Monthly Archives: June 2015

Surf the Waves

 

At times it's all too easy to get caught up in the complexity of this business and the frustration that comes from trying to extract profits from the uncertainty of market action.

It can help, during these times, to step back a little and choose to view the game in a simpler way. Of course this doesn't make it easier to catch the elusive profits; but I find it can help to reduce the overwhelming feelings that do nothing but take you further from your ideal trading state.

There are many ways to view the game in a simpler light. My favourites are those based upon analogy in which we compare the trading challenge with another more familiar activity.

We touched on one of these in the past when comparing trading with a boxing match, trading jabs back and forth, defending our body as we wait for an opening for the knockout punch. http://yourtradingcoach.com/trading-process-and-strategy/trading-is-a-fight/

I've heard of others who view the games in terms of fishing… identifying the prime fishing spot (trade area) in the river (the market flow) and sitting waiting patiently for the fish to bite (right movement into the area).

One I particularly like though is surfing. We view market action simply as waves; the peaks and troughs of the price movement corresponding to the peaks and troughs of the waves.

Our job, is to simply surf the waves.

Watch the price flow. If the waves are clearly defined and regular and we feel nicely in sync with the wave action, then we aim to surf those waves either from peak to trough or from trough to peak.

But if the the ocean is flat or the surf is all choppy and dangerous and we just can't get a good feel for how it's moving, we sit back on the beach and just wait. Perhaps better conditions will come along later.

Last Friday I was getting tired towards the end of the week (not unusual given the crap timezone I choose to live in!). Plus it was the first day I was transitioning back to "primarily CL" having spent a few months looking mostly at the emini's. Given these two factors I dropped back to a single contract, one part all-in, all-out, and just had some fun. I set out to just get in sync with the waves and then just surf that action from peak to trough and back again. I loved it. I seriously should do this more often! 🙂

The results turned out quite nice, but then perhaps I was lucky that the session just happened to provide some periods of clearly defined wave action.

Point being though… if you're getting yourself so overwhelmed all the time with just trying to work out what the trend and bias are… consider trying something like this. Just relax into the market action. Forget about trend definitions and just try to feel the waves. If you get in sync with them, try to surf them (make some trades). If you're not feeling the flow, just stand aside.

Anyway, let's look at some of the surfing action.

We'll start with my favourite sequence of the session where it was easiest to feel the flow.

Surf the Waves... dude!

Surf the Waves... dude!

 

Of course, you're not always in perfect sync with the waves.

Sometimes they're there and you can feel them coming, but you just can't catch them.

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The Path to Increased Understanding of Price Action and Market Structure

 

An expert level understanding of price action and market structure will not come through books.

It comes through experience in the live markets!

It comes through direct observation!

And it comes through questioning anything new or unusual you see in the charts.

The Path to Increased Understanding of Price Action and Market Structure

 

Kind of like the Scientific Method!

And exactly the process we've been suggesting for effective use of your Market Structure Journal.

Let's look at a couple of examples from the last week:

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As A Discretionary Trader, How Do I Define My Edge?

 

Question:

  • "As a discretionary trader, how do I define my edge?"

Answer:

You Don't Get an Edge; You Become the Edge!

My edge is ME!

Knowledge... skill... and attitude!

Trading is a performance activity. Trading is a decision making activity.

You are YOUR edge... positive or negative!

Work harder than other traders!

What do you plan on doing today to further develop your edge?

 

Here are some ideas:

Strategy development:

Work on psychology:

Improve the recording of your stats:

Replay and Review prior sessions:

Develop your Market Structure Journal:

General reading:

Happy trading,

Lance Beggs

 


Day After Monster Trend Day

 

For the last seven years I've been highly recommending traders keep a Market Structure Journal for recording and studying any interesting market structure and price action observations.

In my opinion this will become the greatest book in your trading library, by a long margin. Certainly the most valuable in terms of quality content.

Every day… find something of interest in the charts. Print it out, study it and add notes. File it in your journal. And review it often.

Usually traders will produce their journal in one of two ways.

(1) Based upon themes. Choose a theme for the current month, such as: "This month I will study the price action which forms the low of the day for clues that may have alerted me to this being a significant low." Then next month, replace it with another theme.

(2) Completely freeform. Simply focus on whatever stands out the most from the current session. For example, "Today's climactic exhaustion into prior resistance is amazing. Let's study that; and in particular that opportunity to fade the move on the weaker retest of the highs".

Today's article fits more in the "completely freeform" category in that it's based upon something that stood out in the markets.

But with a slight twist.

Instead of focusing on the feature of interest (a monster trend day), I thought it would be a good idea to look at what follows it (the day after a monster trend day).

While there is value in studying a price action sequence which stood out during a session, there is also exceptional value in studying what comes after it.

One example (such as provided here) cannot give a complete and accurate picture about "how to trade the day after a monster trend day". At best, it may provide us with a hypothesis which can be explored as further examples are found in future trading sessions. Over time our Market Structure Journal will be populated by other similar occurrences. And as we get 20+ examples of "day after monster trend day" we'll start to see some common features that allow us to establish some "rules of thumb" for extracting profits from these days.

Last Friday's Crude Oil session provided a monster trend day.

Let's start by looking at the daily and 30 minute charts to get an idea of what happened that day.

Day After Trend Day

Day After Trend Day - 30 min perspective

Certainly this day was worthy of it's own journal entry.

But let's check out what followed. Because while we might not be able to recognise a monster trend till part-way through the session, we will always know when we're about to commence trading a "day after monster trend day".

So it will be very handy to have some "rules of thumb" in place for what to expect following a monster trend day, if that is at all possible.

Let's examine this one occurrence, from Monday 1st June, and see if we can find anything interesting.

We'll use a combination of both 30 and 5 min charts, simply because they fit the required data into my article image sizes. In producing your own journal entries you will typically use your higher timeframe (or higher) for structural analysis and the trading timeframe for price action analysis.

Let's look first to see what immediately followed the monster trend day. Did it produce any significant follow-through in the overnight data?

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