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.

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

The full sequence, from a higher timeframe perspective:

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

The key takeaway today is this…

You don't have to trade every price sequence.

If the market offers something that is not comfortable, or that's not easy to read, stand aside and wait.

The time to trade is ONLY when you feel it's flowing nicely and you're completely in sync with the price swings.

That is when you trade. No other time.

Let's continue this next week with a look at what happens when I don't remain patient. When I'm not in sync with the market. When I'm trying to force something that is just not there.

Because the market doesn't always offer a nice trending move like displayed here today. And because… well… I don't always get it right!  πŸ™‚

Till next week,

Happy trading,

Lance Beggs

PS. Patience… expressed in a different way: http://yourtradingcoach.com/trader/if-i-could-only-take-one-trade/

 


 

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YourTradingCoach - Admin

30 Comments to “Patience is a Key Component of your Edge (Part 1)”

  1. Raviraj says:

    Nicely explained Lance, Often i get into the trap of trying to trade every move and not able to maintain myself away from the desk.
    It helps to know that not just me but most traders face the same situation and we have to be patient to allow ourselves to find our trading setups.

    • Lance Beggs says:

      Hi Raviraj,

      Thanks for your comment. Yes, this seems to be a lesson that takes many of us a long time to learn. Well, certainly it took me a long time. I’m much more patient these days, but still slip occasionally into old habits. I suspect you’ll enjoy next week’s followup as well, where I will talk a little about lack of patience. πŸ™‚

      All the best,
      Lance.

      • Raviraj says:

        Lance ,

        One question though, I am not sure if its the right place to ask.

        If everyone started following what you write here, these methods are bound to fail , but still work little differently. Doesnt it bother you ?

        • Lance Beggs says:

          Hi Raviraj,

          Three things immediately pop to mind.

          (a) You have greatly overestimated the number of people who actively follow my writing. Compared to the total of all participants in the markets, it’s a VERY small percentage.

          To say, “If everyone started following what you write here”… it’s just not going to happen.

          (b) My readers span a wide spectrum of markets from stocks to futures to forex. And timeframes from 1 minute up to daily. We’re not all trading the same instrument and timeframe.

          (c) Being a discretionary method there is significant scope for variation in how and where we all see opportunity in the markets. Even if someone else where stalking the same setup area as I was, it’s quite likely that our entries would be spread somewhat across the area rather than all located at the exact same price and the exact same time. So anyone else who wants to trade in the same general area as I do, I welcome them. Their orderflow will help my trade through opposing any opposite direction orderflow. There is enough room for us all.

          Cheers,
          Lance.

          • Raviraj says:

            Hi Lance,

            First of all , thanks for your previous reply. Below is what i think.

            It is right that the number of traders following this method is less. But here is what i think can happen.
            Assuming there are set of traders who are waiting for the same price action around same price level , Let us call this price action ‘A’.

            Now,
            Case 1 : If there is only one trader , ( read -> trading setup method is private and not known to many and let us name this trader as ‘T’ ) , He will take the trade on price action A and this particular price action ‘A’
            is created by other market participants ( read -> traders who are unaware of this setup and based on whose actions trader ‘T’ is trading)

            Case 2 : If any trading setup is known to many traders ( call them trader group G )
            – All traders are in group G are waiting for same price action at same price level.
            – Since a large number of traders are expecting same price action at the same price level, their expectations itself can cause that particular price action ‘A’ to be created at that price level
            – example : we are all waiting for breakout , pullback , break and we get a breakout and then a pullback .. The following break now can be caused by the trading group ‘G’ and not by other market participants.
            – Now , trader ‘T’ takes this trade on price action ‘A’ not because of other market participants caused it but because it is caused by group ‘G’, which is not right as we wanted to be trading based on the market actions of all
            market participants.

            You can still say that at any particular price level , the price action solely cannot be caused by discretionary traders, but can that be measured ?
            Please comment what you think. I hope i made myself clear.

          • Lance Beggs says:

            Hi Raviraj,

            I might be misunderstanding you because I cannot see the problem with this. In you Case 2 scenario, the actions from the group of traders will HELP me. Those entering before me, whether through standing limit orders or just entering at market, will act to absorb the opposite direction orderflow. Those entering after me will act to help propel the trade in my desired direction.

            The only problem will come if there are too many entering at market right at the time and price when I want to enter, resulting in slippage (if market entry) or the potential for a missed or partial fill (if using stop limit entry). But this is not a problem so far. And if it eventuates, it will just be yet another market feature that I adjust to.

            Again, I’m not seeing the issue. Have I misunderstood the question?

            Cheers,
            Lance.

  2. Matias says:

    Thanks for yet another great article Lance. Patience is key but hard to manage sometimes. I look forward to the next article.

    Best
    Matias

  3. Mahesh says:

    Thank you for the article.
    Its “Fear of Missing Out” that overrides “Patience” for me.
    Trying to get over it.

    • Lance Beggs says:

      Thanks Mahesh,

      Yes, fear of missing out is a real challenge to overcome. In time though, you’ll have seen so much opportunity come and go that you finally accept that there is always more coming in future. If you miss something you don’t need to chase. You can let it go, confident that there will be more opportunity later.

      Cheers,
      Lance

      • Michael says:

        If I may, I will add that “chasing” used to account for about 90% of my trading mistakes. For me, fast breakouts after long sideways moves trigger this tendency.

        Looking at Fig. 2 of this blog, for example, I used to go short close to the bottom of that first lower break, worried about missing a big move, only to get stopped out 9 times out of 10 by the first rebound.

        I managed to mitigate this tendency significantly, when I changed my intuition of what an “opportunity” looks like: I view fast moves as a *precursor* to an opportunity, NOT as a “move that I’m missing”.

        After learning from Lance’s blog and YTC materials, for me an “opportunity” lies in how the price behaves *after* a fast move, like illustrated in the “expectation” dashed line in Fig. 2.

        Amusingly, my old “it’s going fast, must get in NOW!” mentality would have worked in this particular case – I would have caught the swing that Lance chose to let go. But for this one instance, I can pick from my journal at least 10 similar scenarios where I get stopped out almost right away for a loss, or in breakeven…

        In the long run, it pays to be patient by viewing our expectation as opportunity, NOT the big move itself – and we do lose a few big moves that won’t retrace, but we always tend to overlook all the times where we would get stopped out for a loss: perfect hindsight has a way to highlight the big moves that we “miss”, and hide all the potential losses that we would suffer if we always rush in a big move!

        That’s one of many great ideas that I got from this blog, and the YTC material: opportunity lies in our expectations of what will happen soon, NOT in the big move that is happening right now…

        Michael

        • Lance Beggs says:

          Hi Michael,

          Great comment. Thanks for your kind words.

          I like how you put it – we trade our expectations – when price conforms to those expectations. So seeing these sudden moves as the precursor rather than the opportunity is exactly right.

          I imagine those that do trade breakouts successfully are able to do so because they see the opportunity differently than the newbie who just emotionally reacts to the sudden structural breakout. They likely see the opportunity not in the breakout move, but in how price behaves and sets up prior to the move (eg. compressing and building pressure against the level). That is their opportunity. The breakout is just the reward.

          Either way, it’s a level beyond the idea of “It’s going fast, I must get in NOW!”.

          Cheers,
          Lance

          • Mahesh says:

            Thank you both Lance and Michael.
            Your words are helping me in setting my expectations right.
            And i think “Fear of Missing” and “Chasing” are two sides of the same coin.

          • Lance Beggs says:

            Poor management of emotion leads to chasing. This can be a result of FOMO. But it can also be a result of “wanting to be proven right” (I suffer more from this one than FOMO).

  4. Mahesh says:

    Hi Lance,
    think you for the article.
    Never knew it was so hard to be patient before started trading.

  5. Richard says:

    I look forward to your trades every week. I notice that you aren’t using a moving average. Do you recommend leaving it out in order not to distract from the price action?

    • Lance Beggs says:

      Hi Richard,

      Thanks. I’m glad you’re finding value in the newsletter.

      I have no problems with moving averages at all. If you find they improve your ability to read the price movement, or to structure the market, then by all means use them.

      In response to Q&A with some traders who use YTC methods, I have in fact highly recommended that these traders use moving averages. There have been a few for example who get “stuck” at the stage of trend definition, finding the use of swing highs and lows leads to doubt and hesitation. For them, simplicity and objectivity was necessary, and so they have found that moving averages provide a quick and easy and “close enough” method of trend definition.

      For me, I used to always have them on my charts. I still sometimes like to see them on there (it’s a habit hard to break). But I don’t need them. I can see what I want to see in the price movement.

      Cheers,
      Lance

  6. raviraj says:

    Hi Lance,

    Continuing the discussion here

    The problem would eventually be that , the price action created by the group of traders with the similar order flow as yours, will become a price action trap instead of a real price action signal.

    Taking an example of breakout pullback , break trade.
    1. In case one, the BPB pattern would actually mean that the price refused to go to previous levels
    2. In case two, the BPB is created by trading group expecting a break and hence wouldnt necessarily mean the refusal of market to enter previous levels. Hence might actually become a price trap.

    As an example:
    in early markets probably breakouts had higher percentage of hits than what we have now. we have more breakout failures now and not easily tradable as high percentage of traders trade them.
    Similar thing will happen to any trading setup if large number of traders get into it.

    I may not be right , but this is what i think.

    • Michael says:

      Wow. Really? How much trading volume would be needed, to affect a market to such extent? How many traders would have to be trading in *exactly the same way* for something remotely close to that to happen?

      I wish Lance all the success that he absolutely deserves, but I strongly doubt that there will ever be enough traders trading in exactly the same way that he does. I for one, learned from his teachings to develop my own methodology, and my entry and exit orders are quite different from his – not to mention the time frames I trade: my lowest time frame is 3min.

      I wouldn’t worry about this at all, if I were you.

      Respectfully,

      Michael

    • Lance Beggs says:

      Hi Raviraj,

      As I said before, it’s quite possible I’m misunderstanding your whole question. Honestly, I cannot visualise your two scenarios.

      What do you mean by a “breakout pullback, break” setup? What is the last break part?

      You say, “In case one, the BPB pattern would actually mean that the price refused to go to previous levels

      What previous levels are we talking about?

      Why would it refuse to go to any particular level?

      I’m really not sure what you mean?

      And then, “In case two, the BPB is created by trading group expecting a break and hence wouldnt necessarily mean the refusal of market to enter previous levels. Hence might actually become a price trap.”

      How is a breakout pullback created by anyone expecting a break? The break has already happened???

      As to this forming a trap????????

      I’m really not sure what we’re talking about here. Nor how this is meant to form any sort of trap.

      If it will help, feel free to put it in diagram form and email me. At the moment I just can’t picture what you’re seeing.

      Cheers,
      Lance

    • Mahesh says:

      Hi Raviraj,
      I am not qualified to answer but still trying to participate in the conversation. I think the answer to your question lies in the opening line of this article:
      “The real source of my edge is not my strategy, but rather it’s me. “

    • raviraj says:

      Michael , Lance , Mahesh

      Thanks for all your comments .

      Lance,
      I will try to post you a mail with a diagram , whats your mail id ?

      Mahesh,

      I agree with
      β€œThe real source of my edge is not my strategy, but rather it’s me. β€œ

  7. Chris says:

    Hi Lance

    Another great article, thank you. For months now, I’ve focused on trading EURUSD because I thought it was important to focus on just one market and get to know the nuances of it. However, I ahve struggled to achieve consistent positive results despite the fact I truly believe I have a solid plan, albeit my execution of it could be better at times (but this is improving). I look at EU though on the really high timeframes like the monthly and realise that it has been in consoliation for well over a year now.

    I am now starting to think that I should switch markets once it enters a period of consolidation, to one that has more obvious recent momentum.

    I guess I can’t decide whether to or not, or if I am just making an excuse for my lack of consistency. Any thoughts gratefully received.

    Kind regards
    Chris

    • Lance Beggs says:

      Hi Chris,

      If a plan is not working, then you have to change the plan.

      If you’ve identified lack of sufficient directional movement within EURUSD as the reason for the plan not working, due to the 12+ month consolidation, then there are two options:

      (1) Adapt to the environment that you’re in. Others are profiting within EURUSD. Find a way to trade the more rangebound markets.

      (2) Change environment to one that better suits your trading style (which is essentially what you suggested).

      Which is the right approach for you? That is for you to determine. But first you should be ABSOLUTELY sure that this is the reason for your underperformance.

      But essentially these are your options – learn to adapt to the environment you’re in, or change environments to one more suitable.

      The difficulty with constantly chasing ideal environments though is in learning to recognise when ideal conditions end, in a quick enough manner such that any earlier profits are not all given back.

      Best of luck,
      Lance.

      • Chris says:

        Thanks for the reply Lance. Your last point:

        “The difficulty with constantly chasing ideal environments though is in learning to recognise when ideal conditions end, in a quick enough manner such that any earlier profits are not all given back.”

        This is exactly what I’m concerned about. Having invested the time in EURUSD for over a year now, I think it makes more sense to focus on adapting to the current environment within EURUSD than switching markets.

        I am aware of areas where I can improve, particularly with regards to the execution of my plan, so this is where I will focus my attention.

        Thanks
        Chris

  8. Geoffrey says:

    Hi Lance,
    Great post as always.
    If you have bought the ebook and you notice that eurusd is in a sideway range then you know how to trade it look for bof or tst.
    If you like trending market better then may be you should be looking at lower time frames.
    Would it be possible Lance that you post about your stop loss area on the scalping channel in one of your next post.
    Still have difficulty with that.
    Thank you

    • Lance Beggs says:

      Hi Geoffrey,

      Thanks. I’ll email you directly regarding the YTC Scalper stop placement question. It’ll be easier to discuss via email rather than here.

      Cheers,
      Lance.

  9. Marcus says:

    Great areticle and great discussion. Very much appreciated.

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