Tag Archives: Chris Lori

Blog update for 2014 with my dust allergy kicking in big time

Feel like I’ve crawled across the scorching desert, through a swamp and finally blown the dust off a long buried book of magical spells to update this blog. Apologies in advance since this isn’t likely to be short… Previous update was what? Mid-way through last year >6 months ago?

Still, as I’m struggling to get to grips with the fact WordPress has also mutated, it’s worth having a bit of a review of ‘the journey so far’ for anyone picking this up from scratch.

All the funny/scary/horrendous stuff is back in entries from 2011-12 so if you want to hurl rocks or pooh start back there… mm’kay?

Most of what’s below was written in response to a notable trading person asking a really simple question… ‘How is your trading going?’ Seems innocent enough, right? Little did the poor soul know he’d receive a 8+ page response…

I also sent this to Steve at NoBrainerTrades who is also a bit of a legend. All you Price Action junkies go there and get some sanity. Really good comments/feedback I’ll update inline.

There’s several sections in here… If I was a bit smarter I’d I’ll try to split this up a bit…

The story so far… I had this great idea…

I started looking at trading for all the wrong reasons, chiefly to solve the external problem of not having enough money to meet my commitments and radically change my financial circumstances. Little did I realize when I started what a huge personal challenge this would be and the number of blind alleys I would end up running down. It seems I had have a lot of ‘stuff’ to resolve and every one of these problems made up a barrier which I have had work through to the get to the point I’ve reached now.

The silver lining in all of this has been without trading as an engine for change I doubt there would have been anything to really compel me to evolve as a person. Thanks to this pursuit I began meditating which has (on it’s own) transformed my outlook on people and life in general.

This isn’t to say I’m anywhere near ‘done’ but I’m no longer a danger to myself (in trading) and have a proper appreciation of the process I still need to go through to become a consistently profitable trader.

Working full time as a project manager does not really allow me the time to sit in front of the live market. At the moment I focus on replaying historical price moves and using these observations to further reinforce what I have been taught. 

So here follows a brief history recap, some s**t I’ve noticed and what’s currently occurring.

Year 1 (Trading is Tic-Tac-Toe)

I probably spent >9 months going in exactly the wrong direction and also bought into some ‘education’ which (it later became clear) was essentially a money making scheme for the vendor. The UK trading education market is woeful and centres around spread-betting as a ‘get rich quick’ scheme without there being anything like realistic expectations. An advantage here however is that profits from spread-betting are tax free. Still this is of no comfort if you keep getting carted every day.

So in short, no methodology, no understanding, no edge and a significant lack of any sort of process. Add in indicator madness/the search for the holy grail as well as me being convinced (at this point) of my own godlike intelligence or superiority and you’ve got a recipe for unmitigated disaster.

Happily I wasn’t in a position to damage myself too badly financially – apart from getting completely ripped off by aforementioned ‘training’ 

Year 2 (Trading is Checkers)

Moved to ‘somewhat’ acknowledge that possibly I wasn’t as smart as I thought I was and so undertook some low level studying without really having enough knowledge to structure it properly. Started to understand that my own psychology wasn’t helping me at all in my approach to the market and begun meditating on a daily basis. I still meditate every day because of the ridiculously positive effect it’s had on my life.

Was exposed to some proper traders who made it very clear that my approach was woefully inadequate and underpinned by zero knowledge. Still not really sure what I’m looking for on a chart though and unable to hold back from impulsive trading i.e. not thinking through something before hitting the buttons. Favourite approach this year? Trying to fade one way moves without an adequate understanding of why it didn’t work.

Just enough knowledge to be dangerous and overconfident but still safe due to not willing to over-commit without being consistent. Self aware enough to know that consistent isn’t on my list of trading traits at this point.

Winning consists of luck at this point and massively compromised by the fear of missing out approach

Year 3  (Trading is Chess, against yourself)

Finally hooked up with some proper education (Chris Lori) in someone who was able to teach me how to ‘see’ the market and explain what’s actually happening. We’re not in Kansas anymore.

That combined with being exposed to other real traders ideas (Tom Piccin in the UK, Anthony Drager and Mike Bellafiore’s ‘The Playbook’ and the NBT site) plus books like ‘Bounce’ and ‘Mindset’ I actually started to define the process of how to improve without cutting my own throat. More on this below.

By now I’m more interested in becoming ridiculously proficient at this craft (the journey) as opposed to fixing the external issues by some sort of force of will. Still, having learn to play chess there’s a difference between being able to play and being a master… You only get good by playing lots of games within a proper learning structure.

Year 4 (The present moment)

So at this point I’ve defined a feedback model for myself as a way of structurally driving that improvement – this is outlined below

All through the time above I’ve spent looking at FX majors since it’s actually easier to keep tabs on a half dozen of these and the associated macro drivers than attempting to capture/filter stocks/futures price moves without a significant amount of automatic filtering.

This year will be spent building my experience via historical data and continuing to add to my database/diary of trade setups. I’ve built this using Filemaker Pro because you can capture images (charts) and the context of a move rather than trying to fit this into excel or something that it’s difficult to search within…

filemaker

So with the trade/research dB I need a vastly larger sample size than I’ve currently got but I’ll give you an example of how it’s useful.

The human memory is faulty and suffers from a number of biases. You discount information you don’t like and pay more attention to things that back up a thesis. Just ask any researcher – this is the reason that academic papers require peer review.

I’ve looked at three trades in the last two weeks where I’ve spotted a good level that (imho) should produce a tradeable reaction. Each time the reversal has been front run by 4-5 pips and I’ve not got my fill. Not having a record of these types of events how am I ever going to notice this stuff of improve? My next trade I will know in advance that I need to position my limit +4 above or below what I consider to be the entry point.

Knowing and getting comfortable with this in advance makes all the difference as far as trade management is concerned. This adjustment becomes a reaction to observed market conditions rather than a knee-jerk response to something I may only have a feeling for.

Other Things I’ve learned

The more often a level is tested the weaker it gets, not stronger.

Depending on the price action prior if a level has been tested multiple times it’s more likely to fold than hold. Books, educators and many traders seem to be bought in to the idea that the more often a level is tested the more the ‘market’ will respect it. Does the door get stronger as the SWAT team is bashing it down? Nope…

Emotional Capital in trading is as important as actual capital (well for me anyway)

In fact it may be more important. If you get carted and scared the amount in your trading account and your ability to bounce back will suffer if your emotional capital/resilience is in short supply. I am dealing with this at the moment.

Prediction is for pundits and listening to (99%) of analysts is a waste of time

Having an opinion as to where USDJPY might be in 6 months is all well and fine but it needs to be underpinned by fundamentals data, caveated by possible shifts in central bank monetary policy and not a chart.

Kathy Lien’s FX market commentary is however worth it’s weight in gold if only because she clearly communicates what everyone is looking at. Kathy = legend

Patience. Do not chase price

If you missed the move at the point you wanted to get in then leave it. The bus may reverse back onto you if you chase it down the road. The reason for this is outlined below. Patience also gets you better entries.

The faster/farther price extends the weaker the move becomes, not stronger

Like a water jet the force of the move exists at the base (origin) and not 200 pips above where it broke out from.

As price extends up looking for counterparties this has an effect on orders in the market ahead of or around it and liquidity withdraws away from the spike. What happens next depends primarily on what the price driver actually was and whether you can do anything with this comes down to whether you understand the consequences in a wider context.

Price moves as a function of liquidity

I underlined this one since it’s come to underpin all my trading decisions. If I don’t understand what I’m looking at in the context of this statement then I’m not going to trade it. Thanks to Chris Lori for the lightbulb moment where I finally got this concept

I appreciate that an FX feed doesn’t contain volume data but having spent 2-3 years looking at EURUSD charts I’ve a fairly good appreciation of what/where on a chart there will be a tradeable level based on previous price movements.

Your time-frame is irrelevant (Oooh… Controversial…)

I’ve come to believe that people over-think the issue of time-frames in trading. People will say ‘oh, I only use H1 charts’ because M5 charts are all noise… Wow, really? Just think about that for a minute. Are computer models and algo’s concerned with how we humans have represented price data? What about a M24 chart? Is this more valid than an M30 chart?

The only question is this… What price is optimal to allow me to enter with a high probability that subsequently allows me to reduce my exposure to risk? After that it’s down to trade management and looking at M5 or M1 charts can really tell you a lot about where a ‘safe’ area is when moving stops.

Last one…

You are not trading the market. You are trading the traders who are trading the market

This is somewhat esoteric but this view of the market fits into my worldview nicely so I’ll include it here.

Since we’re all individuals it’s logical that we each have a perception of the world and our experience of it that is unique. No two experiences of life are the same just as no two trades or traders are the same.

We each view what unfolds through the prism of our experience, upbringing, teaching etc. and as with life so with looking at the market. This is where we have to start seeing what’s occurring from the perspective of probabilities and psychology rather than certainty and right/wrong.

If the price gets to point ‘x’ then the probability based on the psychology of the participants indicates that a reaction in a given direction is more likely and the result may well be a trade that wins for you as an individual.

This is a level of abstraction above what or how most people believe the world works let alone applying it to something else. The market doesn’t care about right or wrong in any regard since it’s only there to facilitate trade… You got your fill? Then the market did it’s job. Whatever happens next isn’t it’s concern at all

This view can be extremely useful when looking at a level that ‘everyone’ on twitter or squawk is anticipating will break. Back in October Goldman Sachs published a trade recommendation (which was made public) that called for USDJPY to break 97. This didn’t happen and we’re now banging on 106.

It really comes down to the fact that when the majority of participants expect ‘x’ and it doesn’t happen (e.g. taper as another example) then the reaction will be outsized in the other direction. Disappointment and the fear of being wrong create outsized moves.

Another way of using this is to look at a chart and ask the following question…

‘Where is everyone going to be wrong?’ Go search for Anthony Drager (ref: Market Delta) on this topic and sign up to some of his webinars – he really explains this a lot better than me.

And so to the future…

I’ve come to appreciate more and more what this pursuit of trading has done for me as a vehicle for self development. With this in mind and the structure (database) I’ve created the near term consists of looking at the markets when I have the opportunity, creating ideas and then seeing to what extent those ideas play out

Things to focus on in 2014: –

  • Execution – I am still not ‘comfortable’ putting on positions
  • Patience – especially holding on to positions longer
  • Trade management
  • More screen time
  • Resilience

Currently I don’t have the financial cushion to switch from my job to doing this full time and without something approaching consistent profitability that would indeed be foolish. It is a bit of a chicken and egg situation. 

A very optimistic timeline would be 18 months before anyone sees significant progress here so don’t all get carried away now. Thanks for reading.

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Major Changes – Part 2 of 2

Okaaay… I’m feeling quite intimidated writing this post because somehow ‘Part 1’ generated 380+ page views and I’ve just gained my 200th follower on twitter. So no pressure there then!

Honestly I’m somewhat mystified by this (especially related to twitter) but never the less I really appreciate the interest, comments and support. Thanks 😀

You are all awesome.

—– At this point I paused to make tea and then got completely distracted by passiveaggressivenotes.com —–

and we’re back in the room…

Part 1 of this post closed with me making the point that to be truly successful you need to trade your own personality in the market.

You need to go through the process of breaking down what charts are telling you and then re-building a trading approach that you can connect with technically and emotionally.

I finally realised this in/around the same time as stumbling blindly across a Canadian trader called Chris Lori. Now I’m going to point out from the get-go that I’m not affiliated to Chris (or anyone) and what follows is my own entirely independent opinion.

I’m also going to stick my neck out a little and say that my intention is to get ridiculously good at this skill. If this wasn’t clear before from reading my blog it’s now in black and white. There’s a sector of my personality which doesn’t do half measures and it’s worth being aware of this in respect to the next part(s) below.

What I’ve not found anywhere is an explanation or framework for improving as a trader.

I know this may seem a little hard to believe but really, think about it for a moment… Who’s out there teaching the process of how to improve as a trader? How do you go about the process of learning without burning tons of cash? More importantly – How do you make sure that instead of learning at random what you’re gaining is targeted experience?

I feel compelled to make another ‘gym’ analogy here to help explain this last point…

In the last month it’s finally dawned on me that I need to slim down and change my body composition. I’ve lifted weights for years now but I’ve still got a bit of a spare tyre. Finally I’ve finally found out what to eat, the type, frequency and the amount of exercise I need to do. BUT I only discovered this after what’s essentially been years of random experimentation.

Just think about if I’d gone about trying different diets and workout routines in a structured manner? I’d have been there (where I want to be) years ago already. Guess what? It requires me to do exercises I dislike and to have way more self discipline – LOL

Now you need to follow me on this. The reason I flew all the way to Ft Lauderdale for a workshop was that Chris had put a slide up in a webinar that broke down the process of learning to trade in a extremely structured way. An outline that directly relates experience to feedback and building a discretionary trading model linked to ones own individual personality.

This is a scientific approach I can use!

I can teach myself to fish without having to radically re-shape my personality or to try to become something/someone I’m not. In addition this wasn’t based on indicators or even specific setups but more on an entirely price driven view of the market.

At this point readers who know about price action trading will assume I am talking about pin bars or specific candle patterns etc… or will think ‘yeah, I trade price action too…’

Nope, sorry. The point I’m going to really labor here is that most of the 4 day session was spent with Chris explaining the conceptual framework he’s built up about how price moves which is essentially irrelevant of the fact that you’ve got candle ‘x’ or shape ‘y’. This was all about what’s happening to price behind the fact that it’s represented by a candle which is linked to a time period. If you want to get more from this post then a good place to start is at Chris’s site where you can sign up to a whole bunch of very decent information/videos for free.

Other than that it’s worth pointing out that almost half of the 36(?) attendees had also previously been at one of his workshops. Some had paid to come back three/four times already. That’s really a great recommendation in itself

Now if you’ve a cynical disposition you’d assume that it was because they didn’t ‘get it’ in the first place. However it was clear to me they were back because, like any expert, it was worth learning even more from the depth of Chris’s forensic view of how price moves. Personally I believe Chris’s take on the market is exceptional – he is a very, very good trader.

It was also great fun talking to a bunch of relatively new (and some very experienced) traders and I can honestly say there weren’t any idiots there. Not one.

I picked up so much in Ft Lauderdale but crucially I learned to see the market in a way which actually makes sense to me. There’s so much depth and information there – when you know what to look for!

I now know how to use what I’m seeing so that I can come up with trades of my own that match my outlook. All of these things rely on a conceptual framework and not a bunch of setups from someone else which I myself may or may not be successful at trading.

So what am I currently doing with all this new-found knowledge?

  • Creating a structured learning plan based on taking apart one aspect of trading at a time and thoroughly understanding it
  • Building my own trading model just for GBPUSD

Now if you think about the detail behind just these two points you can see that we’re now very, very far from looking for short-cuts. It’s not quick, it’s not sexy and it requires hard work.

It may though be the only way to succeed and then to remain consistently profitable long term. No-one else can really tell you when to get in 😉

I hope you’ve enjoyed this post and got something out of it. If you’re feeling disappointed that I didn’t give away more specific information about Chris and his approach then I really recommend you check out his site which is really the tip of the iceberg.

Beyond that I can’t recommend enough that you actually come to a workshop. Barring the advent of the zombie apocalypse I’ll be going to the next one whenever/wherever it happens to be.

Thanks for reading.