Tag Archives: Mindset

When your Trap Radar needs Recalibration!

 

Let's start with the daily chart for a bit of context…

I know right! When was the last time we looked at a daily chart?

No need to panic. Oxygen masks have not dropped from the ceiling. And we'll only spend a short time at these heights.

<image: When your Trap Radar needs Recalibration>

You know those days where you've got a feeling in your gut that tells you the market is DEFINITELY setting up a trap?

Well my Trap Radar had activated and the alarm was deafening.

My gut feel was "It's a trap! Fade the market!"

<image: When your Trap Radar needs Recalibration>

So let's step down from these heights and get back to the more comfortable Trading Timeframe and watch the opening sequence play out…

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

Here's the thing…

Way back in the early days I would have shorted this thing at every swing high, grinding my way towards the session stop.

But not now.

I recognise that it's normal to have these strong gut feelings from time to time.

Some people say to ignore them. I don't think we can. Nor do I think we should. Sometimes they're right.

I listen to it. I consider what it's saying. And I plan my trading in case it's right.

BUT… I also have a plan for those times it's wrong.

Having a gut feeling about market bias is fine.

But alongside that you must know the following:

(a) What price action would confirm this bias. And how you will trade it.

(b) What price action would indicate that the bias is wrong. And how you will trade it.

Let's step back to the open:

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration>

So having pre-accepted the potential for my gut feeling to be invalid, I was easily able to drop it and reassess the market structure.

<image: When your Trap Radar needs Recalibration>

For PB and CPB descriptions, see here.

<image: When your Trap Radar needs Recalibration>

<image: When your Trap Radar needs Recalibration> 

<image: When your Trap Radar needs Recalibration> 

Repeating the key points:

Having a gut feeling about market bias is fine.

But alongside that you must know the following:

(a) What price action would confirm this bias. And how you will trade it.

(b) What price action would indicate that the bias is wrong. And how you will trade it.

One of the greatest habits you can get into is always considering, "What if I'm wrong?" 

You are NOT smarter than the market. If it's not confirming your gut feeling, then YOU are wrong. Drop that bias and realign with what is actually happening.

Happy trading,

Lance Beggs

 


 

Embrace the Suck

 

Let's talk a little about mindset. Or more specifically about our expectations leading into the day.

Because I suspect that the way I approach the game differs quite a bit from many other traders.

The market has opened…

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

It's all about expectations.

I expect a really tough day…

and embrace the suck.

<image: Embrace the suck>

Source: Wiktionary

This difference in mindset is important.

Expecting simplicity leads more often than not to disappointment and frustration, as conditions do not turn out the way you expect.

And disappointment and frustration do NOT typically lead to effective decision making, as we analyse the market and identify and manage trade opportunity.

Expecting a challenge leads to a slightly more defensive mindset. One ready to survive through difficult conditions. And yet still open to potential large gains when the market surprises us with more favourable price movement.

Market conditions OFTEN suck.

The sooner you can accept and appreciate this. And in fact EXPECT it, the sooner you'll be able to get on with the job of managing it.

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

<image: Embrace the suck>

EMBRACE THE SUCK!

If the market provides massively favourable conditions… that's a bonus.

If my execution just happens to be flawlessly in sync with the price movement… that's a bonus.

But I don't ever expect it.

Confidence does not come from hoping or praying for A+ trading conditions.

It comes from knowing that even if the market conditions are crap, or your execution at times really stinks, you can adapt and overcome.

Embrace the suck!

Expect it.

And learn to prevail despite it.

That is how you develop unshakeable confidence.

Happy trading,

Lance Beggs

 


 

Trading with a Guard Rail for Increased Confidence in Bias

 

Let's look at a tool that can help you manage the conflict between what you FEEL should be happening and what you SEE is actually happening. Particularly for those of us who prefer clean charts with price only.

Here is the NASDAQ 5 minute chart from Monday 4th March 2019.

<image: Trading with a Guard Rail>

You can't get an indication of how bearish it was due to the scale on the RHS being quite compressed.

This was a REALLY nice move.

But the day after I had some email discussion with a trader who was beating himself up over missed opportunity.

In his words…

<image: Trading with a Guard Rail>

Yep… we've all been there… sitting on the sidelines while we watch the market go on without us. Can't go short because you FEEL it will rally any moment. But can't go long because you SEE it just keep falling.

The old saying comes to mind… "trade what you see, not what you think".

But like all of these simplistic truths, they're much tougher to put into practice than you'd imagine.

My immediate thoughts – don't beat yourself up. Ever.

Or if you feel it's warranted, then allocate a few minutes to let it all out. And then move on.

Today is just one out of thousands of trading days you'll have over your career. Take the hit. Learn from it. Move on.

And really… at least you didn't try to fade the move all the way down. It could have been a whole lot worse.

(NOTE: He actually profited on the day. All the anger and regret were simply because he knew he could have got a lot more.)

So we discussed a few issues.

Missing the initial short was a key part of the problem. This then triggered a shift to "outcome thinking" rather than "process thinking"; not wanting to make a bad situation worse by following up a missed opportunity with a losing trade.

As soon as you fear losing on a trade, it's game over.

So this is an issue he will work on, recognising now that missed opportunity can be a trigger that shifts his mindset away from productive thought processes.

But that is not the point of this article.

Our discussions also led to the recent article series – My Go-To Method for Solving Trading Problems. (Part 1, Part 2)

Because it provides a technical solution to another key part of his problem.

Something that could have provided confidence in entering and holding a short position while he sees that the market keeps moving lower, despite his bullish internal bias.

In other words… he needed a guard rail.

(NOTE: We're going to leave out discussion of S/R, which may have also helped. The trader does not use an S/R framework at all, instead trading the trend structure.)

The Guard Rail is a concept that was discussed in part 2 of the article series.

Think of this:

<image: Trading with a Guard Rail>

Photo by Nathan Dumlao on Unsplash

The primary purpose of the guard rail is to prevent (or limit) damage should you veer off the road.

But it also provides a secondary function. It allows you increased CONFIDENCE in driving along the road without fear of falling over the edge of the cliff.

Can we achieve the same on our charts?

I think we can (to some degree).

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

<image: Trading with a Guard Rail>

Give it a try next time you find conflict between what you feel should be happening, and what you objectively see is actually happening.

Add a guard rail to the chart. Let it act as a clear line in the sand, dividing the chart into two zones. One side allowing you trade what you see is happening. The other allowing you to trade what you feel (and hopefully by then also see) is happening.

Happy trading,

Lance Beggs

 


 

Resume the Fight at a Time of YOUR Choosing

 

I sent the following post out via social media on Tuesday, prompted by some discussion with a trader who dug himself into quite a hole through doubling down on losses.

This message is so important I thought I'd share it with my larger audience here in the newsletter. And also take the opportunity to expand upon the idea a little.

<image: Resume the Fight at a Time of YOUR Choosing>

This is one of the key advantages you have as a discretionary trader.

YOU get to decide when and where you will play this game.

If the current conditions are not to your liking, NO-ONE is forcing you to play.

Get out of there.

Take a break. Clear your mind.

And come back at a time of YOUR choosing, when the conditions are more suited to your style of trading.

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

I have clear guidelines in my own trading plan:

<image: Resume the Fight at a Time of YOUR Choosing> 

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing>

<image: Resume the Fight at a Time of YOUR Choosing> 

 

ACTION ITEM:

Schedule some time to review or amend your Trading Plan.

Make sure to include guidelines or rules for the following:

(a) At what point intra-session will you stand aside and force a break from trading? What changes need to occur before you will allow yourself to resume trading?

(b) At what level of intra-session drawdown will you force a stop for the day?

And longer term:

(c) At what level of drawdown will you force a break from all trading, in order to review your performance and reconsider your plan?

Happy trading,

Lance Beggs

PS: For those concerned that trading should never be a fight… it's simply an analogy that I find particularly useful. See here – http://yourtradingcoach.com/trading-process-and-strategy/trading-is-a-fight/ . The concept is still relevant even if you prefer to not view the game in this manner. If you're out of sync with the market, step away. Come back and play at a time of your choosing, when the conditions are more suited to your style of trading and your preference for market conditions.

 


 

Mindset – You vs Me

 

Your mindset is either working for you or against you. To some degree, you get to choose.

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

<image: Mindset - You vs Me>

NOTE: An essential ingredient in operating with a mindset of wonder is a pre-acceptance of risk. We discussed this recently here.

Before any trade you must pause to confirm that:

  • A full loss on this trade will not break any session drawdown limits, and
  • A full loss on this trade is personally acceptable. I am completely comfortable taking the loss and moving on. (Typically because I expect that any loss will be contained and easily overcome by the next positive trades.)

 

With the above preconditions in place, reframe any nerves you feel as WONDER. And watch fascinated as the future unfolds before your eyes.

Happy trading,

Lance Beggs

 


 

Wait till it’s Clear of Recent Structure

 

I don't know if you're like me, but if you are then you'll have this dark-side of your personality that surfaces from time to time. A side that just WANTS TO TRADE. A side which doesn't so much care about the conditions of the market. Given the slightest hint of opportunity, it wants to get into a position and trade.

And of course, while that will from time to time capture the good moves, it also means you're often stuck in a fight for survival through the all of the market chop that you just KNOW is better avoided.

I'm much better at managing this now. One of the most significant changes to my trading over recent years has been an increasing ability to accept less trades.

But I do need to remind myself of this from time to time. Occasionally that impulsive side of my personality finds itself in control of the mouse, despite my better intentions.

One of these times is the "first day back" after a break. Hence my social media reminder on Monday…

<image: Patience... there is no hurry!>

Yes, often my social media posts are written for me.    🙂

And then again on Tuesday…

<image: Wait till it's clear of recent structure>

But often a simple reminder to be patient is not enough. So here's another of the things I will often do to slow down that impulsive side of my nature.

A tactic I use when first coming back from a break. And also from time to time intra-session if I find myself frustrated and struggling to read the price action.

WAIT TILL IT'S CLEAR OF RECENT STRUCTURE.

Look at either the Trading or Higher Timeframe Charts. Find areas above and/or below recent structure which offer clear space and potential for an obvious directional bias.

Firstly, this gives me permission to "sit on my hands" until an area of the chart with greater potential for ideal trading conditions.

And secondly, this gives me time to just watch price, getting in flow with the movement and the pace, so that when good conditions are present and a trade opportunity sets up, I'm ready to attack.

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

<image: Wait till it's clear of recent structure.>

Define the places you want to trade, clear of any recent structure. Sit back and relax and enjoy the show. Let price do it's thing. Someone else can trade here. Just watch and get in sync with the movement, so that when price decides to play in YOUR playground, you're ready.

Good trading,

Lance Beggs

 


 

Pre-Acceptance of Trade Risk

 

I will NEVER take a trade without having pre-accepted the potential for trade loss.

Because the fact is that MANY will lose.

<image: Pre-Acceptance of Trade Risk>

<image: Pre-Acceptance of Trade Risk>

Pre-acceptance of trade risk means that I am comfortable with taking the loss and will do so immediately without hesitation.

Pre-acceptance of trade risk means that I'm not overly concerned with the monetary loss and can keep my focus on the process of analysis and effective decision making.

My focus remains on process, rather than outcome!

<image: Pre-Acceptance of Trade Risk>

Ask yourself before entry, "Am I comfortable with this trade losing?"

If you're not comfortable with this trade losing then you've likely not yet achieved sufficient confidence in your strategy, or you're trading with too much risk.

You will likely hesitate to take the exit, ensuring a greater than necessary loss.

And you will likely carry some psychological baggage into the next trade, increasing the chance of poor analysis or decision making and greatly increasing the chance of further losses.

<image: Pre-Acceptance of Trade Risk>

<image: Pre-Acceptance of Trade Risk>

Before any trade, pause to confirm:

  • A full loss on this trade will not break any session drawdown limits.
  • A full loss on this trade is PERSONALLY acceptable. I am completely comfortable taking the loss and moving on to the next trade.

 

Because if either of these are not true, then you have no business taking the trade.

Good trading,

Lance Beggs

 


 

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

 


 

A Shift in Mindset – 2

 

Last week we discussed a common problem with new and developing traders – difficulty accepting losses as a normal part of the game.

<image: Losses are a part of the game>

And we discussed a simple idea for moving beyond this problem, through seeking profits over a larger series of trades rather than any individual trade.

You can see last week's article here if you missed it – http://yourtradingcoach.com/trader/a-shift-in-mindset/

Today, let's discuss another exercise which might help.

PAIRING WINS AND LOSSES!

Let's look at your last twenty trade results. It might be something like this.

<image: Losses are a part of the game>

This is the game. This is how your results will (typically) display over any series of trades.

The number of trades on each side will naturally vary. Sometimes you'll have more winners than losers. Other times more losers than winners.

But any series of trades will likely include both WINNERS and LOSERS.

They're a normal part of the game.

The aim then is to approach trading such that anything on the left side (losses) is small enough to easily be covered by one good trade on the right side (wins).

Let's pair them off…

<image: Losses are a part of the game>

<image: Losses are a part of the game>

<image: Losses are a part of the game>

<image: Losses are a part of the game>

Of course… if you end up with excess on the left then this sequence of trades has no edge. And you've got more work to do.

But this is the ultimate aim. A series of trades which includes both winners AND losers, in which pairing them off leaves you with an excess of winners. Achieve this consistently and YOU'VE GOT EDGE.

It might help you to carry out this exercise each weekend, creating a table with your results from the prior week. Firstly to reinforce the fact that it's ABSOLUTELY NORMAL to have both losses and wins. But secondly, to give you a feel for how much of an edge you have. Or how close you are to achieving edge.

Or… for some of you… it might help to carry out this exercise live. In real-time. As you trade each day. Add your losses to the losses column. Add your profits to the profits column. And pair them up whenever you can. The aim being to keep your losses small enough so that they are easily covered by a single win. And more importantly, achieving a confidence boost when you get a profit on the right side of the table, and have no losses available to pair it with.

Give it a try if you think it might help you visualise your "series of trades". And hopefully reduce any concern over losing trades. After all, they're just a normal part of the win/loss table and easily covered by pairing up with the next win. They're no problem at all. Take the hit. Focus. And move on.

Happy trading,

Lance Beggs