Category Archives: Trading Business

Trading Business – In this category we explore the business side of our trading endeavour. This includes topics such as: (a) Market and timeframe selection, (b) trading procedures – pre, during and post-session, (c) The journal and review processes, (d) Money Management, (e) Risk Management, (f) Hardware and Software, (g) The office environment.

Your Number One Priority… Survive the Learning Phase!

 

Before you even think about strategy…

Reduce the risk of single trade catastrophic failure.

Stop losses are essential. If you think you can operate without them, leave my site now. Unsubscribe. Professional traders respect the risk within the market.

If your platform does not allow for automatic submission of stop loss orders when your entry order is filled, then get a new platform.

And keep single-trade risk to acceptable levels (see Chapter 8).

 

Reduce the risk of single session catastrophic failure.

Ensure your plan contains a session stop. That is, the dollar or percentage loss that will trigger a decision to HALT ALL TRADING for that day.

If you're out of sync with the market, get out of there.

Survive to trade another day.

And if you do not have the ability to stick to this decision then find a broker who will implement it for you, preventing further trades once the session stop is hit. They're out there. If you need this, find one who offers it.

Swing traders… you might wish to extend this to a weekly stop. Or monthly stop.

 

Reduce the risk of a slow-bleed loss of account over time.

Implement a maximum drawdown stop.

Your trading is clearly not going according to plan.

It's time to stop. Take a lengthy break. And then reassess.

Take this trading halt as an opportunity to review your trading plan and your trading performance, with the benefit of hindsight.

Return to a simulator environment until such time as (a) consistent profitability is again proven in that environment, and (b) the account balance has been replenished via other sources.

 

Always remember – your number one priority is to survive the learning phase.

Happy trading,

Lance Beggs

 


 

CONSISTENCY – It’s a NECESSARY part of the process!

 

In a previous article we discussed the various levels you need to pass through on the way to achieving your long-term trading goals:

It's Time to Fight to Get to the Next Level

See here if you wish to explore this path in greater detail – http://yourtradingcoach.com/trading-business/its-time-to-fight-to-get-to-the-next-level/

And we also discussed the process required to drive your development through each of these levels:

Manage your growth and development via twenty trade groupings

This has been discussed a number of times, but I believe the flowchart was first used here – http://yourtradingcoach.com/trading-business/you-can-do-this/

20 trades is of course the absolute minimum required. Feel free to increase it if you prefer larger sample sizes. But do not reduce it. Any less that 20 and your sample size is too small to provide useful data.

Anyway, today I want to discuss a NECESSARY component of this 20 trade review process.

I had a chance to speak to a trader this week who was not progressing well, despite tracking stats for 20 trades at a time.

Here's the thing though…

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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.

 


 

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.

 


 

Miscellaneous Thoughts on Making Progress as a Trader

 

One of the things I love about what I do here at YTC is the opportunity to chat with other traders, at all stages of their development.

My email archive provides an absolute treasure-trove of information and ideas spanning all areas of this business from strategy to peak performance to business management.

I was reminded of this by two different email conversations in the last week, in which two traders both achieved a similar breakthrough in understanding. I'll share these right at the end of the article, so that we can finish on a real positive note.

But this got me thinking. I don't dip into the email archive enough for inspiration for articles or social media posts.

So let's rectify that today with a surf through my Sent Mail folder.

I thought we should start with a search for some miscellaneous thoughts related to the challenging task of making progress as a developing trader.

When Overwhelmed…

Let me start with a phrase that is often repeated in my email replies; perhaps more than any other. It's short and to the point. I'll let it stand on it's own without further commentary. You'll know if it's relevant to you and your circumstances.

Excerpt from an email reply:

When overwhelmed… SIMPLIFY!

 

Quality of Effort is Perhaps More Important than Quantity

Sometimes less is more!

If you're putting in a whole lot of effort, but finding no consistency in results, perhaps this email conversation will help you refocus in a new and more effective way.

Excerpt from an email reply:

If you're inconsistent in application of your strategy then I think you seriously need to consider WHY you are trading a full session.

If your inconsistency is leading to doubts about the strategy, then again, seriously consider WHY you are trading a full session.

Yes we need to maximise our exposure in order to grow.

But quality is important as well.

At the moment you're trading a full session but life is providing limited time beyond that for effective review processes.

Is there perhaps a better way to use your time?

What if you traded only half a day and used the remaining half for a more effective and thorough review and learning process?

What if you narrowed focus even further and just traded the opening hour?

Let me run with that idea for a second. What if you did this:

Focus on the first hour of the market open. Learn to trade it well.

Trade for 1 hour.

And then follow that up with 3 hours of review and REPLAY.

Study the session from a strategic perspective. Study the session from an execution perspective. Study the session from a human performance perspective.

Find the setbacks. Study them. What happened? Why? Is there a pattern of behaviour repeating here? What can you do to improve in future?

Find the successes. Study them. What happened? Why? How can you achieve more of this in future?

Replay the hour with the benefit of hindsight. What can you learn in comparing your actual performance, with hindsight perfect performance?

1 hour of FOCUS. 3 hours of QUALITY review.

And you've still got half a day then to allocate towards other areas – general reading and study, idea generation, testing and development, personal development. And occasionally, reward yourself with a half day off.

Start with increasing efforts to trade the first hour well. Find consistency and success in this small period of time. Later you can consider expanding this to 2 hours. Then 3. Then 4.

Inconsistency doesn't just disappear because you found an awesome new affirmation. If you're inconsistent in the first hour, you'll be inconsistent in every hour of the session. Narrow focus. Fight to get the first hour working. Then expand.

 

Stop Comparing Yourself With Others

We all do this. It's natural. But it serves no good at all.

This idea comes up often in my email conversations.

Excerpt from an email reply:

Stop comparing yourself with others. Their results are irrelevant. And for God's sake, ignore what (name removed) says he achieved.

There is no race against others. Only against yourself.

All that matters are your own results.

Whatever they are… accept them. And work to improve from there.

Have you improved when comparing with your abilities a year ago? Great. You're winning. Keep improving. This is the ONLY comparison you need to make.

 

Work With What You've Got

It can be tough to fit trading around a full-time job and family responsibilities. It seems we can never find enough time to work on our dreams.

But it does no good to dwell on it. Accept it. And find a way.

Excerpt from an email reply:

So you can only manage to trade one half-day per week. Fine! It is what it is. Family and income needs have to take priority.

But you've got one half-day per week.

That's 50 sessions in the next 12 months.

50 sessions to trade. 50 sessions to review and learn from. 50 sessions to get better than you are now.

And maybe next year you'll be able to manage a whole day. And the year after that you might be able to manage two.

Maybe this year you'll do 50 sessions on the sim.

But then maybe next year you'll be able to do those 50 sessions live, with a small single contract position. Building gradual success. Slowly increasing confidence.

Maybe the year after that you'll be able to increase size.

And maybe the year after that, success will lead you to new opportunity and new ideas, allowing you to trade more days per week.

The next year is going to pass anyway. It's your choice how you use it.

The next five years are going to pass anyway. Where you find yourself then, will be a direct result of the decisions and actions you take now.

You've got one half-day per week. Go for it. Use it well.

 

It's All About Learning To Perform in an Environment of Uncertainty!

Let's finish on a real positive note by sharing excerpts from TWO different email conversations in the last week, in which two different traders both achieved a similar and related breakthrough in their understanding of this game.

I was fascinated that I received these emails within two days of each other. This was what provided the inspiration to dip into the archives for today's article.

Initially I wrote this section with just "notes" taken from my reply, but in editing I've come to realise that unlike the above sections it reads best when you get to experience the breakthrough in the words of the sender.

The lesson for us – sometimes our progress as a trader comes not through small incremental growth, but through sudden and massive leaps of understanding. A paradigm shift!

The thing is though, typically these paradigm shifts are just the end result of long months of trading, review, thought and reflection. Underlying a paradigm shift is often an whole lot of work that remains unseen by other observers. So if you're putting in the work and not seeing results, keep your chin up. Perhaps you're still just setting the foundation for your next breakthrough in understanding.

Enough from me… let's just share the email conversations and wrap up the article.

Excerpt from email:

Strangely enough I was also going to email you yesterday as I also had a significant aha moment.

You said in your book something along the lines of we are operating in an uncertain environment and therefore looking for certainty is never going to work – all we can do is try to enter at good structural locations, with strength and against weakness, and manage our risk accordingly.

While this made sense to me immediately, last night I was looking through some charts and all of a sudden realised that I was guilty of doing exactly that. How the hell do we know what all the other traders in the market, and therefore price, is going to do next? All we can do is assess weakness/strength, get in with the strength and 'likely' future trend and manage the risk as best we can. The R/R will take care of the rest.

I now realise that I was far too focused on winrate and avoiding losses without even realising it and while I'm obviously not going to go all gung ho now, something has definitely shifted subconsciously and I now genuinely feel so much more comfortable with the mindset of expecting the the next trade I place to lose, and the next one, and the next one and not being obsessed with finding the perfect A+++ entry.

Absolutely fascinating how these things just happen from no where (albeit after 100s of hours of chart time and thinking).

Except from reply:

I'm glad you've come to this realisation. It's one of those things that everyone rationally understands and says they get, but it's clear from their actions and behaviours in the market that they don't REALLY get it. I'm not sure it's possible to teach. It perhaps just requires experience and loss and a whole lot of self-reflection and pain.

I'm reminded of something Mark Douglas said in The Disciplined Trader (his first book). "Most people like to think of themselves as risk takers, but what they really want is a guaranteed outcome with some momentary suspense to make them feel as if the outcome had been in doubt."

Trading success is not about achieving certainty. Rather it's about accepting and managing our imperfection within an environment of uncertainty. Expect losses in the short-term. Play to win over the long-term.

Excerpt from email:

Really enjoying your book, just thought I'd share some contradictory concepts & thoughts I didn't expect that are encouraging for me. Besides getting much needed "structure" from your work, (which I lack in all areas of my world), I never expected to experience the comfort in seeing professional traders actually missing opportunities and taking losses. Over the years I've noticed this underlying gut feeling of anger when I get stopped out or miss an entry, no matter how often I've heard to expect losses & missed trades, it never erased or cleared it mentally for me until now. It's been liberating to take the time to heal an issue I never really noticed how much was holding me back.

I've noticed it's been going on for a while and realized I've held a belief that "perfection is the only way to succeed" and it's been keeping me from progressing. It's comforting to read successful traders also go through this every day, and clearly for me it's taken until now to actually feel and connect with this unconscious nemesis and address it.

Thanks for sharing you're weakness as well as your strengths !

Excerpt from reply:

Thanks for sharing these thoughts. It's great stuff. I love hearing when people have these breakthroughs in understanding.

You're right. Belief that "perfection is the only way to succeed" is almost a guaranteed way to fail. It's setting an impossible standard. It's much better, in my opinion, to believe that "accepting, forgiving and learning to manage our imperfection is the only way to succeed."

Now begins a new stage of your trading journey! Exciting times ahead.

There is no greater "personal development course" on the planet, than trading the markets! 🙂

 

Happy trading,

Lance Beggs

 


 

Time Management for Traders

 

Here's a great question I received via private message on Facebook during the week, which I think is relevant to all of us.

What time management approach do I use?

I'll make an assumption here that the intent is to talk about how to fit trading into "life". That is, how to find sufficient time for not only trading, but all the admin pre and post-session, plus the never-ending tasks of personal and professional learning and development.

Yeah… there is a lot to do.

There are no shortage of supposedly effective time management systems. These are two of the major systems I've tried over the years, both of which have a big following. But there are no shortage of others if you feel like searching Google for "time management". 

 

So what system do I use?

None of them!

Whenever I implement a comprehensive system for managing my time, I end up spending too much time working and managing the system, rather than doing productive work.

But hey… maybe that's just me?

There are millions of people around the world who swear by these type of systems. Give them a try. Just because I didn't find them effective, doesn't mean you won't get great value out of them.

So what do I do then? Let's call it a "Time Management Non-System". I have general themes in life; things that are important to me. Family, trading, YTC, personal and spiritual growth & development, and a bunch of other stuff. And I just work on whatever I feel most motivated to work on at any particular time.

It's perhaps not as efficient as the above "systems". But it works for me.

Now… here's the important bit though, which was my motivation for sharing this via an article rather than just a private message reply.

Whether you operate with GTD or Agile or the "YTC Time Management Non-System", there is a foundation that needs to be in place first. It is the key that ensures you not only find time for all your trading activities, but that you also make maximum effective use of this time.

Without this foundation, you're wasting your time (pun intended!).

What really matters is NOT how you prioritise all your competing tasks and schedule them across your limited calendar.

Instead, what matters is how productive you are with the time you spend on each of your tasks.

Ultimately we are not managing time, but rather managing ourselves and how well we are able to apply ourselves to the task at hand.

And we do that by managing our ENERGY and our MOTIVATION.

Perfect prioritisation and scheduling of tasks is pointless if you don't have the energy to make productive use of the time.

Perfect prioritisation and scheduling of tasks is pointless if you don't have the motivation to work efficiently and effectively on the task.

Energy – Keep fit and healthy, in mind, body and soul. Sleep well. Keep hydrated. Eat healthy foods. Exercise. Maintain good relationships.

Motivation – Fill your life with reminders as to the "WHY" that drives all your efforts towards trading success.

If you lack energy and motivation, it doesn't matter what task you allocate to a particular block of time. It will be poorly executed.

But if you have high energy and are bursting with motivation, you'll ensure efficient and effective use of your time.

So if you wish to be effective in completing all daily trading routines and also allowing time for personal and professional development, then work to first ensure high energy levels, and do ALL YOU CAN to ensure massive motivation towards your trading goals.

The task for you now, if you haven't already done so, is to spend some time thinking about how you can improve your life in terms of both ENERGY and MOTIVATION FOR TRADING.

Because I don't believe it matters which time management system you ultimately choose to use. Or even if you choose to live without one. If you are highly energised and motivated, you'll not only find the time needed to work on your trading, but you'll also quite likely be unstoppable.

Just do it!

Lance Beggs

 

PS. None of these ideas are mine. I don't know where they originally came from, but if you do Google "time management" you'll surely find people discussing these ideas as well. There is a lot of great material out there on productivity. Schedule some time to study the topic and to experiment with different approaches till you find the one that best works for you.  🙂

 


 

What If You Did This Every Day?

 

The following image was posted on YTC Social Media on Tuesday… and I think it makes such an important point that I want to expand upon it in today's article.

First… here's the image:

What if you did this every day?

All trading conditions are NOT equal.

Sometimes the environment is well suited to your trading strategy, your style and your personality.

Other times it is clearly not suited.

What difference could it make to your results, if you were to start each session with a game plan. Something like this, for example:

What if you did this every day?

As always, the game plan is subject to change during the session. But it's a useful starting place.

It will have you ready to engage the market without hesitation, should price move into areas with potential for ideal trading conditions.

And it will have you operating cautiously at all other times.

But how do you learn to identify these areas?

This is a good goal for your Market Structure & Price Action Journal!

What if you did this every day…

What if you added a short task to your session review procedure? Just a couple of minutes to review the higher timeframe and trading timeframe charts.

What if you identified the areas on the charts which provided ideal trading conditions? The price action with clear directional conviction, smooth flow and ideal pace (or whatever other conditions you prefer). Just the absolute BEST!

What if you studied the market structure, noting on the chart the features or conditions that led to creating this ideal environment. Typically these might be areas that spring an HTF trap, or areas of significant breakout.

What if you studied the price action, noting how to best exploit the trade opportunity to maximise profits while minimising any risk.

What if you printed the charts, along with your market structure and price action notes, and filed it into a ring binder or folder?

What if… after doing this for a year… you realised that you had a document with maybe a hundred or so examples of ideal trading conditions, along with notes on how to identify them, and how to exploit them once they're confirmed.  (Yes there are well over 200 sessions a year, but not every session will provide an area of "ideal" trading conditions!)

What if you used this resource to document some rules-of-thumb for identifying potential areas of ideal conditions, allowing you to commence each session with a game plan just like the example listed above?

Would that perhaps be useful?

Let's look at another example using the same market as in the above image, but from the very next day.

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It’s Time to Fight to Get to the Next Level – Examples

 

Last week we added some structure to our growth and development as a trader, exploring how we could use our review process to drive our progress along the development pathway.

Check it out here if you missed it – http://yourtradingcoach.com/trading-business/its-time-to-fight-to-get-to-the-next-level/

It's Time to Fight to Get to the Next Level

The summary version of the plan was as follows:

(1) Find where you currently reside on the above pathway.

(2) Determine the Win%, Loss%, Average Win and Average Loss stats for your most recent trades (20 trade group… minimum).

(3) Identify the next level you hope to achieve.

(4) Determine how your step (2) stats will need to change in order to place you within the next level of the pathway.

(5) Immerse yourself into a review of the trades making up your most recent sample, to identify the reasons for failing to achieve the required statistical outcome, and the changes necessary to take you to that next level.

(6) Implement the changes and apply them as you trade your next group of trades (20 trade group… minimum).

(7) Repeat

 

Let's work through a couple of hypothetical examples, in order to make the process clearer.

Example 1:

(1) Find where you currently reside on the pathway.

You already know this. You're stuck at the very first stage. Sim trading with spot forex mini-lots… and still losing. Not losing badly mind you. But just slowly grinding your way to a smaller and smaller account.

No problems. That's absolutely fine. We all start there and build our way higher.

First things first though, you recognise that you need to quantify the problem and get some useable stats. So you document your plan as best you can and complete a sample of 20 trades.

The P&L clearly shows a negative result, down 100 pips ($100) over the sample of trades. So yes… it's confirmed… we're in stage one. It's all upside from here! 🙂

(2) Determine the Win%, Loss%, Average Win and Average Loss stats for your most recent trades.

Let's examine the stats a little closer though.

Win% = 55%

Loss% = 45%

Average win = 10.91

Average loss = -24.44

Expectancy = (Win% x Average Win) – (Loss% x Average Loss)

Expectancy = (0.55 x 10.91) – (0.45 x 24.4) = -4.98

You're losing almost five dollars per trade!

Ok this is not the end of the world. This is something you can work with.

(3) Identify the next level you hope to achieve.

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It’s Time to Fight to Get to the Next Level

 

Feedback from a recent article has been so incredibly positive, with a number of emails coming through saying that this was EXACTLY what these people needed to hear right now. It seems one of the most popular articles of the last 12 months.

Check it out here if you missed it – Are You Closer To Profitability Than You Thought?

So let's explore an idea expressed in my favourite line of the article.

And that's the following:

  • "… right now it's time to end the mediocrity. It's time to fight to get to the next level."

There are various levels to pass through on the way to consistent and increasing profitability.

It's Time to Fight to Get to the Next Level

For most of us, there are no short cuts!

There are no Game Cheats that can jump you straight to the end goal.

It's Time to Fight to Get to the Next Level

It's a step by step process of growth and development.

It's Time to Fight to Get to the Next Level

Progress will be slowed (or completely non-existent) if you're plan for progression is unstructured and random.

Here's how to provide some structure.

(1) Find where you currently reside on the above pathway.

Look at results over a recent sample of trades. What you did three years ago is irrelevant. We want to see what you're achieving NOW.

Take a recent sample… 20 trades minimum. And look at the P&L. Where does that place you on the above pathway? (Note: the sample chosen must also represent "typical" current results. If you fluked a massive winner through poor practice (and if you're honest with yourself you'll know if you did that) then exclude that trade. You'll only be cheating yourself if you include it.)

Wherever you are… accept it. There's no point denying it. This is your starting place. You build from here.

(2) Determine the Win%, Loss%, Average Win and Average Loss stats for your most recent trades (20 trade group… minimum).

If you don't have sufficient stats to determine these… you need to keep better stats. Start again with a new 20 trade group and keep better stats.

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