Yearly Archives: 2018

What if you Redefined your Primary Role as a Discretionary Trader?

 

Most discretionary traders see their job like this:

<image: What if you redefined your primary role as a trader?>

What if you switched this around a bit?

What if you redefined your job as follows:

<image: What if you redefined your primary role as a trader?>

Is it possible that relentless focus and commitment to the processes and routines which guide your decision making and behaviour… might just see improvement in the actual trading results?

This doesn't mean we're no longer discretionary traders. Discretion can be built into processes. But how we come about our trade decisions, is standardised and made as consistent as possible.

The following post was shared recently on social media:

<image: What if you redefined your primary role as a trader?>

Essentially, we're expanding upon this idea.

For each of the areas listed in that post, we aim to:

  • Seek excellence in development of routines and processes for carrying out that role, and
  • Seek consistency in implementing the routines and processes.

 

It's said, "That which is measured, improves".

But ONLY if that which is measured is applied consistently.

And consistency will only occur if the process is clearly defined.

So maybe consider a little shift in how you define your role as a trader.

Primary role: Development, out-of-session, of world-best routines and processes for (a) finding and exploiting edge, and (b) reviewing and driving growth.

Secondary role: Trading, for the purpose of implementation, validation and testing of the routines and processes, defined above.

Happy trading,

Lance Beggs

 


 

Thoughts Leading into the New Year

 

My performance last year… NO LONGER MATTERS.

WHAT MATTERS… IS WHAT I DO RIGHT NOW!

I am scheduling time during my Christmas and New Year break for three major areas of focus:

1. REST

I don't yet know the challenges that I'll face in the new year, but I know that I will be ready.

As the opening bell rings on day one, I will be primed for peak performance.

Physically, mentally and emotionally recharged.

Confident, alert and FOCUSED.

2. REVIEW

I don't yet know the market conditions that I'll face in the new year, but I know that I will be ready.

And I will have learnt from the lessons of the past.

My performance and process reviews will have identified both successes and failures.

That which I did poorly… I'll know exactly how to improve.

And that which I did well… I'll know exactly how to do better.

3. PREPARE

I don't yet know the price sequences that I'll face in the new year, but I know that I will be ready.

Clearly defined goals.

Clearly defined routines.

All set for quality decision making and process-driven focus, no matter what the markets throw at me.

Rest… review… and prepare!

When the new year comes… I'll be ready.

Will you?

Lance Beggs

<image: Rest - Review - Prepare> 

 


 

Nothing “Always” Happens

 

One of the essential breakthroughs we need to make in our journey involves learning to think in probabilities.

It's something that all traders say they understand. But, for most new traders, their behaviour and decision-making shows that it has not been accepted.

This came to mind when I received the following email question:

– – – start of email excerpt – – –

I’ve circled the “Spike Low”. You can see from the Volume that it spiked as well…. my understanding is that this is a “test” for higher prices. When I’ve observed this very thing (over several years) Price Action “always” moves HIGHER… Today, it Moved LOWER and wanted to educate myself on WHY…

Else, maybe I have the whole thing wrong…

If you can comment and/or direct me to something on your site, that would be great.

<image: The email chart...>

– – – end of email excerpt – – –

Here's the chart using my usual display format. I've added a higher timeframe support level and positioned the spike at the right hand side.

<image: The context...>

And zooming in to the spike itself…

<image: The spike pattern...>

The question again – "When I’ve observed this very thing (over several years) Price Action “always” moves HIGHER… Today, it Moved LOWER and wanted to educate myself on WHY…"

My big problem is with the word "always". Yes, it's in quotes. But it still concerns me.

Here's an excerpt from my reply (noting that at this stage I had no idea of the market or timeframe and was replying based upon the original black-background chart image above).

– – – excerpt from my email reply – – –

I can't really answer as to why this move went lower, being unsure of which market and timeframe and whether this price move coincided with any news event (planned or unplanned).

Typically we can't ever know with complete certainty the reasons for any price movement. Price moves where it does based upon the orders that hit the market. Why did it go lower? Because the net effect of all the orders was bearish. Any discussion as to why trade decisions were net bearish, is simply speculation.

The error in your thought process is when you use the word "always" in this sentence – "When I've observed this very thing (over several years) Price Action "always" moves HIGHER."

Does it really always move higher? Or were there actually some occurrences where it moved lower?

We're dealing with probabilities, not certainties. Nothing "always" happens.

Even if this was a 99% probability of moving higher (which it's not because nothing is that close to certain) then there would still be 1 out of 100 cases where it moves lower. This example was that 1 occurrence.

Let's say the pattern has actually 55% probability of moving higher, which might be more realistic. This example then simply sits on the 45% side.

So it's nothing unusual. And nothing that needs understanding "why".

What is important is firstly that you shift your thinking away from certainties to probabilities. And secondly, that if you're trading something like this and take a position LONG in expectation of movement higher, that you recognise as quickly as possible that this occurrence is falling on the losing side of the probabilities, and you adapt quickly and get out.

"Why" is not important. Recognising and adapting is important.

– – – end of reply – – –

Subsequent discussions confirmed the market as EURUSD, 1 minute chart, on 26th November 2018.

So let's finish up with two additional important points:

1. Knowing the market, date and time, I was then able to confirm that the price spike occurred just two minutes after 09:00 US Eastern Time (two minutes after midnight my time). Two minutes prior to that spike there was a scheduled speech by the ECB President. Given the high-impact potential for such an event (especially given the current Brexit negotiations) it's reasonable to expect that such an event could completely shift the sentiment in the market, rendering any prior analysis and levels as irrelevant. Just something to consider!

You have to be aware of scheduled news events. You can find the economic calendar I currently use on my Resources Page – http://yourtradingcoach.com/resources/

2. For those interested, I actually have no problems with someone entering LONG from that spike. The following are my thoughts regarding the price movement following the spike, looking purely from a price action perspective.

<image: My thoughts on the trade...>

<image: My thoughts on the trade...>

<image: My thoughts on the trade...>

Happy trading,

Lance Beggs

 


 

Missed Opportunity Mindset Hack

 

<image: Missed Opportunity Mindset Hack>

<image: Missed Opportunity Mindset Hack>

<image: Missed Opportunity Mindset Hack>

The end result is that I still have a profit. And yet I feel crap. And my mind starts beating me up for not doing better.

All part of being human, I guess.

But not ideal if you wish to be an effective trader.

There is very little to be gained by carrying negativity into the rest of the trading session.

So here's what I do.

FIND A POSITIVE. ANY POSITIVE.

Break the cycle of negativity as soon as you can. Actively, consciously, seek out and focus on something positive.

Here's one I use in situations like the above trade example, where I've taken some good profits but left a whole lot more on the table.

Immediately… look left and find an earlier multiple-trade losing sequence.

Does the trade I just took completely cover that multiple-trade loss and still provide profits? If so, that's awesome. Great trade. Move on.

Let's check the charts…

<image: Missed Opportunity Mindset Hack>

If there isn't an earlier losing sequence, then find something else positive. Anything.

Even if it's just something basic like, "There was a time in the past when I wouldn't have caught that at all. I did today. Awesome! Great Trade! Move on!"

Whenever you find yourself with some negativity… break the pattern!

Find a positive. Any positive.

Enjoy the positive.

And consciously declare, "Great trade! Move on!"

There are more trades coming and they need your full attention, with a positive and focused mindset.

Happy trading,

Lance Beggs

 


 

The Counter-Intuitive Path to Trading Success

 

I recently received an email from a YTC reader with an incredibly important insight into trading success.

Here's an extract from the email:

Hi Lance,

I heard this recently while watching football.

It's not how many great plays you make, it's how few bad plays you make.

I immediately emailed this to myself because it is so applicable to trading. I know where the good places are to trade, but the key is waiting for price to get there and not "forcing" a trade.

It also ties in well to your Facebook posts last week and the latest blog article.

Here is the full quote I found online:

"Like I always say, it's not how many great plays you make; it's how few bad ones you make. I know fans, and even some losing coaches, are enamored with long pass completions or the great run plays, but that doesn't offset the interception or the fumble."… Jimmy Johnson 

Excellent!

I love it!

This is absolutely 100% applicable to trading.

It's the counter-intuitive path to trading success.

Reduce the number of bad trades.

How do we do that?

1. We limit our trading to our best setups only.

Get absolutely clear on what an A+ trading opportunity should look like. And then cut out anything that doesn't meet these strict requirements.

Define the context. Where will these trades be found within the wider market structure? Now limit trading ONLY to those places on the chart.

How should price be moving (speed, volatility, smoothness)? Define your ideal conditions and put in place controls to ensure you trade ONLY when those conditions are in play.

2. We have a predetermined plan for execution.

Now that we're limited to trading only within an ideal context (market structure and price conditions), you need to be completely clear on how you execute and manage your trade opportunity.

Consistency in execution requires standard default plans with regards to sizing, entry triggers, stop and target locations. Plus any additional techniques which might be relevant to your style of trading, such as when you will scale in or out, or under what conditions you will re-enter if stopped out. Your decisions may involve some discretion. That's fine. But this discretion should be built into your standard management plan.

You need to know what to do… and when to do it. No hesitation. 

3. We monitor our performance to identify and reduce errors.

Track everything! If you make an error or poor decision, record it.

Look to your longer term stats during your weekly or monthly reviews. If you find something repeating over time, then that is cause for celebration. You have found a way to improve your edge. Find a way to cut out the error, or at least reduce the likelihood or frequency of occurrence.

<image: Track Your Errors>

Image: Error tracking via the Trading Journal Spreadsheet!

It's not how many great plays you make, it's how few bad plays you make.

Along the same lines, but for those who are not into sport and perhaps relate more to art, I saw this quote recently which I quite liked:

"The sculpture is already complete within the marble block, before I start my work. It is already there, I just have to chisel away the superfluous material."… Michaelangelo

Trading success is already there.

It's just hidden beneath all the errors and poor decisions. We just need to chisel away at them, getting rid of the bad trades and poor decisions, and allow the underlying success to reveal itself.

Trade well,

Lance Beggs

PS. See here also for the same theme – http://yourtradingcoach.com/trading-business/are-you-closer-to-profitability-than-you-thought/

 


 

Trading the Edges of a Sideways Market

 

When the market is stuck in a sideways trading range, the primary place to look for opportunity is at the upper and lower edges.

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

<image: Trading the edges of a Sideways Market>

When the market is stuck in a sideways trading range, the primary place to look for opportunity is at the upper and lower edges.

Important References:

Sideways Trend definition: Volume 2, Chapter 3, Pages 99-102

3rd & 4th Principles of Future Trend Direction: Volume 2, Chapter 3, Pages 145, 149, 150

BOF Setup: Volume 3, Chapter 4, Pages 28-31

LTF Pattern entry: Volume 3, Chapter 4, Pages 86-93

Happy trading,

Lance Beggs

 


 

Find Your A+ Trades

 

Let's continue this recent theme…

  • Focus on the areas of the market structure that jump out at you. The sequences that are so obvious, so easy, that you'd be kicking yourself if you missed the trade.
  • Identify them. Study them. Learn from them.
  • And then trade ONLY them… until you've got a proven edge.

 

These are potentially your A+ Trades. The ones you will aim to master.

In last weeks article, I shared what I consider to be one of my A+ trades – http://yourtradingcoach.com/trading-process-and-strategy/focus-on-catching-these-trades-first/

This was followed up with a social media post on Tuesday, comparing the trade sequence from that article with another from a previous article.

Note the similarity…

<image: Your favourite trades should all look the same>

The key point, repeated for emphasis:

These trades come easy to me. The ones that come easy to you might differ from this. Your job is to find YOUR OWN A+ opportunity and get to know it in detail. There are more trades coming soon. You need to be ready.

Do you want another one?

<image: Your favourite trades should all look the same>

<image: Your favourite trades should all look the same>

<image: Your favourite trades should all look the same>

Note again how similar it looks in structure to the prior two trades. Your favourite trades will all share similar qualities.

And this first pullback after a change in structure IS one of my favourites.

It might not be one of your favourites. And that's fine. The idea is not that you should start trading these setups.

You need to find your own.

  • Focus on the areas of the market structure that jump out at you. The sequences that are so obvious, so easy, that you'd be kicking yourself if you missed the trade.
  • Identify them. Study them. Learn from them.
  • And then trade ONLY them… until you've got a proven edge.

 

If you're struggling, then please note that this could be the key insight you need. 

I received some great feedback from a YTC reader, TK, in response to last weeks article. Here's an excerpt from his email:

Hi Lance,

I just wanted to thank you for the last Friday's article and let you know that I find articles on this theme of great value.

This is exactly what makes all the difference for me. The shift in mindset that made me focus on the moves that I find obvious and easy has greatly improved my trading. I regularly come back to the article "Focus on the obvious moves first" that was the first article that made me review my trading and think about whether I take mostly the obvious trades or not. This has helped me to get rid of many marginal trades.

Last week's article reinforced this practice for me. I think that this may be a key thing that developing traders need to focus on. If I may, I would suggest that you follow up with more articles like this, that would be great.

This is the article he referred to, as being originally responsible for the new and better understanding – http://yourtradingcoach.com/trading-process-and-strategy/focus-on-the-obvious-moves-first/

Be sure to read it.

Why?

Repeating the key point from the email: "This is exactly what makes all the difference for me. The shift in mindset that made me focus on the moves that I find obvious and easy has greatly improved my trading."

Could this be the difference you need as well?

Happy trading,

Lance Beggs

 


 

Focus on Catching These Trades First

 

There are some trade ideas you look at with hindsight which are quite complex and which may have been difficult to execute.

And there are others which jump out at you as being really simple.

If you're not yet profitable, then focus on the SIMPLE trade ideas.

Identify them. Study them. Learn from them. And then trade ONLY them… until you've got a proven edge.

What you see as simple may be different to what I see as simple. But essentially, we're talking about those you would call your A+ trades.

Look at any historical chart. They're the trades which your eyes go straight to. The ones that are immediately obvious. The ones that you'd be kicking yourself if you missed.

They're the simple ones.

They're the ones you need to focus on first.

For me… one of my favourites is the first pullback following a significant change in structure.

<image: Focus on catching these trades first>

This trade… and every trade like it… jumps out of the chart at me.

If there is a "first pullback after a change of structure" trade that I miss, I'm seriously not impressed with myself.

Here's what I was seeing as it unfolded:

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

<image: Focus on catching these trades first>

What trade opportunities jump out of the chart to you?

Identify them. Study them. Learn from them. And then trade ONLY them… until you've got a proven edge.

They're the simple ones.

They're the ones you need to focus on first.

Happy trading,

Lance Beggs

Additional Notes:

1. YTC Price Action Trader readers – From the YTC PAT perspective the trade is simply the first PB opportunity after a transition from uptrend to downtrend. The classification of uptrend is not immediately obvious due to the lack of structure this early in the session. In the absence of any pre-session data, I will usually make use of any opening gap and also an opening range bias. With both being bullish in this case, I'm happy to call an uptrend.

2. Note the similarity with the trade in this post. Even though it's pattern sets up on the higher timeframe chart, the concept is exactly the same. You'll start to notice that after a while – all your good trades share similar qualities.

3. The reference to 11:30 is of course my timezone (UTC+10). The time at the exchange is 09:30. This is the time that stocks commence trading on the Hong Kong Stock Exchange.

 


 

Order Entry Error – Again

 

I seem to average an order entry error maybe once every two months. That's not too bad considering entry is via a single click. But it's something I will continue to work at improving.

In the meantime, it's an opportunity to again present my ideas on how to best manage those times when you somehow find yourself trading in the wrong direction.

Those times when order entry gives way to confusion, as things just don't look right, and then to shock as you realise you're short when you expected to be long (or vice versa).

Common advice is to IMMEDIATELY hit the CLOSE button. Accept any loss (or bonus profit). It's not part of your edge so you have no business trading it. Then try to get back in; this time in the right direction.

If you want to do that – fine. There are no problems with this.

I prefer something a little different. Maybe the idea will appeal to you as well.

The general idea is to use your skill to make a real-time contextual risk management decision. You can do this. Your brain is better at pattern recognition than you realise.

  • Is the position in immediate threat? (ie. Is price likely to continue to move against you?)
  • If so, then exit immediately
  • If not, then see if you can actively work a better exit, or even turn it into a profitable trade.

 

Think of it this way. What percentage of your trade ideas lose?

50%, 40%, 30%?

Whatever it is, there's a reasonable chance that this trade idea could fall on the losing side.

Which means, now that you're trading in the wrong direction, you might actually be able to get a profit.

Low odds perhaps. But you've found yourself in this situation. So why not try to turn it into a positive.

Don't jump straight for the CLOSE button if there is no immediate threat.

Pause. Assess the situation. And allow yourself to make a real-time decision as to whether to close or whether to manage any further risk and opportunity.

Here's the trade idea:

<image: Order entry error - and how I manage it...>

Reference for CPB setup: YTC Price Action Trader Vol 3 Ch 4 P38

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

<image: Order entry error - and how I manage it...>

Use your skill to make a real-time contextual risk management decision.

  • Is the position in immediate threat? (ie. Is price likely to continue to move against you?)
  • If so, then exit immediately
  • If not, then see if you can actively work a better exit, or even turn it into a profitable trade.

 

Happy trading,

Lance Beggs