Monthly Archives: March 2016

Seeing the Market in New Ways

 

An amateur and a professional trader can look at the same price charts and see completely different things.

The difference is not as simple as the professional having a better strategy, but rather that they have superior mental models and belief systems.

They see the market in ways that the new trader cannot yet comprehend.

A lot of my writing has been with the intent of helping shift the way you view markets and price movement.

A key goal with the YTC Price Action Trader was to help you see this trading game in a superior way; playing the metagame rather than the usual pattern-based game that most play.

  • Seeing the charts from the perspective of "traders making trading decisions" rather than just as somewhat random price movement.
  • Feeling the hope and fear within the other traders; especially at the point where they get trapped in a low probability position.
  • And using this information to profit from their loss.

 

The obvious section to reference is the whole of Chapter Two, but the concept underlies all the material which follows through chapters three to six.

Much of the last eight years of the YTC article archives was also devoted to helping you see things in new ways.

Just recently there has been a focus on the following:

 

And a key aim with the upcoming video course will be redefining how you apply deliberate practice principles to drive your growth and development. A recent insight led to a new level of understanding that has completely shifted the way I manage my own progression. I can't wait to share it. More on that later.

Until then though, let's see if you can trigger your own paradigm-shift!

I'd like you to consider the idea that maybe your next improvement in results will not come from a new system, or some new knowledge, but rather from changing perspective and learning to see some particular aspect of this business in a new way.

It's not easy. You can't force new insights. They typically come at unexpected times.

And they often need a trigger to shift your perspective and open up a whole new world of possibilities.

The good news… there is one method that can help provide this trigger… assuming you do have the required foundation of knowledge and experience.

Schedule some time to question your beliefs and assumptions.

You may find they're quite valid. But you may also find a new way forward.

You may find that something you held to be true, is perhaps not 100% certain. 

Time spent questioning your beliefs or your assumptions, is NEVER time wasted.

Consider the following areas of your trading business:

  • Your understanding of how and why price moves.
  • Your understanding of how and why you expect to profit from price movement.
  • Your reasons for market and instrument selection.
  • Your personal routines for achieving and maintaining a peak performance state.
  • Your routines for pre-session preparation.
  • Your method of position sizing.
  • Your method of assessing market conditions and selecting appropriate tactics for those conditions.
  • Your method for rapid recognition of a change in market conditions and adjustment of tactics to suit the changes.
  • Your method for real-time contextual reading of market bias.
  • Your method of identifying trade opportunity.
  • Your method of entry.
  • Your method of risk management.
  • Your method of trade management.
  • Your method of trade exit.
  • Your routines for post-session review.
  • Your routines for longer-term review… and the way you use this to drive further growth and development.
  • Your routines for ongoing personal and professional development.

 

For each of these areas of your business, question your beliefs:

  • What are your beliefs about this aspect of your business?
  • Why do you have this belief?
  • Is there evidence to support this belief?
  • Is there evidence which suggests that it's wrong? Or incomplete?
  • Is it possible that this belief is only valid in a certain context? Only in particular times, or places on the chart, rather than being an always 100% certainty?
  • Imagine a professional trader who has mastered this aspect of the business. Are they likely to operate with the same belief? If not, what would they have to believe in order to operate more effectively?
  • Can you adopt this new belief? What can you do to test this new belief for validity? What actions can you take on a regular basis to reinforce this new belief and instil it into your daily habits and routines?

 

Time spent questioning your beliefs or your assumptions, is NEVER time wasted.

Schedule some time this weekend to question your beliefs.

All the best,

Lance Beggs

 

PS. YTC Price Action Traders: If you need a new way to "question" price movement at the hard right edge of the screen, try the questions listed in section 3.9, on page 209 of Volume 2.

 


 

Trade Management Requires a Constant Reassessment of Probability

 

The path from entry to profit target is rarely a straight line. Especially when market structure gets in the way.

In today's example we have an area of resistance, right in the way of our trade. Given the potential for some reaction off this area of resistance, we have two options. We could hold a much wider stop and accept the potential for trade failure back at breakeven. Or we could accept a need to scale in and out in accordance with our assessment of short-term bias.

There's no right or wrong. It's rather just a matter of choosing the style that best matches "who you are as a trader!"

For me, the second option is clearly my preference.

The key, for those of you interested in actively managing trades like this, is to maintain a constant reassessment of probability throughout the life of the trade.

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

Trade management requires a constant reassessment of probability throughout the life of the trade

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You Won’t Be Successful Until You’re Ok With Losing!

 

A VERY common theme amongst the email Q&A I get from new and developing traders is the frustration that comes from having a losing trade.

They typically want to know where they went wrong. Or what they should have done better.

Often though… there was NOTHING wrong.

Losses happen.

Seriously!

This is not a game of winning every trade.

Trades are not taken because of any belief in certainty; but rather because our assessment of the odds and potential payoff deems them to be worth the risk.

And success comes through managing both winners and losers, such that we profit over a series of trades.

Winners AND losers.

You will get both.

Sometimes they lose:

You won't be successful until you're ok with losing

You won't be successful until you're ok with losing

You won't be successful until you're ok with losing

You won't be successful until you're ok with losing

Sometimes they win:

You won't be successful until you're ok with losing

(more…)

Finding The Places Other Traders Got It Really Wrong

 

I really like this statement from last week's article, where we discussed how I use "the other trader" to identify good trade opportunity.

  • If I can't feel someone on the other side of the trade getting it really wrong, there is no trade.

Step one in implementing this idea into your trading, is to learn to find these areas where "the other trader" might have got it really wrong, with the benefit of hindsight.

And to achieve that, I recommend you use one of my old favourites – your Market Structure & Price Action Journal.

Let's add a new category to our journal entries – "Places Other Traders Got It Really Wrong".

Print your trading timeframe chart. Cover it with notes. File it. And review it often.

You don't have to find every single occurrence.. Just the obvious ones which really stand out to you. Anything which immediately screams out to you, "that was a dumb place to trade!!!"

Here's an example covering the first hour and a half of the most recent session.

(Click on the image to open a full-size version in your browser)

Finding the places other traders got it really wrong

What if you did this every session for the next few months?

Could the potential improvement in your edge more than justify the five minutes it may take each day?

What are you waiting for?

Happy trading,

Lance Beggs

 

PS. It's important to note that in trading like this I rarely enter via a limit order placed ahead of time in the area of interest. My personal preference is to let price enter the area where I think other's might have got it wrong. And then watch to confirm the behaviour. Ideally I'll see some sort of stall or exhaustion, indicating a failure to continue further in this direction. That's my cue to enter. Sometimes it comes VERY quickly. Other times it provides a nice stall structure which allows entry as it breaks. With experience you'll know whether it has potential to snap back quickly or not. First step though… learn to see them with hindsight. So get started on your Market Structure & Price Action Journal.