When the market drives in one direction straight from the open, I’m ALWAYS watching the first pullback for trade opportunity.
A strong open drive might only happen a couple of times a month.
But when it happens, I'm ALWAYS watching the first pullback for trade opportunity.
Happy trading,
Lance Beggs
You might like to consider your review process as the vehicle which drives your trading business to its ultimate destination.
Whether that destination is ongoing improvement and eventual success… or continued mediocrity, frustration and failure… is completely up to you.
If you've got nothing in place, here is a simple process to get you started.
Once you're comfortable with this, there is great scope to expand it to new areas of review. It doesn't solve everything.
But again, if you've got nothing in place, consider implementing this process RIGHT NOW.
Look at your last 20 trades. Study them with the benefit of hindsight.
Examine 50 if you prefer. Or 100. Find the right compromise for sample size, which is large enough to be statistically significant and small enough to ensure your review process occurs on a regular basis. But not less than 20. I would suggest that is the absolutely minimum.
Once you've gathered all the trade data and charts, let's check the quality of the setups.
How many of your trade ideas were in chart areas which DID offer potential for multiple-R profits (2R minimum)?
It doesn't matter whether you actually managed to profit, or not.
We're checking the general concept. The trade idea.
We're making sure you're trading in the right areas of the chart.
Did price move from the setup area a sufficient distance to provide multiple-R returns?
Take note of all the trades within the sample which achieved this goal. And now let's check the quality of trade entry.
Now consider those trades that were in good multiple-R setup areas. How many were you able to enter at a place and time which offered good potential to catch those multiple-R profits?
Again, it doesn't matter if you achieved a profit or a loss.
With the benefit of hindsight, given where you entered, is it reasonable to expect that a successful trader could manage that position to achieve multiple-R profits?
How many of these trades would you classify as having a good entry?
Take note of them… and let's move on to check the trade management.
Now consider those trades that were in good setup areas and which were entered well. How many of these were successfully held from entry to the first target level?
How many were you able to hold open to the initial target point, avoiding all temptation to scratch the position early?
And then…
Of those which did achieve the initial target, how many of these were held to a further "hindsight perfect" exit point?
Again, take note of how many achieved this aim.
And now let's use this information to drive our business forward.
Looking at these figures, which area do you need to improve when trading the next sample?
It's important that we focus on one area at a time.
And that we work in order.
Get the setups right first. Are you happy with the number of trade ideas that are actually providing multiple-R profit potential? If not… focus on improving the quality of your trade ideas.
Then work on entry.
Then initial management.
And then ongoing management.
Find the first area that disappoints you. Examine why. Determine a course of action for the next 20 trade sample.
And repeat.
Happy trading,
Lance Beggs
One of the great things about being involved in trading education is that it provides me with the ability to chat with a LOT of developing traders.
Common themes appear over time. This is one of them…
"Can you review this trade. It's a trade idea which I thought was good, but it just didn't work out."
They want to know where they failed with their analysis or decision making. They want to know what they did wrong.
But often, there was nothing wrong with their analysis or decision making.
Here's the reality of this game – we won't always get it right.
But we don't have to.
That is not what this game is about.
I can understand it. We're wired that way. We like to win. We don't like to lose.
We like to be right in our analysis and trade decisions. We don't like to be wrong.
And there's a whole technical analysis and trading education industry out there, which promises to "show you how to find winning trades".
But that's not what this game is about.
It's not about being right.
Not EVERY TIME.
It's about profiting over a SERIES OF TRADES.
A series that includes both winning trades AND losing trades.
It's about ensuring that when you are right you take as much out of the market as you can. And when you're wrong you cut the loss as much and as quickly as you can. So that, when the whole series of trades is done, the end result is a profit.
Let's look at a very short series of trades from Wednesday night. It's a sequence in Crude Oil which occurred in the hour immediately following the Crude Oil Inventories report.
This is a very low timeframe. And it's high volatility, fast pace stuff. Don't be put off by that if you trade other markets, other timeframes, or in fact other strategies. The concept still applies. It's not about being right. It's about managing the winners and losers such that you profit over a series of trades.
In this sequence, EVERY TRADE ENTRY DECISION I MADE, EXCEPT ONE, WAS WRONG.
But it still provides a profit.
Stop trying to be right.
Instead, try to find the places on the chart where you can win bigger (when right) than you lose (when wrong).
It's only a slight shift in perspective. But it makes a massive difference in how you see this game.
Happy trading,
Lance Beggs
Related Articles:
It's six years since we last looked at this topic. Wow!
So it's definitely time to revisit it.
Check out the prior article if you want to see the original drills – https://yourtradingcoach.com/trading-process-and-strategy/trader-performance-drills/
Today we'll discuss a drill that I've quite enjoyed from time to time over the last six months whenever I've had a spare hour or so to "play".
It provides practice and learning opportunity in real-time assessment of context and market bias. And like all good practice drills you'll received rapid feedback on your decisions.
In particular this drill works to develop the following skills:
Entry:
Trade Management & Exit:
Let's set it up…
The Chart Overlay
The result is a very tight channel around price as shown in the image below.
The Performance Drill
Open your Market Replay application.
Select any random date and time.
Now trade with the following plan:
(a) You can ONLY enter trades at or beyond the channel boundaries. You can ONLY enter short ABOVE the channel. You can ONLY enter long BELOW the channel.
(b) EXIT TRADES anywhere you feel necessary in order to both minimise loss and maximise gain.
(c) AIM TO PROFIT over whatever series of trades you complete during this drill exercise.
Additional notes:
1. By all means examine your usual charts alongside this. Feel free to refer to your usual higher and trading timeframe charts for context. And your usual lower timeframe chart to fine-tune your decision making. Market internals or orderflow tools are fine as well. In fact… whatever you normally use for your trading is absolutely fine for this drill. The 5 min EMA channel only provides the limits to the buy and sell areas.
2. I highly recommend speeding up the replay at all times except in the entry zone. For entry, set the real speed so that you can "feel" the movement of price as it would feel in a live environment.
3. You do NOT have to enter on every excursion beyond the channel. In some cases you will miss it anyway as price just tags the channel and moves back away from it. In other cases it would be wise to stand aside, such as fading a strongly directional market. Avoiding a very low probability trade is a good decision!
4. Stop losses – I like to keep this tight in order to practice timing the entry as close as I can to the extremes. I set them at around half the width of the channel. NOTE: Re-entry is always an option if you get stopped out.
5. Remember – the aim is not to profit on every trade. Just like real trading, we aim to profit over the larger series of trades. So take your losses but keep them small. One or two winners should more than compensate for these losing trades.
Real-time Contextual Decision Making
At times this will be easy.
At other times, it will be quite a challenge.
Your only restriction is that you must enter at or beyond the channel boundary. Ideally with quite a tight stop.
Everything else is open to your best judgment, based upon your assessment of context and real-time reading of market bias.
How will you enter?
Will you place a limit order and let it be hit? Sometimes this will give incredible entries. Other times you will be run over, if you misjudged how far price would extend beyond the channel.
Will you wait to see how price behaves beyond the channel before entering at market? Sometimes this will result in a missed trade, when price just tags the entry zone and rapidly moves back into the channel.
Will you scale in? Or go all in on one single entry?
There is no right or wrong.
Just play!
And learn!
That's the beauty of the replay tool, allowing you maximum trade entry and management decisions by speeding up the data in-between trade opportunities.
And in providing rapid feedback to each and every decision you make.
This is not something you will do every day. No-one has time for that. But from time to time when you find yourself with an hour or two available, and a desire to play with some historical price charts, go for it.
And who knows… if you enjoy this you might just be able to expand the rule-set and create a whole trading methodology out of it. 🙂
Happy trading,
Lance Beggs