Tag Archives: Uncertainty

Trading an Uncertain Trend

 

The YTC Price Action Trader provides clear definitions for a trend – uptrend, downtrend and sideways trend.

But despite this, there will be times where price action offers something that is not so easy to read.

One of these times can be immediately following a news release:

 

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

It would be great if the market was always smooth and easy to read. But it's not.

And that's fine.

The plan at times like this is simple:

  • WAIT until it is clear.

 

If you wish to make "Uncertain" an additional trend type for your trading, alongside up, down and sideways trends, then by all means do so.

But either way, the plan is to wait until it is clear.

STAND ASIDE completely. At least until price reaches the edges of the structure.

What do I mean by "the edges of the structure"?

It's the place where the market has potential to transition into something that is more readable. Something that does fit more nicely into the definitions of up, down or sideways trend.

Like this:

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

Trading an Uncertain Trend

 

An important news release has the potential to completely shift the sentiment of the market. Sometimes the new trend structure is not completely clear, immediately following the news release.

If the trend is uncertain, WAIT until it is clear.

STAND ASIDE completely.

At least until price reaches the edges of the structure, where the trend will (hopefully) become more readable.

The same applies at any other time, outside of news releases. If the market is choppy and you just don't have a good read, it's fine to declare it uncertain. Zoom out on the chart and identify the edges of the structure. Where are the upper and lower zones which might offer some clarity as to what is happening from then on. And stand aside until price reaches these zones.

It's ok to not know. "Uncertain" can be a valid trend type.

Happy trading,

Lance Beggs

 


 

One Trade Can Make a Session

 

Not every session trades as you wish it would have traded.

Not every opportunity will be caught.

Not every trade will work.

But remain patient.

Sometimes all it takes is one trade to make a session.

Let's look at one session that with hindsight MASSIVELY underperforms what was available; but still provided a positive result when I finally caught one decent trade.

And that's ok.

That's trading.

You can't catch every move.

Review all sessions to see how you could have traded them better. Learn from the experience. And move on to the next session.

One trade can make a session

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Sorry To Be So Blunt!

Question Received via Email:

I'm an experienced long time, unsuccessful trader looking for profitability and consistency (aren't we all), anyway you seem to have way TOO much information. Can your method be boiled down to a few simple rules or is it more complicated than that. Sorry to be so blunt. Thanks.

Initial Email Response:

Thanks for your email. The short answer is no! My methods cannot be boiled down to a few simple rules.

It's a good question though so I'll expand upon this answer in Friday's newsletter, looking at a trade sequence from today's HSI market.

That will give you greater awareness of how I trade.

And also why I don't believe that market success can be boiled down to a few simple rules.

A Bit More Detail:

To say that my methods cannot be boiled down to a few simple rules, is not quite correct. It can be:

  1. Trade against those who attempt to fight the market bias, aiming to enter at or before the point of their trade failure, to profit from their exit orderflow.

  2. Improve your ability to do step 1, over time, through application of deliberate practice methods of learning.

Simple rules… but not easy to implement as they require a process of skill development!

(more…)

This is the REAL Challenge of Trading

Price has collapsed rapidly at the start of the new session

Following the initial low, then a retest, price pulls back to offer us a 3-swing-retracement entry short (also could just as well be considered an upthrust).

(Chart Info: Crude Oil, 20 Jan 2012, 1-min chart; although the concept discussed in this article applies to all markets and all timeframes. Timeframes used for the trade were 1-min and less (YTC Scalper timeframes) although the trade decision making and management in this instance were pure YTC Price Action Trader, not YTC Scalper).

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Comfortable Lies and Uncomfortable Truths

"We do not err because truth is difficult to see. It is visible at a glance. We err because the lie is more comfortable."

… Alexander Solzhenitsyn

 

Are comfortable lies holding you back from making progress as a trader?

Is the time and effort you currently devote towards the comfortable lies, perhaps better spent in learning to accept some of the uncomfortable truths?

Comfortable Lie:

  • Market insider shares secrets to massive success. Only 5 copies left. Be one of the lucky few to own the Forex Orgasmatron.

Uncomfortable Truth:

  • There are no market insiders sharing secrets. There are no secrets. The Forex Orgasmatron will never leave you satisfied! There is no Holy Grail magic system that can make all your dreams come true. Success requires talent. Talent requires time and effort to develop.

Comfortable Lie:

  • I just need to trade this pattern with discipline and I’ll be a success.

Uncomfortable Truth:

  • Trading is not about blindly taking pattern based entries. Trading is about knowing when to take your pattern based entry and when to avoid it. And on those occasions when you do take the entry, it’s then about knowing when to hold your position and when to scratch it.

Comfortable Lie:

  • If I just set a target of three times my risk then I only need to be right 25%
    of the time.

Uncomfortable Truth:

  • As you increase your target, your winning percentage will also reduce. You cannot just increase your target and expect to maintain the same winning percentage. Quite likely you may end up getting close to that 25% winning rate. How will that affect your mindset? Targets need to be suited to the market environment. Sometimes, in some environments, the market will not offer three times risk.

Comfortable Lie:

  • I just need to trade without emotion and I’ll be fine.

Uncomfortable Truth:

  • You can’t! You’re human! Emotions are part of being who you are. You cannot just
    block them out. You need to understand them and learn to work with them.

Comfortable Lie:

  • The broker took out my stop.

Uncomfortable Truth:

  • Perhaps you put your stop in a really dumb place!

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Trading Success – Predicting the Unpredictable

A very small percentage of people who unsubscribe from my email newsletter take the time to advise me of their reasons why. This effort on their part is very much appreciated, as it allows me to see in some cases where I need to focus future articles.

Last week, one of the unsubscribe emails contained the following single line reasoning: 

  • “I can’t predict the unpredictable”

 

Now, I must start with a disclaimer to the effect that I have not communicated with that person beyond their statement; it’s not appropriate considering the act of unsubscribing is in part a request for no more communications. As such, any of the following discussion in relation to their intent and meaning is based purely on speculation.

That being said, it does appear to be a common statement from those struggling to find their way in this game of trading.

“I can’t predict the unpredictable”.

There are a couple of problems with this statement.

Firstly, there is an underlying assumption that markets are unpredictable. While it’s understandable for a trader to form this conclusion having worked so hard to unlock the code of the markets with little success, it’s not entirely correct.

While it’s not possible to forecast future market action with 100% accuracy every time, it’s also not entirely random. Proper application of market analysis will allow you to identify market biases, which will provide you with an edge when combined with effective money and risk management.

As we discussed in the Rock, Paper, Scissors article, this game of trading is not so much about price, but rather about determining the future actions of other market participants. If we know their likely actions, we can position ourselves to profit from the resultant orderflow. Future actions of individual traders may be unknown, but with experience you’ll learn to identify places on the chart at which the masses are most likely to take action. In particular, at areas where they’re suffering drawdown and operating under extreme stress.

The main problem in the statement though is with the word ‘predict’

www.dictionary.com states that to PREDICT is usually to foretell with precision of calculation, knowledge, or shrewd inference from facts or experience.

While this implies a potential for error, I suspect that the reality is that most people are searching for certainty, rather than learning to deal in probabilities.

At a rational level, they know that this is a probabilities game. But at a deeper level, we do not operate well in an environment of probabilities – people crave certainty and will go to desperate lengths to find it.

Mark Douglas said it best in The Disciplined Trader

“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.”

In the market environment where certainty does not exist, these people will typically end up quitting out of frustration. Very few will persist to the point where they are finally forced to learn to operate in an uncertain environment.

It’s the difference between seeking certainty and managing probability and risk. Net long-term losers are typically seeking certainty in the markets. Net long-term winners have learnt to manage probabilities and risk.

So, if you’re trying to predict the unpredictable, stop it. You’re taking the wrong approach.

Identify a market bias; identify areas where order flow is likely to occur in the direction of the market bias; confirm the setup area provides a suitable risk:reward ratio and provides a technical place to put a stop which invalidates the trade premise, and then work the best entry you can within that area.

While at some level we are forecasting or predicting future market direction, we are in no way seeking certainty. We have simply identified opportunity and so act to take advantage of that opportunity, while managing risk in case this is one of our many losers. We can’t know in advance which of our trades will be winners and which will be losers. So, we accept either outcome, entering the trade and managing the risk.

It’s not about seeking certainty. It’s not about predicting the unpredictable. It’s about identifying opportunity and managing risk.

Lance Beggs