Tag Archives: Psychology

Some Days Are Just A Grind!

 

I find it fascinating chatting with new traders in this industry. Typically when they come to me they've moved beyond the Holy Grail indicator and systems dream and have come to recognise that it's time to develop some skill instead. Skill in real-time reading of price action and market sentiment. What amazes me though, is the number that still hold some belief that once they learn price action, then the game will be easy.

Here's a reality check. It doesn't get easy. You just get better!

Sure, there are days when everything sets up perfectly and you're dancing in perfect step with the market.

But there are also days when you're completely out of sync and just tripping over your own feet.

And then there are the majority of days which fit somewhere in-between these two extremes, where you just do the best you can despite your imperfect decision making.

Let's look at one of these days. A day when I struggled to maintain confidence in my read of the market; and a day in which I struggled to execute well.

The result was a good profit (considering my poor performance). But it was messy. None of the trades were held for any significant distance, despite a nice trend.

The session was a recent FOMC day. I don't trade post-FOMC. It's 5am. Seriously… there's a limit to how late I can stay up.

I do trade the market prior to the FOMC though… but this is carried out with CAUTION.

My expectation for a session leading up to a significant news event is for a higher probability of a narrow range quiet market.

If that is what the market provides, then I have no interest in trading. Hindsight may well show there was opportunity available at the edge of the range structure, but I'd rather sit on the sidelines and survive to trade another day. A good result would be quick recognition of the narrow range environment, and NO trades.

However, if the market can show some directional conviction, then I'll trade this for as long as the directional move lasts and for as long as I have a good feel for the bias. And more often than not with reduced position size.

Here's the 5 minute chart (Higher Timeframe chart) which shows the session open through till just after midday (which is all I trade).

Higher Timeframe showing the opening hour trend

Let's examine the 1 minute Trading Timeframe trend within the first hour (and just beyond) and see how it was managed.

Trading timeframe

Trading timeframe

The outcome

Trading timeframe

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The First Loss – How Will You Let It Affect Your Mindset?

 

Last week's article led to an interesting comment about the sequence preceding the one discussed in that article.

Check it out here if you missed it – How to Enter When the Pullback Shows Strength!

The email feedback expressed an interest in the fact that the session started with a loss and yet I managed to quickly recover that loss.

  • "I particularly like the way you showed how you were wrong on the long but it did not affect your session, you focused on the price action projected, possible scenarios and continued to do your job."

So I thought we should look at this earlier sequence and see if there are any lessons available.

Let's begin with the trading timeframe, showing the price action which offered the initial loss and the subsequent two wins.

The first loss - how will you let it affect your mindset

Let's start by examining the LONG BPB trade.

The first loss - how will you let it affect your mindset

The first loss - how will you let it affect your mindset

I'd love to be able to say I caught the SHORT entry as the breakout failed. But it was not to be. I was biased LONG. I was wrong.

Loss was minimised though. So this was a good trade.

Except for the fact that I've started the session in minor drawdown (which seems to be a habit lately!!!!)

Let's move on to the rest of the sequence.

The first loss - how will you let it affect your mindset

The first loss - how will you let it affect your mindset

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Start Again – Start Better – Start Smarter

 

I love this quote:

“Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending.”

… Carl Bard

Whenever I wish to do so, I am free to reset today to DAY ONE!

Whatever happened last week, last month, or last year no longer matters.

My new trading career begins now.

Hit the reset button. Clean the slate. And build again… better and smarter than ever before.

Hit the reset button

But here's what I'm thinking…

What if I did this every day?

What if EVERY TRADING SESSION was a new beginning?

I am forgiven my imperfections.

I am forgiven my failures.

Today is a new day… I can start from now and make a brand new ending.

Better… and smarter… than ever before.

Today I will begin work with sufficient rest and relaxation to ensure a healthy body and mind.

Today I will complete my pre-session routines in full, prior to the session open.

Today I will approach the session open with a clear idea of my game plan for the day; and a willingness to amend that plan if price has other ideas.

Today I will eliminate all distractions; maintaining the conditions essential to attaining my Ideal Trading State.

Today I will enjoy the challenges which the market provides.

Today I will flow with the shifting sentiment of the market; adapting tactics to suit the conditions the market provides.

Today I will engage the markets with controlled and focused aggression – standing aside patiently when the market offers nothing but risk, accepting that risk when the market provides opportunity, and attacking the market in force should it provide perfect trading conditions.

Today I will complete my post-session routines in full, allowing me to learn from my data recording and review processes.

Today I will forgive myself my imperfections; and celebrate my successes.

And tomorrow?

Well tomorrow is a new day.

And tomorrow I get to start again; better and smarter than ever before.

Happy trading,

Lance Beggs

 


 

Improving Performance by Optimising Your Time Perspective

 

Part of my pre-session routine involves a quick review of my Motivation Journal.

The Motivation Journal is simply a folder containing various pieces of text or image material which I find sufficiently motivating; the aim being to ensure I face each trading session with focus and commitment and, most importantly, confidence.

The YTC Price Action Trader discusses the sections and contents of my journal in Chapter 10. While the content itself changes from time to time, I've been consistent in following that same format for the last six or so years.

However, last weekend I came across a video which I found fascinating, and which has led me to consider changing the format of my Motivation Journal.

It's a TED Talk by Psychologist Philip Zimbardo who you might know from the 1971 Stanford Prison Experiment.

The topic of this talk is "The Psychology of Time"

Here's the video. Please watch it. It only takes seven minutes.

 

If the video does not show here, try these alternate links: TED Talk or YouTube

If you have time (pun intended) there is a link at the bottom of this article to a longer video presentation showing a lot more detail. Highly recommended! If not… the 7 minute video shown here will be sufficient to cover the basics.

Prof. Zimbardo suggests that the optimal profile for balancing time perspective is as follows:

  • Past-Positive => High
  • Future-Positive => Moderately High
  • Present-Hedonism => Moderate

Nothing surprising here in that it's all overly biased towards the positive side.

This is a great way to view life.

But I think it also has application in daytrading, in providing structure to our Motivation Journal and ensuring it addresses all three time perspectives.

The benefits of our pre-trading routine including a motivation session based upon the optimal profile, as listed above, should be:

  • A greater likelihood of commencing the trading session with a positive and focused mindset.
  • And a subsequent increase in likelihood of quality performance.

So here's how we could structure our journals:

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My Daily “Trading Psychology” Routine

 

Here's a great question I received recently:

Q. What do you do during a session to maintain a positive trading psych mindset?

What I do during a session cannot be talked about without also discussing the pre and post-session routines. It’s all a part of one whole approach.

I've shared an image previously which I'll include here again, which gives a summary of how I see trading psychology (or performance psychology which is probably a better term).

mindmap of my performance psychology plan

You can see the article related to that image here if it interests you – http://yourtradingcoach.com/trader/creating-the-conditions-for-success/

What I want to do today is to approach this question from a different angle, by listing everything I do with a performance psychology focus as I work through my pre, during and post-session routines.

As noted though in the above image, I see there being two areas of priority for practical application of performance psychology:

  1. State Management
  2. Focus on process

 

State Management – My aim is achievement and maintenance of my Ideal Trading State. The Ideal Trading State will vary from individual to individual and will typically be found only through trial and error. But for myself, and I suspect most others, it's a calm and focused environment with no distraction.

Focus on Process – My aim is to ensure I follow the process as outlined in my Procedures Manual. It's commonly stated that we need to trade without emotion. That is rubbish. You're human. You can't trade without emotion. Your aim instead should be to ensure that you follow process, despite the presence of emotion which might otherwise interrupt or interfere with your process.

Everything I do pre, during and post-session is done with the intent of enhancing performance in one or both of these areas – state management and focus on process.

Before I step through my routine though, let's first drop back a bit and set a foundation.

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Do You Need A Better Belief System

 

"The words we attach to our experience become our experience."
… Anthony Robbins

 

The following are extracts taken from email Q&A with traders (taken at random from my email archives).

  • I love trading and keep on working hard, striving to become a better trader each day.

  • I am constantly working on my weaknesses but they are now finally in a minority of sessions.

  • I took 2 months off and took a step back from the charts. I was able to identify several very big problems with my "process", and since then I've addressed the concrete problems and am constantly working on the less tangible issues. The first half of 2013 was incredibly painful, but taking that step back was like a breath of fresh air. I came back to the screen in June, and since then I've doubled what I made in 2012. More importantly, I am much (much!) happier with my process, especially with regard to my journaling and daily review. I'm still working on it, but the idea of process > outcome has become a central theme – I've even printed it out and posted it on the door to my office and on the wall above my main monitor. I ran through the psych and emotional cap exercises in your YTC ebook, and the evolution of my answers have been very instructive as I look through the past 2 years in general and the last 10 months in particular.

What do you notice that is common amongst all these statements?

For me, they are all positive and empowering. These traders are taking personal responsibility for their own growth and development. They are actively working on themselves – expanding their knowledge, building their skill levels and adopting a positive growth mindset.

Let's compare the above statements to these extracts from other email:

  • i just wish i could find a simple method to do over and over which is successful. so far, no luck. 🙁

  • I am not greedy – I just want to execute the perfect trade everytime and let rest take care of itself.

  • i need signals

  • Why do I always feel lost when I look at the chart?

  • I don't care that you disagree. It's clear to me that the broker screwed me over.

  • THE OWNER OF THE SITE IS VERY ARROGANCE AND I DON'T LIKE THIS SH##;

Well, apart from the last one which I just find amusing (I guess that comes from my arrogance), what are the common elements in these statements?

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Sometimes you need TIME-OUT

 

No… not the naughty chair. This is not a punishment.

Sometimes you just need to separate yourself from the screen.

Get away from the computer. Get some fresh air. Relax and refresh the mind and come back to start again.

Like a reboot for the trader!

Sometimes you need time-out

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Feeling Joy When I Look at this Price Action

 

I absolutely love this email I received recently, from a trader who is making tremendous progress in his growth and development.

It's nice and simple. Just one single line…

Feeling joy when I look at this PA.

And here's the attached image:   (It's a large one so I've reduced the size. Click on the image if you wish to open a full-size version in your browser!)

Click on the image to open a full size version in your browser

 

I also feel great joy when looking at this. Here's what I see…

Trapped traders

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Dealing with Psychological Pressure Post-Entry

 

From YTC Facebook:

 

Posted Wednesday 4/6/14:

It’s psychologically draining to enter a trade and then watch it almost immediately move to drawdown.

But here’s a fact… the best entry technique for any particular trade CANNOT be known until the trade is over and reviewed with the benefit of hindsight.

We can’t expect to pick the optimal entry point every time.

Is it therefore not reasonable to expect that a good proportion of your trades will move to a worse price after entry?

Absolutely!

Here’s one way to help with this psychological pressure… expect it!

Assume your entry will always be early and price will pull back further to retest the prior swing highs or lows.

Consider how price should behave if the trade premise is still valid and the swing highs or lows should hold. And how should it look and behave if it is likely to take out the stop.

Pre-considering the worst case scenario helps you to hold during drawdown if price action is such that it still supports your trade premise.

 

Posted Thursday 5/6/14:

Yesterday we discussed one strategy that can help with the psychological pressure post-entry.

Here’s another…

If you find you’re scratching your trade too often or too soon, then amend your entry procedures to include walking away or turning off your monitor for (at least) the duration of the first trading timeframe candle.

So if you trade on the 5 minute chart for example, enter your trade, then walk away for 5 minutes and clear your mind.

Simple… but very effective!

 

Happy trading,

Lance Beggs