Your Trading Coach
Because you'd rather be trading for a living...
Give the Market Every Chance to Pay You
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Wednesday 30th November 2011
Let's look at a "mindset" lesson, for a bit of a change from price action.
When reviewing your session, seek both the good and the bad. Growth comes from enhancing and repeating that which is consistently good and avoiding or improving that which is consistently causing challenge. In the case of the good though, please note that it's not necessarily your best trade. Often it is found in the way you manage those trades, or sequences of trades, where your bias is not quite right.
In today's crude oil session I'm particularly happy with the mindset displayed during this sequence of trades.
In hindsight, my read on the bias was wrong. That's something I need to review again via a market replay session. But given my read of the bias, I gave the market every chance to pay me while at the same time minimising any risk of damage each time it failed to act in the expected manner.
This is the required mindset for the way I trade... an interesting blend of risk aversion and aggression. This damn thing is going to pay me for being here, and pay me now, or I'm outta here!
Of course that's not the only way to trade. Don't feel you have to do it the same as me. You may be more willing to hold through such a sequence with one position, as the P&L oscillates through small profits and small drawdowns, awaiting the eventual move in accordance with your analysis, or trade failure. There's nothing wrong with that. A massive part of our journey is learning what kind of trader we are and adapting our trade management approach to suit.
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December 1, 2011 4:49 AM
Thought provoking lesson Lance.
One I battle with a bit to be honest, being capable of changing your bias quickly from short to long and visa versa. The market takes me out a BE or perhaps a small loss and I sit looking at the PA thinking I should be in the other way lol
Would you exit one trade and almost immediately enter in the opposite direction when trading these small timeframes or do you stand aside for a time and wait to gather your thoughts missing that move?
Di
December 2, 2011 10:37 AM
How do you know your read of the market was wrong? Was it because the trade didn't work?
December 2, 2011 1:10 PM
Di,
It's rare that I stop & reverse (or scratch and reverse). Usually I'll exit and take some time to reconsider, so that it's not an emotional decision. It's easier to do that when flat. The only time I will stop and reverse is when I expect that a stop position entry may benefit significantly from "stop" orderflow. In other words, it's a very significant position on the trading timeframe (and even better if also on the higher timeframe).
Lance
December 2, 2011 1:11 PM
Hi Pepe,
Correct. My trades are based upon my read of the market, which in this case was for movement lower. The fact that this movement did not occur indicates that my read of the market was wrong.
Lance
December 8, 2011 11:08 AM
When you reviewed the price action, did you find where you made a mistake with your read of the market?
December 8, 2011 3:49 PM
Hi Pepe,
I believe I held on to my bearish bias longer than I should have. Sometimes it's hard to switch and we stubbornly hold onto our expectations despite any evidence to the contrary. I'm happy with the first three entries. When they failed to continue lower, and then when price rallied higher at 00:28, I should have switched then, allowing an entry long on the retest of the lows (ie. rather than taking the last +11 I should have waited for failure of this leg and entered long).
Of course, it's always easy to say this with hindsight.
So any error was more with mindset issues, rather than with any price action analysis.
Lance