness was that he never mastered his exit strategy!"

In last Friday's newsletter we explored the idea that imperfection in decision making and outcome will ALWAYS be a normal part of our trading. (See here if you missed it!)

Only a few hours later as Friday's session commenced, I experienced the following trade. Naturally I had to share it as well.  🙂

 

Expect imperfection

Expect imperfection

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Expect Imperfection

 

Imperfection is part of the game. Expect it.

While you should always seek to minimise error and to improve your market reading skill and decision making abilities, you cannot ever completely eliminate imperfection.

Instead, your job is to learn to profit over a series of trades, despite the presence of imperfect decisions and actions.

Expect imperfection

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Do You Need A Better Belief System

 

"The words we attach to our experience become our experience."
… Anthony Robbins

 

The following are extracts taken from email Q&A with traders (taken at random from my email archives).

  • I love trading and keep on working hard, striving to become a better trader each day.

  • I am constantly working on my weaknesses but they are now finally in a minority of sessions.

  • I took 2 months off and took a step back from the charts. I was able to identify several very big problems with my "process", and since then I've addressed the concrete problems and am constantly working on the less tangible issues. The first half of 2013 was incredibly painful, but taking that step back was like a breath of fresh air. I came back to the screen in June, and since then I've doubled what I made in 2012. More importantly, I am much (much!) happier with my process, especially with regard to my journaling and daily review. I'm still working on it, but the idea of process > outcome has become a central theme – I've even printed it out and posted it on the door to my office and on the wall above my main monitor. I ran through the psych and emotional cap exercises in your YTC ebook, and the evolution of my answers have been very instructive as I look through the past 2 years in general and the last 10 months in particular.

What do you notice that is common amongst all these statements?

For me, they are all positive and empowering. These traders are taking personal responsibility for their own growth and development. They are actively working on themselves – expanding their knowledge, building their skill levels and adopting a positive growth mindset.

Let's compare the above statements to these extracts from other email:

  • i just wish i could find a simple method to do over and over which is successful. so far, no luck. 🙁

  • I am not greedy – I just want to execute the perfect trade everytime and let rest take care of itself.

  • i need signals

  • Why do I always feel lost when I look at the chart?

  • I don't care that you disagree. It's clear to me that the broker screwed me over.

  • THE OWNER OF THE SITE IS VERY ARROGANCE AND I DON'T LIKE THIS SH##;

Well, apart from the last one which I just find amusing (I guess that comes from my arrogance), what are the common elements in these statements?

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What Doesn’t Happen – Is Important Information

 

Trading for me is all about the metagame.

My aim while looking at price action is NOT to find patterns in the traditional manner, but rather to look at that price information from the perspective of the other traders.

What are they thinking?

Where are they trading?

What happens if they're wrong?

It's orderflow that moves price. And if you can find the times and places on a chart where enough other traders are forced to act (usually where they know they're wrong) then you've found a source of orderflow that may just offer trade opportunity.

Let's look at a recent example (market and timeframe removed to avoid the usual question, "Does this work in my market and timeframe?". Focus on the concept. It's applicable to all markets and all timeframes!)    🙂 

 

Playing the metagame

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Improving Focus – The Essential First Step

 

For the last year or so my trading computer has been on a desk just to the left of my work computer.

This has been fine except during quiet periods of price movement, when I've often found myself tempted by the work computer. All I have to do is turn to the right and it's within reach.

"I'll just check emails or facebook. It'll only take a second!"

Usually this is fine but occasionally I'll become so absorbed in whatever I'm looking at that I don't realise five or more minutes has passed without watching price.

The good news is that there was a simple fix, which has allowed me to maintain focus on price. I'll get to the solution just below. But let's talk in general terms first, because the solution works for many other causes of loss of focus.

How do you maintain optimal focus in a world full of distractions?

How do you maintain optimal focus in a world full of distractions?

The internet will provide many exercises on willpower and mindfulness, which should help with any focus issues you may have. These are great. But they're not the first step.

The first step is not to work on your focus. The solution is much simpler.

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