Tag Archives: learning

Trade 160413

Only just posting this trade from April and it’s now June… which goes to show how much time I am not devoting to this endeavor at the moment.

Complete stagnation may be something of an understatement but as previously mentioned this is mainly due to working a ridiculous amount.

So… this is probably my least stellar effort recently due to me having completely missed a key aspect of this ‘setup’ (which it isn’t really) or rather a key component in taking these types of trades so you don’t get your ass handed to you…

M5 EURUSD 160413

There’s way too much uncertainty here at this point to be trying to fade this move.

  1. Move up is +70 which isn’t generally enough to start trying to fade
  2. Not enough space/inefficiency from where I got in to the area shown in the rectangle
  3. Lack of contextual understanding… which I’ll explain below.

My observation is that multi-day ranges break from the opposite side… or to explain this another way… by the time you notice it’s in a range it’s time to start looking to buy at the BASE or sell at the TOP. I was out by about the 30 points out this cost me.

In this case I wasn’t paying a blind but of attention to the context of what I was doing.

M30 EURUSD 160413 context

The smart move would have been to sell later.

The smarter move was to actually get an idea of context and buy the retest @ 1.3110

Genius move? Buy the test of the low at 1.3030

I’ll settle for smart/patient at this point 😉

Trade 040113

Ah and so to new beginnings… and I’m going to clear this point up right now before anyone reads any further. Post-trade analysis is always 20-20

Which means it’s challenging to put yourself back in the moment when you placed the trade. It’s inevitable that there might well be a lot of ‘coulda/woulda/shoulda’ in these types of posts so I’m open to suggestions as to how to improve them. Comments purely along the lines of ‘that was a shit trade’ are only welcome if you can point me to your blog/analysis/audited trading results.

The intention here is for me to objectively look at what I did so I can wring all the lessons from each experience. If you feel compelled to point out a bunch of mistakes then I’m going to insist you’re not a dick about it. That was a ‘Be Nice‘ warning on behalf of the ‘Feeling Slightly Vulnerable Here’ party. Thanks for your polite consideration.

I’ve started writing this up and have also begun to realise what an awful lot of work I might have let myself in for but lets press on regardless shall we? Need a brew first though!

Trade Thesis – EURUSD

Essentially although there’s been an equity rally the euro has just not gone anywhere the last few days so I’m looking at places to get short. Based on previous observations there’s usually a reaction when price gets back to the days range pre-europe open about 06:00-07:00. in this case that’s around 1.0342 for a short.

M5 Big Picture

So the NFP number came out and it was near as dammit on expectation so there was a steady hitch up to that number. It sat in/around 1.0340 for 10 minutes without getting above 1.03048 so I did get short at 1.03042 as per my plan. Bonus points for sticking to the plan but many negative marks for not being patient enough to wait longer. If I had waited and stepped back from the trade a little things would have been much better.

My rationale for this trade was invalidated by the ‘non-miss’ nature of the unemployment number. The price behavior usually seen at this point was overcome by a larger part of the market seeing am opportunity to buy and I’d avoided an opportunity to look at the bigger picture – which I’ll get onto later. Other participants reading the situation differently meant I was going entirely in the wrong direction at this point.

Couple of execution issues also didn’t help. Firstly put my stop much, much too close to the action i.e. within the previous dealing range rather than outside it… This should have been above two dealing ranges (1.3071?) to give me some protection and I wouldn’t have gotten stopped out.

See the two boxes to the left in this screenshot to really see what I’m talking about.

M5 Big Picture order flow blocksSo with all that in mind here’s the real error from this trade. Let’s remember the retro-active analysis challenge of this type of thinking but the next screenshot is what I had put up yesterday evening when I was looking before all this happened. The box with the red line and the arrow in it was where I was expecting price to get back to before falling further…

M5 YesterdayQuite… I’d basically drawn in a line where price goes right back to 1.3090 area which is exactly what it did do this evening. I got suckered into only looking at a very, very small extract of what was happening and entirely forgot the bigger picture. All I was focused on (unfortunately) was the price in Asia pre-market and the sell off without reference to the higher time-frame.

[Hindsight warning] I should have been buying at 1.3034’s and I’d have had a defined take profit already in play. With some further thought I guess I could well have avoided this but I’m only just coming back to look at everything now rather. Still it was an interesting exercise.

The last screenshot is something I’ve just noticed while writing this which is that when the payrolls number was announced a clear trendline break occurred. Having focused only on the price from this morning without the larger context I made the wrong directional call.

M5 trendline

There you go.

New direction for 2013

Hi guys and gals it’s 2013 so well done for surviving the Mayan apocalypse 😀

I wanted to say thanks and outline what’s happening with this blog/platform going into the next year

I’ll put an example post up from last month so you can see where this is going trade-wise

Another post will go up with ‘people I really rate’ in FX/trading and so on but really it’s gonna all be about the trades and posting those to the exclusion of pretty much everything else 

Best wishes for 2013 – Rob

Blog update for November

Well that’s just super… WordPress ate my blog so this is a re-type… hence it’s going to seem curt, short and to the point. I can’t remember the jokes from the first version either but take it from me they were hilarious 😉

It’s been two months since my last post and I’ve pretty much taken my brain out of the whole ‘trading’ subject. Ok, that’s a lie. What I’ve been doing is attempting to re-frame how I think about the sharp end of this topic which is placing and managing trades. This has resulted in me realising a few things about the contents of my own brain which I’ll go into.

Developing non-attachment

Really what this comes down to is that I’m too attached to the outcome associated with an action.

This is supremely ironic because in my day job (project manager) I’m very much at home with making decisions and proposing a course of action. Where I think this falls over in trading is that I’m way too attached to the outcome…

‘Attachment is the origin, the root of suffering; hence it is the cause of suffering.’

In my meditation practice being attached to the outcome of a situation means that you fail to see it clearly. That filter of attachment introduces fear, doubt and uncertainty which makes for sh**y trading decisions. Getting in too early and then getting out too early are big ones for me.

So I’ve spent a lot of time re-framing how I perceive myself when trading. In fact what I’m attempting to do is develop what’s called ‘witnessing consciousness’ which is the dispassionate observation of the ‘chatter’ in your own mind. This isn’t trading without emotion, this is avoiding being triggered by emotions that do arise – think of this as being able to look at yourself doing something from the outside.

This leaves room for intuition/fear/emotion etc. but it means that you’re looking to create a ‘gap’ between feeling and action which is based on trading experience and reason. It’s an attempt to short circuit your screaming monkey brain which is trying to throw pooh at the monitor 😉

Being here now…

I have consistently attempted to push my life forwards and then gotten incredibly frustrated when it’s failed to move at the speed I’d like. I’ve recently realised what a waste of energy this is and my disappearance two months ago was really the result of me throwing my toys out of the pram to go and sulk…

There is no good time to start anything new. Waiting for the perfect moment or opportunity to start doing something is preventing you from starting. The trick is simply to start because inevitably you’ll get there a lot sooner because whatever it is that you want to do will probably take you longer than you think anyway… so just start.

If I’d have waited till I knew everything about exercise and nutrition before starting to go to the gym I’d be in even worse shape now if I’d never have started. As it is – seven years later – I’m in the best shape I’ve ever been and I still don’t really know as much as I’d like about what works or doesn’t work for me. A couple of things I’ve tried recently have paid off but again, this is seven years after I began by puking up trying to run round the local park.

Probably because it’s more cerebral and not physical I’ve delayed really starting to get my head around trading till fairly recently – I have been waiting for perfection when it’s clear that may only be reachable in a few more years. The learning isn’t in the learning, it’s in the doing.

So there needs to be a lot more doing.

Forget about the future

I have literally no idea what my life will look like with respect to trading two years from now. What I do know is that thinking/planning/worrying or being concerned about it now is a complete and utter waste of time and effort.

The thing to focus on is the trade I will place tomorrow, then the one after that, then the next one.

In a number of years (as with going to the gym) I will be able to think back to this point and think ‘Aha! look how far I’ve come’. Being overly concerned with the end goal now is a total waste of time and inhibits my freedom of action/movement.

These three things are the same thing

Fear. Fear of making a mistake whether it is with regards to trading or any other topic. Having some idea that I’m able to get to a point of understanding or ‘completion’ in trading/life is essentially an illusion. As with all things you have to engage in experiences and then learn along the way as part of an iterative process. Had I had less fear/concern about the future I’d have got laid a whole lot more by now too…

In my work life I’ve pretty much had enough of these that I know what works. In going to the gym all this time I’m finally getting there where I know what works for me nutritionally. In trading this comes down to knowing way more theory than learning from real experiences.

So the way forwards is to practice non-attachment, to be unconcerned with the distant future and place one foot in front of the other. Then one day I’ll look up and find I’m at the top of the mountain.

Thanks for all the comments / encouragement over the last few weeks. There will be a number of blogs coming out in the next week with stuff I’ve stumbled over as well as some decent trades too so stay tuned and thanks for your patience.

Trading practice – learn it to earn it

That’s possibly too grand a title but I’ll try to explain where that’s come from based on what I’ve been doing recently to improve my trading skills.

What I’ve been doing is ‘trading’ through a lot of historical EUR/USD price data using Trade-Interceptor‘s great charting package.

You can wind back the clock and do simulated trading for free and their ‘Trading Intelligence’ module records all the results and gives you a summary.

Now for a number of reasons I didn’t do any significant amount of paper trading before I opened a trading account. I was fed the line that ‘demo doesn’t count’ and I wanted to get onto the ‘making money’ bit.

This basically proves what an idiot I am. Yes, from a psychological perspective it’s not the same BUT you can still learn an awful lot about how you see the market and the technical aspects of trading before you even begin to throw money about (or away).

If you’re looking at trading you absolutely need to spend time getting familiar as to how the instrument you’re trying to trade actually moves. You’ll also learn what sort of path your equity curve might follow. Here’s mine after 32 ‘sim’ trades.

Just looking at this graph shows a number of different things.

1) I lost 4 trades in a row there. What was I doing wrong?
2) It goes up!! 😀

Trade Interceptors package also give you a bunch of useful summary data…

Key take home points from this are as follows: –

12 Wins (1159 pts) and 20 losses (418 pts) resulting in +741 pts
11 shorts and 21 longs

Delving a little deeper and using excel I found some interesting underlying challenges.

Holding period for winners was 25% more than for losers. In other words I’m holding winners for about 10 hours and losers about 8 on average.

Maybe cut losers earlier? Anyway, the results data I’ve used for this post is also really old but hopefully you get the point.

Once you’ve traded through this sort of thing look for information you can use. In this ‘run’ 16 of the 20 losing trades I had in EURUSD were longs. That’s a really large amount and goes to show I have a long bias – probably attempting to pick the bottom of a falling market 😉

Anyway – this type of analysis is mandatory in my humble opinion and also (for me) long overdue. I hope this helps illustrate a tiny, tiny, tiny amount of what’s actually required to get better at this skill. Practice!

I wrote this post about 8 weeks ago now and realise the following – having done this a dozen more times…

  1. I wasn’t structured enough in what I was looking for/trading/trying to understand about the market when I did this exercise
  2. Be very clear before you start what time-frames/other inputs you’re going to accept
  3. Your ‘success’ rate should theoretically be higher in live trading because you don’t have access to whatever the sentiment of the market was 29 days ago and so on.

Any new or would be traders out there reading this you need to do  a LOT of this type of work and if you decide not to ’cause it’s boring for you and you just want to get to the making money bit then you are a fool… and you know what they say about fools and their money.

Major changes – part 1 of 2

So approximately 18 months into what was supposed to be a two year project I’ve reached a very interesting point in my journey that I’d like to share…

If you’re looking to become profitable and consistent in this endeavour I seriously suggest you pay attention.

In part 1 I’m going to argue that as much as we’d all like to deny it the following is true. Learning other people’s specific setups and copying their trading methods does not work.

In part 2 I’m going to try to explain what this means as far as learning to trade goes and some of the things I’m doing about it. Part 2 will take me a couple of days to put together so lets kick off part 1 first.

So 18 months in and having extended my timeframe for becoming profitable on a consistent basis I have been very much on the point of giving up. Well, not quite, but the most ‘giving up-est’ I’ve been so far.

This prompted me to look around for what the profitable traders I’ve ran into have said about their own path to success and whether there were any common points. Here are some very lose observations: –

  1. The average timespan seems to be 3-6yrs to get really good
  2. If you dig a little deeper it’s mostly nearer 6yrs
  3. Those that seem to be consistent threw out the rulebook and developed their own trading methodology from scratch based on personal observations
  4. The majority of these individuals use ‘price action’ rather than charts with loads of indicators and wavy lines
  5. Some only trade one or a very few number of markets with very simple setups/rules
  6. Most of these rules are entirely dependent on experience which reinforces their discretionary approach
  7. Anyone who is very heavily promoting or selling themselves/their approach probably isn’t actually trading at all

So what does this tell me – other than I’m possibly screwed?

It’s been written over and over and over (which I’ve also completely ignored) that you can’t really trade someone else’s system/approach.

Acknowledging this truth would mean that I’m going to have to do a lot of hard work so I’ve ignored this up till now and not understood the point being made.

This statement removes the possibility of all short-cuts and frankly that’s a bit of a bugger.

However I now know this to be true from the following experience.

In October last year I signed up with Jimmy Young and went through his excellent and extensive training. There’s absolutely nothing wrong with Jimmy’s approach and he is a completely genuine, honest and straight-forward guy with 20+ years of trading experience. The amount of effort he puts into educating his students is frankly un-paralleled. He’s got some extremely talented students and I can’t find any fault at all in how he conducts himself.

He genuinely wants everyone he’s teaching to succeed

When snow storms took out his local power/internet in the US Jimmy decamped himself to a motel for 3 days so his students could still get the information he provides every day. No really – Jimmy’s sending out a 10-15 minute webinar every day going though the previous day’s trades and what would have been the best approach as well as providing a huge amount of insight to the next day.

I know his approach completely works but I just am not able to enter the market and trade like he does. My personality with regards to trading just doesn’t work like his. Sad but true.

In order to not get emotionally steamrollered every time I look at what’s happening in the market I need to do what so many (now) successful traders have done and break everything down to something I can understand. Only then will this connect my personality, my unique view of the world and my psychology with how I trade.

Not only can I not trade like Jimmy, I can’t trade like @Trader_Dante, @FTSEDay, @50pips, @FT71 or any of the other great/supportive people I’ve run into on this mad arsed pursuit. To quote Monty Python…

Yes, we are all individuals!

So exactly where does this leave me, you or anyone else out there looking to become a consistently profitable trader?

You need to pull the market apart for yourself and see how it works with your own psychology/approach/creativity in mind. Then you can put it back together for yourself and objectively test what works. I’ve now come to the conclusion that this is the long, boring, slow and un-exciting process of becoming a trader. Just like working out and eating right is the long, painful, slow process of getting into really good shape.

There are so many people selling shortcuts, there’s the considerable challenge of self delusion and on top of that the impossibility of trying to change your personality to match someone else’s trading style… On this basis I’m un-surprised that few actually get there.

At this point you might think that I really should give up.

So why am I really excited now about moving forwards?

Well, think about it for a moment. What if the thing that’s holding you back isn’t that you’re not a good trader? What if it’s got a lot to do with the fact that you don’t take good trades like person ‘x’ because (surprisingly) you don’t see what they see ’cause you’re not them? Logically this makes complete sense to me. What a relief it is to put that burden down!

Perceptually the world I see isn’t what you or anyone else sees. You can get 100 different interpretations from the same chart. What follows from this is that you need to trade your own personality in the market.

How do you get to a point where this can happen? Well, you’ll have to wait for part 2 in order to find out and you’ll discover why I went all the way to Florida to really move things forward…

First time in a trading room – fun and very useful

So here’s a new experience for me that’s been something of an eye opener.

I had Thursday and Friday completely off work so took up Mike’s (@FtseDay on the twitter) kind offer to hang out with him and the crew in the trading room he’s created all focussed on trading the FTSE100 using a few really simple setups.

It was great fun since trading can be an entirely solitary experience plus the banter keeps everyone on their toes. The last thing you want to do is trade like a total d**k-head in front of a bunch of people 😉

I’m pretty gutted that due to me work commitments I’m unable to spend more time in this environment because as a learning experience I’d reckon it’s pretty awesome. To come back to a previous post (here) I’d suggest that in order to be successful at trading you need someone to teach you. Books on trading don’t work. Books on psychology are on the other hand extremely useful. I’ll come back to this point in another post.

Anyway, being in a trading room would (imho) be the top of the list for the fastest way to learn and importantly make money at the same time. Some of the advantages:

  1. Multiple people looking at the same chart – many hands make light work
  2. Can see the same thing from lots of angles – you may be wrong but someone else is probably gonna nail it.
  3. See other people’s psychology at work – if someone’s more patient then it’s easier to ask/learn from them how they do it
  4. Quickly learn from others what not to do 😉
  5. Moral support
  6. It is competitive and that’s a good thing. Props to eddie and especially James for winning the ‘balls of steel’ award last thing on Friday.
  7. Nothing worse than someone taking a trade (which you didn’t) and see them making their target while you sit on the bench – thanks eddie (lol)
  8. You learn faster as you’re learning from the ‘collective’ not just yourself
  9. The market is live and you’re trading it. You’re not learning from some static chart where the resolution (and success) is obvious with hindsight… This is a key advantage

Now this was all based on everyone learning/trading using the same kind of approach that Mike trades the FTSE100 with. I can imagine that if it was a ‘free for all’ room with no underlying ‘this is our approach’ theme then it wouldn’t be half as effective. However it was extremely useful.

If you’re new to all this and want to learn to trade effectively straight off the bat then I could do a lot worse than recommend you go check out what Mike is offering. Major bonus for the newbies is that he’s not taking the piss by charging stupid amounts of money for stuff that doesn’t work.

BUT before anyone gets way too excited though I’m going to point something out that I hope is obvious by now… There are still no short-cuts. No-one is going to hand you a guarantee that trade ‘x’ is going to work because it’s still your own psychology and experience that will determine whether you take a trade/setup or not.

I missed some absolute corking opportunities on both days but I still made some money while having a blast. So if this sounds interesting to you then go check out Mike on the twitter or here