Tag Archives: Psychology

A Tactical Withdrawal

 

This short article is to share some excellent Q&A following our recent series on "patience".

Check out the prior articles if you missed them:

Part 1 – http://yourtradingcoach.com/trader/patience-is-a-key-component-of-your-edge-part-1/

Part 2 – http://yourtradingcoach.com/trader/patience-is-a-key-component-of-your-edge-part-2/

In particular, it relates to the period of "emotional reaction" in last week's trade sequence:

Patience - you don't have to trade every price sequence

 

Q. Won't I be annoyed if I don't take a third attempt short and the market moves lower without me?

So this is what we're talking about here:

This is what happened

But what if this happened

Would I be annoyed?

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Patience is a Key Component of your Edge (Part 2)

 

Last week we discussed the idea that PATIENCE plays an important role in trading.

A key component of edge comes from recognising and accepting that you do NOT have to trade every price sequence.

When the bias is unclear, stand aside or trade another market.

When the pace of price flow is too fast or too slow for your liking, stand aside or trade another market.

When the price action is choppy rather than flowing smoothly, stand aside or trade another market.

And we looked at an example in which I waited on the sidelines for over an hour, before finding price movement that was screaming out to be traded. Good pace, good structure and easier to read. Something that I felt nicely in sync with.

Patience - you don't have to trade every price sequence

Check out that article first, if you missed it – http://yourtradingcoach.com/trader/patience-is-a-key-component-of-your-edge-part-1/..

So I closed out that article by promising that we would discuss another session in which I did not act with good patience, but instead reacted emotionally and chased opportunity where there was none.

In fact, it happened the day immediately following our prior example.

The session started in a quite similar fashion with a strong bearish drive. My expectations were exactly the same – look for PB/CPB trade opportunity.

Patience - you don't have to trade every price sequence

YTC Price Action Trader references:

The First and Second Principles – Volume 2, Page 145-148

The PB & CPB Setups – Volume 3, Pages 34-40

The market pulled higher to offer the first trade entry.

Patience - you don't have to trade every price sequence

I should have got it. But I didn't.

That's fine. Let it go.

Let's see what follows…

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Patience is a Key Component of your Edge (Part 1)

 

You might recall this previous article which talks about the fact that the real source of my edge is not my strategy, but rather it's me. The knowledge, the skill and the attitude which I bring to the market each day.

I'd like to touch on a part of this edge today and then again in a followup article next week.

In particular just one simple idea.

The fact that PATIENCE plays a key role in this game.

A key component of my edge is in recognising and accepting that I do NOT have to trade every price sequence.

The same applies to you. You do NOT have to trade every price sequence.

When the bias is unclear, stand aside or trade another market.

When the pace of price flow is too fast or too slow for your liking, stand aside or trade another market.

When the price action is choppy rather than flowing smoothly, stand aside or trade another market.

The game is hard enough. Don't make it any more difficult than it needs to be.

Remain focused. Remain alert. But remain patient.

Watch and wait. If it's not right, stand aside.

And when it is right, when it's screaming out to be traded, attack and destroy that opportunity.

Patience - you don't have to trade every price sequence

Patience - you don't have to trade every price sequence

YTC Price Action Trader references:

 

Patience - you don't have to trade every price sequence

Patience - you don't have to trade every price sequence

Patience - you don't have to trade every price sequence

For the lower timeframe view, let's use the YTC Scalper templates for a change. I don't do that often enough. The reasoning behind timing of the entries should be obvious to anyone who uses this variation of the YTC lower timeframes.

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Not All Sessions Provide Equal Opportunity

 

On Thursday morning I woke to find two emails somewhat related to the same topic – the challenging trading conditions we've experienced so far this week.

So my first thoughts were to expand upon a topic I shared via social media a bit over a week ago. Because I know that only a small fraction of you receive my social media posts.

And this one is important!

Here's the post which shows the daily chart for NQ as at the 1st of June. The same concept applies for ANY market.

Not all trading sessions provide equal opportunity

Let's first talk about what is showing in the bottom half of the image. And then we'll get to "what it means".

The daily chart overlay

It's simple to set up:

Setting up the Range Indicator

Setting up the Channel Indicator

Nice and easy.

And it gives an immediate comparison of the current days range versus the average over the last month.

So let's see exactly what prompted the email concern over challenging trading conditions.

The emails related to ES and CL, but I'll start by updating the earlier social media post.

This is NQ as at the time of writing, early on the 9th of June 2016:

NQ - low daily ranges so far this week

ES - low daily ranges so far this week

CL - low daily ranges so far this week

Of course, low daily ranges DO NOT necessarily mean a tough session. There are other factors involved as well.

But for many of us, who operate a strategy that requires price movement to profit, there's a high likelihood that narrow range days are those that get on our nerves.

Narrow range = limited opportunity = frustration!

Here's the thing though…

It's completely normal. Narrow ranges are a part of the game. And we need to learn to work with them.

We need to learn to profit over the longer time scale… comprising periods of both wider range markets and lower range markets.

The good news though, if you're stuck in a period of quiet markets and narrow ranges, is that it won't last. At some point the markets WILL move. 

So what do we do with this data?

1. Use it manage expectations.

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Stop Fighting an Obvious Market Bias

 

Charts this week come courtesy of a trader who contacted me seeking some help.

This is something he finds himself doing time and time again.

And in my experience he's certainly not alone.

This is such a great example. I'm really pleased I can share it.

The original images were too large to fit here, so I've included two smaller segments of the larger chart. The market and timeframe have been removed. Examine the charts as if they're your own market and your own timeframe.

In case it's not obvious, all trades here are SHORT.

Stop it. Seriously... just STOP IT!!!!

The key point…

STOP FIGHTING AN OBVIOUS MARKET BIAS!

If you consistently trade like this you are NOT on the right path.

This is not the way to win.

And it doesn't always need to be such an extreme trend. 

The pain continues… a little bit later in the same session…

All SHORT except for the second last trade.

Stop it. Seriously... just STOP IT!!!!

STOP FIGHTING AN OBVIOUS MARKET BIAS!

If you have this problem of continually fading an obvious market bias, here's a starting point for correcting the problem:

First, gather some chart evidence which highlights the problem.

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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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