Monthly Archives: July 2018

Patience at the Open

 

Until you have a good read of the market, there is NO TRADE.

  • Confidence in your real-time understanding of the market structure.
  • Confidence in your real-time understanding of the nature of price movement.
  • Confidence in your real-time assessment of market bias.
  • Confidence in your projection of that market bias forward in time and price.

 

And most importantly:

  • An understanding of how future price movement should behave if your forward projection has some validity.
  • And confidence in your ability to adjust your understanding (and your trading decisions) should price movement offer something unexpected.

 

In simpler language… if you don't know what's going on… you have no business trading.

Watch and wait until some clarity appears, in terms of structure, price movement and opportunity.

The market open is one time which has great potential for confusion, doubt and uncertainty.

I remind myself before the open that there is no need to rush the first trade. If it screams out to be taken, then take it. But otherwise, be patient and allow myself time to get in sync with the flow of price.

Here are two of the market opening "warning signs" that have me keeping my trigger finger well clear of the mouse.

1. Bias Conflict

During the session I maintain a sense of the bias through the YTC Price Action Trader rules for trend projection.

At the session open though, I like to complement this with a really simple and objective method – the opening range breakout.

If they're in agreement, it's game on.

But if they conflict, it's a sign to be patient and wait till they come into alignment.

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

2. Seriously BAD LOOKING Price Action

Not just bad looking price action. We're talking seriously bad looking price action.

<image: Patience at the Open>

<image: Patience at the Open>

Remain Patient. Watch and Wait.

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

<image: Patience at the Open>

Happy trading,

Lance Beggs

 


 

The Mindset of a Champion

 

This social media post from last Sunday is just SO IMPORTANT, I thought we should expand upon it and get the ideas out to the whole YTC audience.

<image: The Mindset of a Champion>

This is just a perfect example of a growth mindset, viewing losses as feedback that serve to drive further improvement and growth.

There are two things that I love about this.

1. It is SO ACTIONABLE.

Look to your own post-session procedures and ensure that you are approaching your review in the same way.

Serena Williams:

  • "I'm already deciphering what I need to improve on, what I need to do, what I did wrong, why I did it wrong, how I can do better…"

 

Let's make this relevant to our job:

  • What decisions were less than ideal? (Consider all aspects of today's trading, including your physical, mental and emotional state, your work environment, your ability to analyse the market, to get in sync with the price action, to recognise opportunity and to execute on that opportunity.)
  • Why did I make these decisions?
  • What alternate decisions would have improved my performance?
  • What can I do to ensure I make better decisions in the future?

 

2. It finishes with POSITIVE ENCOURAGEMENT.

After the review is complete and steps for improvement have been identified…

Serena Williams:

  • "OK, I do improve with losses. We'll see how it goes."

 

"I do improve with losses."

Beautiful!

Zero baggage carried forward into the next game.

Consider adding that to your own post-session procedures:

  • "I do improve with losses. Let's see how it goes tomorrow."

 

But Wait… Let's Make this Even Better…

Sunday's post also featured some great points from Nicholas…

<image: The Mindset of a Champion>

<image: The Mindset of a Champion>

If you want to be great you cannot settle for "good enough". You need to CONSTANTLY PUSH TO BE GREATER.

So let's improve the earlier post-session review items, ensuring they consider all sessions regardless of whether we outperformed or underperformed.

Step 1:

  • What decisions were less than ideal? (Consider all aspects of today's trading, including your physical, mental and emotional state, your work environment, your ability to analyse the market, to get in sync with the price action, to recognise opportunity and to execute on that opportunity.)
  • Why did I make these decisions?
  • What alternate decisions would have improved my performance?
  • What can I do to ensure I make better decisions in the future?

 

Step 2:

  • What decisions were excellent? (Consider all aspects of today's trading, including your physical, mental and emotional state, your work environment, your ability to analyse the market, to get in sync with the price action, to recognise opportunity and to execute on that opportunity.)
  • Why did I make these decisions?
  • What can I do to ensure I continue to make similar decisions in the future?

 

If you want to be great you cannot settle for "good enough". You need to CONSTANTLY PUSH TO BE GREATER.

Growth will be found at and beyond the edge of your comfort zone.

Welcome the frustration!

Welcome the pain!

Welcome the challenge!

And use it to DRIVE YOURSELF TO HIGHER LEVELS OF PERFORMANCE.

Happy trading,

Lance Beggs

 


 

Slow, Steady, Incremental Progress

 

Excerpt from an email from J.L.

  • Finally, do you have any articles that could be helpful going from sim to live?

 

Let's write one now…

Do NOT rush.

The markets will always be there, ready and waiting for when YOU are ready.

The journey takes as long as it takes. And the psychological challenge is different at each level of risk.

So aim for slow, steady, incremental progress.

Let's break the journey into stages, noting that this is for discretionary traders. Systems traders will use a different process.

 

Stage 1 – Historical Chart Study

Stage 1 involves study of past data in order to achieve the following two aims:

  • Understanding the strategy – HOW to trade it and WHY it should work.
  • Confirming potential for edge through study of historical chart sequences.

 

This stage takes as long as you need it to take, until the point at which you you understand the strategy and believe it has potential for edge.

The key word above is "potential". Any edge you perceive through historical study is only a potential edge. It needs to be proven at the hard right-hand side of the screen, with real-time data. This will be done in the following stages. For now – just confirm that all evidence appears to show edge.

The more thorough your work at this stage, the greater the likelihood that you'll not be wasting your time in the following stages with a strategy that does not offer any real long-term sustainable edge.

 

Stage 2 – Simulation – Proving Edge

Stage 2 involves operating the strategy in a simulated environment in order to confirm the edge is real.

Some people are tempted to skip this stage, through concern that a simulated environment does not offer the same psychological challenge of a live environment. But that is exactly the reason why you should start on the sim – keep it simpler. Why risk actual funds when the edge is not yet proven. Take the time to prove the edge in the simpler and safer environment, without this higher degree of psychological challenge. Then, once proven, you can advance to the live environment with a greater degree of confidence in the strategy and your ability to trade it.

Slow and steady!

Incremental progress!

We will be analysing our trade performance in groups of trades. So you need to start by determining a suitable group size for analysis of stats, ensuring that groups will contain no less than twenty trades. It doesn't really matter whether your groups contain a variable number of trades (perhaps weekly groups, or daily for more active traders who complete dozens per day), or whether your groups contain a fixed number of trades (20 or 50 or 100 trades). Pick something that makes sense for your frequency of trading. Just ensure it's no less than 20 trades. And be consistent.

Trade a complete group, recording your individual trade results in your Trading Journal Spreadsheet. While trading a group your concern is not profitability but rather consistency of process and quality of execution. Your trading should be carried out with minimum size, simulating the EXACT processes you will follow when you first transition to the live environment.

Only when the whole group is complete should you concern yourself with performance. Analyse the stats for the group, in particular the win percentage and win/loss size ratio. Confirm whether you have proven edge across this sample of trades.

If edge is not proven, determine which group statistic is underperforming. And then study the component trades to identify (a) one potential cause of this underperformance, and (b) a plan to improve performance over the next group. Now document the changes and start again with the next group.

If edge is proven, congratulations. Now do it again.

Repeat the process until you can prove edge in terms of profitability and consistency, maybe five times in a row. Only then should you consider transitioning to a live environment.

 

Stage 3 – Live Environment – Proving Edge

Stage 3 takes you live, with the ABSOLUTE MINIMUM exposure to risk that your strategy and your market allows. That is, the smallest position sizes possible.

The aim is to trade in exactly the same manner as just carried out in the simulated environment. The only change should be live execution and the additional psychological challenge of having money at risk.

Be completely clear regarding your maximum acceptable drawdown during this stage. And commit to dropping back to the sim again, should this limit be hit.

Slow and steady!

Incremental progress!

Performance will again be assessed in groups of trades, using the same group size as when sim trading.

Trade a complete group, recording your individual trade results in your Trading Journal Spreadsheet. While trading a group your concern is not profitability but rather consistency of process and quality of execution.

Only when the whole group is complete should you concern yourself with performance. Analyse the stats for the group, in particular the win percentage and win/loss size ratio. Confirm whether you have proven edge across this sample of trades.

If edge is not proven, determine which group statistic is underperforming. And then study the component trades to identify (a) one potential cause of this underperformance, and (b) a plan to improve performance over the next group. Now document the changes and start again with the next group. If performance is completely unacceptable then consider dropping back to the sim.

If edge is proven, congratulations. Now do it again.

Repeat the process until you can prove edge in terms of profitability and consistency, maybe five times in a row. Only then should you consider increasing risk.

 

Stage 4 – Live Environment – Improving Edge

Stage 4 is a never-ending process of stretching yourself to new levels of performance.

Identify the change you wish to make, ensuring that it is in ONE PART of the process.

The obvious example here is an increase in size. Make it a small and incremental increase.

But this may also be any changes to process. Keep it small and incremental. One change at a time.

Performance will again be assessed in groups of trades, using the same group size as in previous stages.

Trade a complete group, recording your individual trade results in your Trading Journal Spreadsheet. While trading a group your concern is not profitability but rather consistency of process and quality of execution.

Only when the whole group is complete should you concern yourself with performance. Analyse the stats for the group, in particular the win percentage and win/loss size ratio. Confirm whether you have proven edge across this sample of trades.

If edge is not proven, determine which group statistic is underperforming. And then study the component trades to identify (a) one potential cause of this underperformance, and (b) a plan to improve performance over the next group. Now document the changes and start again with the next group. If performance is completely unacceptable then consider rolling back the changes in order to return to something that was working, before again attempting change at some point in the future.

If edge is proven, congratulations. Now do it again.

Slow and steady!

Incremental progress!

Two final points here.

Firstly you should never completely trust an edge. Maintain constant vigilance. Continue to monitor the stats for your groups of trades, in order to confirm not just profitability but also some degree of consistency from group to group.

And secondly, if you're not growing as a trader, then the problem is that your review processes are not driving any growth. Fix your review processes.

<image: If you are not growing as a trader, this is the problem...>

Best of luck with your journey.

Remember, there is no hurry.

Slow and steady!

Incremental progress!

Lance Beggs

 


 

The Other Trader (6)

 

Let's continue with an old article series – the metagame – trading AGAINST other traders who find themselves on the wrong side of the market.

Because…

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

You can see the prior articles here if you missed them – OneTwoThreeFourFive.

Here is the general concept for today's trade…

<image - metagame trading - the other trader 5> 

In playing the metagame, we aim to place ourselves in the mindset of any trader who bought late in the move, at or soon after the breakout. Feel their stress build as price stalls. And stalls. And stalls. Feel their pain as their "sure thing" collapses back below the stall region. And find a way to profit from their pain.

Yes, trading is a predatory game!

Let's see some charts.

We'll be seeking BOF Setup opportunity at this point here:

<image - metagame trading - the other trader 6>

 

The key part I want to emphasise today is the following:

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6> 

 

Let's play the metagame and put ourselves in the mindset of those who entered LONG on the breakout.

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6>

<image - metagame trading - the other trader 6> 

 

Trading the metagame…

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

Let someone trap themselves in a low-probability position.

Place yourself into their mindset.

Feel their pain.

And when it gets to the point where they've lost all hope, STRIKE.

Go get 'em,

Lance Beggs