Monthly Archives: February 2014

Retest of the Point of Contraction

With hindsight, Tuesday's Crude Oil session started off the first few hours as a narrow-range sideways low volume market.

Note to self – I've often said I should avoid rollover day. One day I should listen to myself.

In a ranging market, the best opportunity is usually found at the edges, in particular when it traps those seeing a breakout of the range.

But sometimes there is also opportunity within the range.

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How do I work on Emotions?

Response to a question on YTC Facebook on 29/1/14:

Q. How do I work on emotions?

Response:

In most cases emotional issues are not actually the problem. They're highlighting the fact that either (a) your strategy is flawed, or (b) you don't have faith in your strategy, or (c) you're trading too much size.

Correct any of the above first.

But assuming that the above areas of trading are all fine, and you're finding that your emotional response to risk is consistently leading to inappropriate actions:

1. Consider it a whole mind/body system. Manage the body first – eat better, exercise more, ensure sufficient sleep.

2. For emotions… first awareness of the problem and then acceptance. Admit your fears. Notice them when they arise during trading. Welcome them and thank them for providing their information (sounds stupid I know… but do it… it takes some of the edge off the emotion).

3. Develop pattern-interrupts for whenever you observe fear, in order to prevent it from leading to out-of-control behaviour. ie. strategies to ensure either minimisation of risk during these periods of emotion, or avoidance of risk through separation of yourself from the markets.

4. Consider the original source of these fears. It pre-dates your trading! There is great potential for self-growth here.

Best of luck!

Lance Beggs


Traps Against Bias

There are a few concepts that I tend to repeat often. "Traps against market bias" is one of these concepts. Not just because they form a key part of my trading approach. But also because traps are difficult to trade for many traders. Psychologically, they can feel really uncomfortable. But in my opinion, when the context is right, these are setups that you should be taking. It's my hope that repetition will breed some familiarity and help you somewhat along the way to making them an integral part of your trading approach.

See here for a review: http://www.yourtradingcoach.com/trading-process-and-strategy/Gaining-Confidence-in-Taking-the-Trap-Entries/

And here: http://www.yourtradingcoach.com/trading-process-and-strategy/Gaining-Confidence-in-Taking-the-Trap-Entries-2/

But let's summarise…

The concept:

  • A common reason for difficulty in taking trap entries is your faulty expectations.
  • You're expecting breakout success. I'm anticipating breakout failure!

 

Why is this the case?

  • Standard TA teaches us that a breakout of a key level or a significant swing high or low is a potential sign of a new trend.
  • This leads to people expecting breaks to work.
  • The reality is that it's only a potential sign of a new trend… at least up until price acceptance in the new area and signs of strength in this new direction.
  • The reality is that breaks against bias often do fail.
  • So, if you can gain an entry on a break against your bias, with acceptable reward:risk parameters, then this is a trade that you SHOULD be taking.

 

When a breakout occurs against a larger market bias, anticipate a failure.

Trending markets… find breaks of swing highs/lows against the trend.

Ranging markets… find breaks around the edges of range support and
resistance.

 

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