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.
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.
YTC Price Action Trader references:
The market pulled higher to offer the first trade entry.
I should have got it. But I didn't.
That's fine. Let it go.
Let's see what follows…
I'm not completely annoyed with the first trade.
With hindsight it doesn't look great. It didn't look great when it was happening live, either.
But it did stall on a break of the prior swing high for quite a bit and had potential to snap lower if this stall failed.
I'm ok with this loss. Kind of!
It was marginal. But I'm not going to beat myself up over the first loss.
It was the re-entry that I'm NOT HAPPY with. There was absolutely NO reason to take that one.
So what did I do next?
Do you recall this recent article – http://yourtradingcoach.com/trading-process-and-strategy/two-attempts-then-reassess/
Then step away, clear my mind and reassess from first principles.
The pattern was broken by my "Two attempts then reassess" rule.
I have some small routines which I call AA Statements (YTC Price Action Trader Vol 4, Ch 10, P48).
I completed the Regroup and Focus routines. It only took a couple of minutes.
And then I looked at the charts again with a clear mind.
It was completely obvious what was going on here.
- Frustration at the missed entry leaving me REALLY wanting to get short. And the stall as price broke the high of D provided just enough hint that perhaps the bears were still in control and price would fall.
- And of course ultimately some "need to be right".
This was NOT the patience we talked about last week. It's the complete opposite of patience.
You might recall last week I mentioned that patience was being ok with standing aside until the market was screaming out to be traded.
Here's an important point…
The only thing screaming in this trade sequence was my ego. There was an internal urge to trade which did NOT come from the market movement. It came from within me.
This is a key difference.
Before a trade, maybe I need to consider this quick question – "Is the market telling me to take this trade, or is it coming from inside me?"
Patience was restored and I moved on to the next trade opportunity.
This time I was happy to stand aside.
I don't need to trade.
I don't care if the next opportunity takes half an hour to appear. Or an hour. Or even tomorrow.
Until THE MARKET tells me to trade… and screams out to be traded… there is no trade.
Fortunately, it didn't take till tomorrow:
So here is the full sequence:
Let's wrap up with the key takeaway from last week's article…
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.
And let's add the one from today…
Pre-trade, ask yourself this question – "Is the market telling me to take this trade, or is it coming from inside me?"