Is Trading What You Think?

I have not been posting for quite a while.  Making some adjustments in my life and spending some time to think about trading.  Of course, I am still trading constantly. :-)  Anyway, some thoughts I have here that I posted to my private group of friends...


I have been thinking hard these days, why there are people who can make it in trading, and those that can't.  Is there a secret formula? 

My conclusion is still hard work.

Method:

You can trade the simplest method all you want.  It would work.  However, the issue is not (at least not so much) about the method, it is about how you manage yourself as a trader, manage your risks and money, and make proper decisions. 


You need to find your method(s) or system(s) that suits your temperament, your availability of time, your capital, your financial objectives for trading, your way of thinking, and something that you could manage well in terms of time and effort.

Money:

No matter how you want to trade, get into the market, get out of the market, you need to have a clear idea of how you want to manage your risks and money.  Or rather, how you make use of your money to earn more money.  This department requires you to spend time to constantly review it and put your system(s) to test.  For those that came from T3B or any other schools, this department is vaguely touched on, so do not under estimate the amount of time required.  Spend a lot, a lot, a lot of time and efforts.

Mind:

As a trader, you need to know yourself very well.  How you make good decisions and how you make bad decisions.  In fact, many traders make stupid and illogical decisions.  You need to train yourself such that it only boils down to only good ones and bad ones. Journalizing is one of the best way to know yourself, what affects you and how to improve yourself.

Holy Grail:

There is no holy grail.  I believe all would agree on this but many (including people in this group) are still chasing it without knowing.  Get someone to sit down with you, tell them about your plans in detail.  If you realize that you cannot do it, then it is clear that you might be heading no where in your trading journey.  And my advise is, it is time to think about it.  

Time:

Let's assume all traders would need 10,000 hours to train themselves is true.  If you only use 1 hour to train yourself every day, you would need 27 years to achieve success in trading.  If you can put in 10 hours, then 2.7 years is what it takes.  And I can tell you this 10,000 hours is necessary, and I have clocked it.

And the hours you spent must have purposes and provide training for yourself.  Sitting in front of the laptop and monitor market does not count, or discount 90% off the hours.

Think about it.  Work on it.  

Week 15 GBPUSD - End of Week review

GBPUSD did not make any move for the week.  Trades have been done on intraday taking small profits.  Let's see if next week would have any opportunity.

Week 15 GBPUSD - Quick update

Possible retracement coming.

Week 15 GBPUSD - New opportunity

Most USD pairs have given strong evidence that price might go higher in coming weeks (obviously not straight line up).  And one thing that we won't know is how high it can go.  As long as there are HH and HLs forming, buy on dips would be a good strategy from week to week till the market change its condition again.

Week 14 GBPUSD - Thursday update

After coming from Malaysia over the weekend, had some hard time trying to catch up with the market.  Somehow, I think slower than the market than usual.

Anyway, with the rate news coming out tonight, I guess it's a waiting game now.

Week 13 GBPUSD - Thursday update

Price has been struggling, during the last 3 days, nimble play would be most profitable.  Buying low and selling high in LTF would have worked out pretty fine.

So far, big picture has not changed.  And we trade according to what we see, though we might have a different plan in mind.

In my opinion, if you are trading setup by setup, i.e. you do not have an overall plan, in the long run, it is very difficult to make decent money out of trading.  Don't forget there would always be periods where no matter how you trade or how you adjust to the market, you just can't make money.  And during such periods, if you can't control your risks, that is most likely the end of your trading career (got to make it sound serious :-P, but seriously, it might happen...)

Below is just an update

Week 13 GBPUSD Tue 12pm Update

Though we might have the bigger picture that price may break low, the question is we do not know when.  With new market information, we see that price might be moving up before any possible down move.  Thus it's either we do a buy now then sell later.  Not forgetting price has dropped a lot, it might need some retracement and if it forms an ABCD, then it would be perfect.

If you are an day trader, then it would be easier to follow the price development.  If you have less time to trade, then waiting for a good sell setup at the imagined point D would be a better choice.

There are many options in trading, even a sell at current price may not necessary means you would lose.  It all depends how you plan and manage your risks unless price shoots all the way past last high without good retracement.  (Hint* grid trading)

Week 13 GBPUSD Big Picture

Below is one of my plans if price broke low in coming week(s).  i.e. I would plan to sell on every rally.

ok... correction.  "Every" sounds too certain.  Main plan is to sell as long as bearishness is sustained.  :-)

Week 11 EURUSD Analysis

This analysis is for teaching purposes.  Usually, I don't have such complicated analysis to help me with my day to day trade planning.  However, big picture is always critical in defining our road map.  Just for sharing...

What is your edge?

Lately we have some good discussion within our group of traders talking about creating an edge in our trading.  And one of our traders was asking how to create an edge when the technique she used did not work for her but work fine for others.


below were some good replies from other traders


Trader 1:

I started forex trading back in 2007, began learning the basics from experienced traders, then went on and attended several stock and forex trading courses. I continue to learn from websites, through active participation in forums where I learned from many other traders, I read books and also do my own research and self-study. After more than three years, I am still learning every day. I continue to attend workshops and seminars to develop myself to be a better trader. I have already clocked several thousands of hours doing all these. Also, on my bookshelf at home are many books which will provide various different answers to your question WHY???.

To be a trader is starting on an extremely long journey with no destination in sight. There will be many roadblocks, pit stops and milestones along the way but never an end to this journey.  To continue in this journey, I urge you and also all others in this forum to be active. Everyone can be active by posting your market analysis, trade plans, winning and losing trades, post trade reviews, and also asking questions whatsoever which will help you learn faster and trade better.    

You need to put in the hours to create that EDGE for yourself. It’s unique and cannot be replicated.

Trader 2:

When you mention technique, do you mean technique for analysis?  Technique for entering trades? Technique for trade management?  When I look at what is not working out for me, I look at which aspect of trading am I tackling.  I ask myself what is it that I'm lacking, and what I can do to bridge the gap.  It could mean more reading, more training, more practising, asking more questions, more thinking.  Very often, it is a lot of practising.  Backtesting with past data, and forward testing/practising in real-time.

Sometimes I also had to seek the answer within myself, and see if there is any conflicting issues within myself and the technique.  Not all techniques are suitable for everyone.  If the technique is not in line with your beliefs or thinking or trading schedule, then you either change the technique, or work on it to change your beliefs/thinking.

And mastering the technique does not necessarily mean you see immediate result in your trading or become profitable.  It just means you have gained one more skill in one aspect of your trading, and that you are probably moving one step closer to having an edge.

I summed it up:

My purpose of starting this topic is to trigger your thinking.  

Systems, strategies or techniques are very rule based skills and are considered as hard skills.  If based on these, you can become a successful trader then there would be at least 50% more profitable traders in the whole world.  These components are just the start point for you to kick start your learning.  They are just foundational skills.  By knowing them alone, it does not provide you with consistent result. 

Trading is a business that requires a lot of thinking, a lot of decision making, a lot of planning.  The hard skills are helping tools, but without a proper frame of mind, they are useless.  I created Hexametry Framework is to address this key that most people do not know.  I am not saying that I have created something unique, in reality all successful traders or to-be successful traders would have their own framework or their sets of thought processes.  And they would naturally harmonize in many ways though they may not be entirely the same.

The good thing about trading as a business is that the entry barrier is low.  And it can be self learnt.  Learning is a crucial part of the business and it is never ending. That means the attitude to learn and the ability to learn are required qualities of a trader.  The catch?  The learning curve is long and steep.

There are just so many things to talk about trading and I can't possibly list them all.  However, there is one thing that I would urge everyone to create, your self-awareness.  Know yourself.  Know what works and what not work for you.  Know your learning capabilities.  Know your limitations.  Know your potential.

Week 10 EURJPY Road Map

I have been making bullish calls for EURUSD, GBPUSD.  I guess it's time for EURJPY

Trading is about compounding and not linear

Do you agree that trading is about compounding and not linear?

A stumble may prevent a fall

The irony about trading is that you need to accept failures are a big part of your business.  The fail trades along the way may make the trader stumble.  With the diligence and the commitment to review what caused the failure and learning from it would prevent the trader from big falls in the future.

Week 8 EURGBP Analysis

I am already in Long positions for the dollar pairs since my call for long.  This week, probably can look at EURGBP for about 100pips move to the resistance level.

Week 7 EURUSD Analysis

Possible bullish Gartley forming for EURUSD

Week 6 GBPUSD Analysis

This Thursday, bank rate announcement and would it propel GBPUSD higher?  Looking at the current price formation, it suggests strongly of this possibility.  Buy on dips should be a good strategy for this week

Week 5 EURUSD Analysis (Updated)

Early week analysis did not work out and it is time to review and revisit.  Below is the new analysis, it looks like there is a possibility of price attempting 2009 high in weeks/months to come.  In any case, whatever we visualize need to be proven by the market and what we need to do as trader is to collect the information and trade the market as it goes.

Week 5 EURUSD Analysis

I am taking a bearish view for EURUSD for the week.  Expecting price to retest 1.3450 region and if the support do not hold, 1.3100 is a possible target in the mid term.  Week chart shows possible formation of right shoulder and when the reversal pattern is completed, I am expecting price to go back into the range as shown on the day chart.

(Note that the prediction is just a trader's imagination of how price might develop, more importantly is that the trader has plans ready for the market at real time, and there are a lot more other factors to determine if the trader can profit from the prediction)

Week 4 AUDUSD - Pivot points and 123 reversal pattern

Did a classic intraday trade today using 123 reversal patterns and pivot points for AUDUSD.  The ability to interpret price action would give us an edge and notice my early entry and the more confirmed entries.

Week 4 EURUSD - Trend Line Bounce Entry

In the world of price action trading, this is the classic trend line bounce trade where price attempt to go low before breaking high again.  This is extremely common in Forex market.  I did a short on when the first M15 candle dropped from the high and took 40pips on first half of size and 20pips on second half when market refused to go down any further.

And because market is not going down further (bounce from TL) and after the H1 candle closed, it tells us that the market is most likely to be still up.  And thus the possible down view was invalidated.  Below is the chart to show how we could get into such entries

Trader's Time Frame

I am a full time Forex trader and have been conducting workshops at Singapore Management University (SMU) and at Traders Round Trable (TRT).

During the workshops, one of the frequently asked questions is about trader's time frame.  Or rather, when the question is popped, it is normally "What time frame are you trading?"

I did not find it easy to answer as most people would already have a fixated mind that a trader should have a specific time frame, which I cannot fault them.  My experiences taught me something different.

Commonly, we do need a specific time frame for our planning, but we need to go to both higher and lower time frames to look for information to support our planning (Multiple Time Frame Analysis).  And when comes to execution, usually we would go to lower time frames simply for the reason that we need more detail information from the market and always need to reconcile back before the final decision.

The conclusion is that you would need the various time frame for different purposes.

In any case, knowing how to use the time frames are basic skill sets of a trader and this is just part of the foundation.  It would not be the key to turn your trading profitable, but it is an important and mandatory skill to acquire.  And this usually takes hundreds of hours to train.

Importance of Reviewing Your Trading Performance

IMHO, trading has to be seen as a full time job even if you are just trading part time.  And reviewing your performance is an extremely important activity.  Trading without knowing your own strengths and weaknesses is one of the most fatal mistakes that traders make.

I constantly keep track of my performance and making sure that I do not run into unnecessary losses.  Below is one of the metrics that I track for my intraday trading.

Performance based on R-Multiples.  
Noticed that most of my winnings came from good trades that return more than 1.5R and I have losses that are smaller than R.  My R (max risk per trade) is fixed for each cycle.  And the vertical axis is the amount of profit or losses I made over my equity.

My expectancy ratio for week 1, 2 and 3 are 1.71, 0.61 and 5.13 respectively

Week 3 EURJPY Analysis

When comes to trading, I always advocate to have the big picture in mind.  It doesn't mean that it will sure happen, but if the plan unfolds itself along the way, you need to ask yourself if you are in the market.

I have already profited twice doing intraday trades base on this big picture, it is still valid at the moment.  Still looking to long this pair until the market tells me that I am wrong.

Week 2 EURUSD Analysis

Taking one of my student's analysis.  Looks like there might be some up side for EURUSD for rest of the week until we have new information from the market.

Week 1 EURJPY Analysis

Technical analysis for EURJPY, updated on Thursday.

Price has found its base around 107.80 and moved up and re-tested the ceiling of the box yesterday.
We were looking for a reversal pattern inside the box.  This provided evidence that price is establishing its up flow, further more we already have higher high and higher low.  111.00 would be the immediate target.

[Friday update]
The plan did not work out.  Took a small position to long when price retraced to 109.00.  Hung there for several hours and eventually abort the trade with small losses and long GBPUSD instead.  Again, the read of the market is wrong, but manage to earn some profits and reverse the trade to short.

Week1 GBPUSD Live Trade

Good start for 2011, captured a nice trade on GBPUSD based on what was planned on Monday.  Price did a nice retracement, stalled and create an opportunity for a long setup.  News was at 5.30pm and entry was about 3 hours before it.

The news helped to propelled the price, thus having a good setup before the news is something that I always look out for.  This could be said as the "way" I trade news.  Actually, it is still based on price action as the chart is telling us price is likely to go up then down since yesterday evening.

Week1 GBPUSD Analysis

Good morning!  It's the first trading day of 2011.  I wish everyone a fruitful year in their trading journey.

To start with, I have a potential bullish view of GBPUSD for coming days.  I would try to keep up with my blog post if possible.