Tag Archives: Mindset

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

 


 

A Shift in Mindset

 

I love this comment in response to last week's article (see the article here if you missed it).

<image: A Shift in Mindset>

This was the trade Steve is referring to:

<image: A Shift in Mindset>

Too many traders take the loss personally. As Steve says, they're stuck in the mindset of "Aaargh, I did it again."

Their focus is on themselves and their feeling of intense injustice and frustration.

Their focus is NOT on the price movement.

And so they miss the next opportunity, which spirals them into even greater depths of despair, especially when that opportunity is back in the original direction in which they entered.

LOSSES ARE A PART OF THE GAME.

Take the hit. Refocus yourself. And move on. (Provided session loss limits are not hit, in which case you shut down for the day!)

We've talked quite a bit over the years about the fact that trading is NOT about individual trades. Instead it's a game of profiting over a SERIES of trades.

Individual trade results are irrelevant. Series of trades are what matters.

And here's the thing – every series of trades will likely contain a combination of both winners AND losers.

LOSSES ARE A PART OF THE GAME.

Take the hit. Refocus yourself. And move on.

I shared a simple concept once before, which may help create a shift in mindset for some who read it. Let's repeat the idea today.

What if you stopped trying to find winners?

<image: A Shift in Mindset>

Why is that?

Because…

<image: A Shift in Mindset>

<image: A Shift in Mindset>

It's an important difference.

A novice trader is trying to find a trade that will win.

I'm trying to find a trade that is worthy of being one in a series of twenty. 

I don't need a winner.

I place all the odds in my favour. And I take the trade.

If it's a loss, I take the hit, refocus and move on.

It's a slightly different mindset… but one with a whole lot less fear.

I want to share one more idea which might help create this shift in mindset. But this article is long enough already.

Let's continue next week.

Happy trading,

Lance Beggs

 


 

How I Think on Trade Exit

 

Context:

<image: How I Think on Trade Exit>

The trade idea:

<image: How I Think on Trade Exit>

The entry:

<image: How I Think on Trade Exit>

Out:

<image: How I Think on Trade Exit>

How I think on trade exit:

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

All exits are temporary.

Pause and reassess.

Consider re-entry if the premise remains valid.

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

<image: How I Think on Trade Exit>

Sometimes it takes two entries. Sometimes it takes three.

There are no ways around this.

In the uncertainty of market action it's unreasonable to expect that we will always get a perfect entry.

So we're left with two options. Either we spread the entry via multiple parts across a general entry "area". Or we try for all-in precision but accept the fact that sometimes we'll need two or even three attempts to catch the move.

Although I sometimes trade the first method, my preference is for the second. All-in entries, accepting that it may take multiple attempts.

All exits are temporary. Pause and reassess. Consider re-entry if the premise remains valid.

Happy trading,

Lance Beggs

 


 

Trade When You See Edge. Stand Aside When You Don’t!

 

A few weeks back we discussed a quick and simple method for identifying a "bigger picture" directional bias.

See here if you missed it and want to review the idea – Part 1, Part 2.

The second article generated quite a bit of good email conversation, with several traders now adding this to their current trading process.

One email included a brief question, which I feel it is important to discuss with all of you today.

  • "I always looked at the opening range as something that worked some times (when the market did move) and didn't work other times (when the market didn't move). So you taught me a great lesson here. It works all the time, because that failure of price to move from the opening range is the information we need to identify a lack of directional bias. What I would love to see though is how you traded one of these days that were neutral bias throughout the whole day. Like on the Tuesday for example, you said "My preference is to stand aside". Does that mean you didn't trade at all? Or at what point did you stop? Or if you did trade at any time, what was the reasoning at the time?"

 

Nice question!

Let's look back at the session on that Tuesday. This was the higher timeframe chart, with the opening range, as discussed in the prior article series.

<image: Trade when you see edge. Stand aside when you don't.>

Clearly a neutral bias throughout the vast majority of the session.

But yes, I DID make some trades.

Before we examine the trades, there are two key points I want to make.

Firstly, we need to remember that the image above is the HIGHER TIMEFRAME chart. Trading decisions and actions are based upon the Trading Timeframe chart, within the context of the structure provided by the Higher Timeframe chart.

And secondly, we need to remember that the session bias is something which gradually reveals itself over time.

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

Let's look at the Trading Timeframe Chart…

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

<image: Trade when you see edge. Stand aside when you don't.>

With hindsight there will ALWAYS be a ton of opportunity you can see.

By all means learn from it post-session if it's opportunity you want to catch in future.

But when you're operating LIVE at the hard right hand edge of the screen, it can help to remind yourself that you don't have to trade every price sequence.

When price is moving nicely and you feel in sync with the movement… when you see edge… only then do you trade.

All other times… when you don't see edge… shift that chair back so that you're out of reach of the mouse. Watch and wait for something better.

Or call it a day.

You don't have to trade every sequence. Trade when you see edge. Stand aside when you don't.

Happy trading,

Lance Beggs

 


 

What’s Going On when you Hold Past the Stop

 

I'm always fascinated to hear from traders who have trouble exiting a trade at the stop loss. The ones who move the stop loss further away to avoid the exit. And then move it further. And further.

Until eventually, they can't take the pain any more, so they get out of the trade and destroy several days, weeks or even months of profits.

Personally, I don't recall ever holding past the stop, although I have found evidence of having done it once in the past while reviewing old charts.

Hopefully this was a one-off occurrence. Either way, I've clearly learnt from that at some point.

No-one likes a loss. Me included. But you need to be quite comfortable taking them.

For those of you who have yet to learn how to take a loss, let's discuss what is happening when you hold past the stop.

(Noting of course that this is not always the only issue. Maybe not even the primary issue. Everyone's situation is somewhat unique. But it is a significant factor that I see in a whole lot of cases. So if you're letting price run through you're stops, give this some consideration. It may just be the pathway you need to explore to find your way to greater success.)

This is what we're talking about…

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

<image: What's going on when you hold past the stop?>

In many cases the primary issue is NOT that you fear losing any money.

Often instead, the problem is that you don't want to be wrong.

YOU DON'T WANT TO BE WRONG!

You rationalise that if you just give it a little more room, and a little more time, price will turn around and prove you right.

It's all ego!

What does it mean to be wrong?

Every trade you get wrong is a dagger in the heart, reminding you of every time you've been painfully wrong in the past. Every time you've failed at something. Every time you fell short of your hopes, dreams and prayers.

Every wrong trade is one small step closer to the ultimate failure of your trading business.

And when you're no longer worthy… what will your family think of you? What will your friends say about you? What will your own mind say about you as you desperately try to fall asleep each night to forget the pain?

You don't want to be wrong!

So you move the stop to give it a little more room. But the fear only increases as price continues to move against you.

You give it more room. Again the fear increases.

And then again… you give it more room.

Until finally… acceptance… you know you're wrong.

And now it's about the money.

The loss is big, but fear of it getting even bigger lets you get out. Because you KNOW you're wrong.

Again, please note that this is not always the only issue. Maybe not always the primary issue. Everyone's situation is somewhat unique. But it is a significant factor in a whole lot of cases.

So if you're letting price run through you're stops, give this some consideration. It may just be the pathway you need to explore to find your way to greater success.

Here's the problem, as I see it.

You're playing the wrong game.

You're playing a game of individual trades.

But this business is not about individual trades.

The outcome of any one trade is irrelevant.

We profit over a series of trades.

You need to accept that this game is not one of being right. But rather one of managing a sequence of wins and losses so that over a large enough sample we can produce a profit.

Wins!

And losses!

They're just a part of the game.

What if you accepted that half your trades would win and half will lose. And you made it your aim to ensure that over any series of trades (20+) your average win was greater than your average loss?

To do this, you absolutely CANNOT let your losses run larger than they need to be.

Take your losses, quickly and decisively. Keep them small. It's only one in 20+ trades in your current series. You've got a whole lot of trades still to come. And some of them will more than compensate for the small loss.

By all means, aim for as high a win rate as you can achieve. But seriously… a 50% win rate IS enough. Just aim to ensure your average win is greater than your average loss.

Happy trading,

Lance Beggs

PS. If this article was useful, you might want to read this as well – http://yourtradingcoach.com/trading-process-and-strategy/Winning-Through-Losing-Better-1-of-2/

 


 

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

 


 

Learning from Baseball’s “Mental Reset”

 

I recently sent out the following two posts via social media, discussing the importance of having a plan in place to quickly clear your mind and get back into the game, whenever you sense frustration of any kind:

<image: Learning from Baseball's "Mental Reset">

<image: Learning from Baseball's "Mental Reset">

In response to these posts, I received the following exceptional email:

Hi Lance,

I liked your recent Twitter post about your "Regroup Procedure" after losses and thought I'd share something I learned while playing college baseball that I have applied in my trading.

We practiced what we called our "Mental Resets" while batting. A mental reset is required whenever anything "shocks" you and gets you off your plan at the plate. Every time you walk up to the plate, you should have a pre-meditated plan of the pitch you are looking to hit and anything that can dissuade you away from that plan has to be combated with a mental reset to get you BACK to your plan.

The physical act of mentally resetting is to: Step out of the batters box, focus on a small spot on your bat (we call it our "zero point"… We want to get back to zero emotionally), and take a slow deep breath. You then reaffirm your plan in your head, and step back into the box with confidence.

Our 5 Automatic Mental Resets were:

1) Swinging at a pitch that doesn't match your plan… – Swung at a bad pitch… step out of the box and RESET.

2) NOT swinging at the pitch that you were looking for… – You had a plan and for whatever reason you didn't pull the trigger on your pitch… RESET.

3) Bad call by the umpire… – You didn't think it was a strike and your upset. The umpire is out of your control… Step out and RESET.

4) Brush back… – You almost just got hit by a pitch. Your heart rate is too high and you aren't in a good state to be confident stepping back into the box… Step out and take a MENTAL RESET to bring you back to zero.

5) Changing of plan… – Something happened that requires a quick change of your plan (the most often one being moving to a 2 strike approach once you get 2 strikes on you)… – Change of plan… Environment has changed, we need to RESET here.

You don't have much time in between pitches to cool off, so if something upsets you, it is extremely important that you use a Mental Reset to keep your focus and get back to your plan. I think it is the same thing with trading… especially shorter time-frame trading. You don't have a lot of time to sit there and be upset. You have to RESET.

I thought you might find this parallel of Trading to Baseball interesting.

Cheers,

Alex

Thanks Alex. That is EXACTLY what I was talking about. Except your baseball analogy explains it just SO MUCH BETTER.

I called it a regroup (based on a term from my military days where a unit facing attack might drop back in order to reset and reorganise, in order to continue fighting).

Baseball calls it a mental reset.

The concept is the same.

When something has put your mindset on tilt then you need to step back away from the charts and reset or reorganise yourself, in order to return to the game with a clearer and more highly-focused mindset.

I've found this most effective when it involves a predefined and practiced ritual, such as my regroup checklist or Alex's routine for focus on the bat, slow breathing and reaffirmation of the plan.

To continue with the baseball theme, I'm reminded of a video which I shared a few years back.

The whole video is worth watching from a trading mindset perspective. But take note at 7:55 and you will see Evan Longoria complete his version of a mental reset.

(If the video is not playing here, click on this link to go direct to YouTube.)

Do you have a regroup or reset procedure?

If not, develop one now. Start with mine. Or adapt the baseball mental reset shared by Alex.

And then over time, amend it and make it your own.

As they say in the video, you need to have something to go to when the garbage hits the fan. Because the garbage will hit the fan. So let's be ready for it.

Happy trading,

Lance Beggs

 


 

Remain Focused and Get In on the Retest

 

The aim of today's post is to highlight two lessons we discussed in previous years, which came into play in a recent price sequence.

<image: Two lessons from the YTC archives>

<image: Two lessons from the YTC archives>

<image: Two lessons from the YTC archives>

We don't profit from regret. We profit from quality decisions in the NOW.

So when you miss a price sequence that you feel you "should have" caught, you need a way to move past it quickly to ensure that it doesn't negatively affect further decision making.

I find these two lessons quite effective in helping me get over missed opportunity: 

Lesson 1: It wasn't mine to catch. If it was, I would have caught it. Let it go.

Lesson 2: Remain focused. There might just be an opportunity to get in on a retest.

Happy trading,

Lance Beggs

Related article: It Wasn't Mine to Take but the Next One Will Be