A Trades - A Scalpers 12 step recovery program

I have a habit of over trading and loosing all I make during trends when prices consolidate afterwards.

With the intention of reducing these losses, I'm going to journal here all the end of day charts as I see them. I'm expecting that undertaking such an analysis will force me to trade only trends as they breakout and not get crunched in the mill of the consolidation.

Analysis is going to be a mixture of candle readings, Support & Resistance, EMAs and Fib studies all based on the daily chart. Again, trading higher time- frame charts is another attempt to stop me trading too much.

Ironically, I also don't want to OVER-Analyse the situation and end up never entering anything because there's always so many good reasons not to enter.

I'm going to do this every night at the daily close. Here's my first analysis for EOD Friday 29th Feb 2008 which I did with the benefit of the first few hours of monday trading. (Only just decided to commit myself to this). From now on I'll do them in the evening.

EUR-USD
Consolidating after the last three days of Trend, almost a Doji and almost the same high as yesterday. Certainly wouldn't go long and short neither therefore it's time to sit this out.

GBP-USD
Inside Bar. Yesterday, prices almost retraced to the 38.2 of the last swing. There's resistance above from wednesdaý's high at 1.9971 and the 150EMA.
Would trade a break of both of these, at 1.9985.

To the downside there's support from the 365EMA that's been penetrated a number of times, and the rising shorter term EMA. Would need to see a sustained drop to consider shorting.

AUS-USD

Heading for 38.2 Fib retracement and confluence with 10EMA. Looking for Price Action to confirm a long trade if it bounces.

NZD-USD

Strong retracement from Wednesday's high, touching 25EMA. Looking either for a bounce from this support or a further drop to the 38.2. Don't know if the gap remaining (about 77 pips) would be tradeable.

USD-JPY

Bar finished at the recent low after a strong down move. Stochs are already oversold (as if that meant anything) but would be expecting a retrace basically because everything else is retracing. Trying also to overcome the habit of joining in right at the end of the move, so would rather let it run another 1,000 pips without me than enter and see it reverse.

Skunny: "Concentrate on working out why the losses happened and let the wins take care of themselves" (or something like that - cheers Skunny)

Verdict: No trade entry.

USD-CAD

Right, this has already retraced to the 38.2 (and 10EMA and last swing low) so i'm looking for price action to confirm a bounce. Stochs are on their way up, EMAs on their way down. Confusion = no trade.

EUR-JPY

The friday bar closed just below the 50% fib retracement. There's doesn't seem to be any other confluence here. As I write this on monday morning, we have a pin-bar forming to the down side and the stochs are turning.

Verdict: Wait.

GBP-JPY

Prices have trading in a (big) range for the last 6 weeks. Heading back down to the lower support at 204.81.

Verdict: Wait for breakout or bounce.

God, trading the daily chart is really boring. I think I need to dedicate myself to another profession while I'm waiting.

While I'm sitting here dutifully watching the Euro Zoom up and down and feeling like someone at a 12 steps meeting ("Hello, good evening, my name is el choco and i used to scalp the 1 min chart") I came up with the following list of trading blunders which I am attempting to resolve.

Information overload
I watch about every currency i can get on about five different time frames. Then after about 30 mins i'm just staring at the screens in a daze.

Answer: moving to a longer time frame and check in every now and again.

Always wanting to pick the top and bottom
Dammit even if I miss a pip I think I'm loosing out.

Answer: Don't be so darned greedy. Take the meat out of the move and leave the edges for other folk.

Trading all day
I made loads last week and then chucked it all away thinking the trend would continue at 20.00CET.

Answer 1: Stop trading at 5.00pm. (As I write this I'm watching the 20.00 speech by Gov Kroszner and thinking.... "it's going to move 100pips without me")

Answer 2: Turn off the trading platform and enjoy life. There's always more trading tomorrow.

Thinking I know what the market is about to do.
Yes, with my careful analysis I don't need to watch the screen anymore. Even though my super indicators were saying "DOWN" I somehow 'knew' everything was still going "UP". Another loss.

Answer: Trade what I see. Believe my charts.

Getting Bored
I'll sit and watch consolidation for about three hours and then think, "right, it's obviously going to be a quiet day today". By the time I've gone to get my sandwich I've missed the move of the day.

Answer: Set alarms for regular intervals. And get someone else to get the sanwiches

Getting bored 2
I'll sit and watch for hours and then think "Bua, i haven't earned any money yet. Look, there's a D- signal - lets go in !!!"

Answer: Go for A+++ trades only on longer time frames.

Getting bored 3
"I wonder what the GBP-JPY is like during an interest rate anouncement. I'll put on a single lot just to try it. Oh, I'm broke."

Answer: Demo trade ideas, live trade tested strategies.

Waiting for too much confirmation
"Is this really a trend? Am I sure? Just another 10 pips and then i'll get in on the retrace. Oh, it's going the other way." I don't trust that the set-up I have are actually going to work unless I see them having worked!! Of course by then it's too late. I enter anyway of course.

Answer 1: Solving this by moving to a break-out trigger. ( I guess i'll now think "has it really broken out?")

Answer 2: Fade in a trade early, if it goes wrong no pasa nada.

Answer 3: Trust the charts. I need more practice time.

Trading in periods of consolidation
Answer: Don't. Trade the breakout (thanks to James16 for hammering this home about 10,000 times)

Trading tired
Seeing the london session begin to move at about 06.30CET (guess it's really Moscow or something) I thought it would be useful to wake up at 05.30 to trade. Unfortunately I am NOT good in the morning and even though I was in front of my screen I was still mentally asleep until about 10.00. Then the rest of the day was spent in a fog of sleep deprivation leading to stupid trading decisions.

Answer 1: Set defined hours and that's good enough. (I sound like my mum)

Answer 2: Sleep rocks!!

Too discretionary a plan
Need a definite trigger rather than just "I think it's going up".

Answer: Using breakout as triggers.

Trying to take too much profit
Because I only enter at the end of the move, I feel cheated and then hold on for too long. profit dwindles and then... "maybe it's just a retrace."

Answer: Decide (in advance) on a sensible TP given the time frame i'm on.

All my signals seem to change just before entry to convince me not to enter
Answer 1: Practice more and develop trust.

Answer 2: Finding a strategy that works on historcial charts is totally different to trading live. Learn to live with the uncertainty and only go for A+++ trades.

Answer 3: Use Vhands more. Find a MTF version.

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I already know there's more but that will do for now.

EUR-USD

New all time high (again) today on the Euro, leaving a neutral spinning top stuck out in the middle of nowhere. No trend lines, resistance or EMAs in sight. Not retracing although momentum does appear to be slowing a little (however it could just be weekend bar changing the angle of the rise).

Lots of movement on the speech this afternoon with generally depressing US news. Poor US construction data also out. So, verdict? Price Action gives nothing away, very balanced between bulls and bears.

I stayed out of a break of the previous high today which was lucky (or smart) as it went up 20 pips and then fell like 70. How much of a break is a break? Does it need to retrace and then convert Resistance into Support before I'd consider going long?

On the other hand, my old scalpers mentality is chewing away at my ear saying "you left 100 pips onthe table today".

Bua! Let's leave it. I'm looking for A+++ breakout trades on this thread, so I'll wait for the retracement. Therefore, no trade.

GBP-USD
Another slightly bearishly neutral bar as the GBP gets squeezed between incoming EMAs. Same position as yesterday really. Buy the break past resistance and the 150EMA confluence. And as for selling... still gotta get past the 365EMA and other minor EMAs.

AUD-USD
AUD bounced off the 10EMA in what looks like a simple return to it's previous rise. Finished high up on the candle and the stochs are reloading for another push. The Price on the weekly chart is floating out into space so would expect a retrace at some point soon. Stochs on weekly have just crossed and going south. Verdict: probably a slight rise tomorrow before flatteng out midweek. ¿Enough to enter a trade? Hmmm. not for me.

NZD-USD
Kiwi bounced off the 25EMA and continued up strongly. 4Hr chart had ran into the 25EMA from the other side. Would buy the break of todays high but expect a retrace first.

USD-JPY
Showing a pin-bar and a turning stoch. Also has travelled the same distance as the width of the previous consildation range. Would buy the break of the pin bar high.

USD-CAD
Loonie up strongly after a weak pin-bar on thursday (and rubbish US news). going to run into the 10EMA and the stochs are already heading into OB. Just noticed we're coming up from the bottom of a trading range (which would have given more weight to the pin bar last week). Weekly chart is horizontal. Possible bounce of 10EMA would confirm a down trend. Verdict: wait.

EUR-JPY
Pin bar penetrating into rising trend line, stochs about to turn. Buy the break up of the bar high. Take profit early at the 25EMA/365EMA confluence.

GBP-JPY
Pin bar penetration of previous double low. Weekly chart strongly downwards, monthly just turning to the up-side. Yuk. Confused. Stay out.

Just noticed this. I knew that there was stong correlation between (some of) the pairs, but having spent a massive two days watching the daily chart for the first time in my life i realise how much this is true. EUR-USD, AUD-USD and NZD-USD track each other really well, GBP-USD sort of follows along but has the descant.

Anything with JPY in it seems to have the same swing timings (although the magnitudes are different giving the curves different shapes). If we were to do a shenkerian analysis on this they'd come out pretty much the same.

Hmmm. Bernanke is speaking again later so it MAY be another market mover (what's he got new to say?). Poor bloke. I hope he's got his pension in a Euro account

Last night I noticed that trading daily candles means that I have to leave orders pending while I go to bed. This strategy was supposed to reduce stress but instead I was thinking "what if they're all triggered and then turn into a loss". Have yet to solutionar that one.

I lost control

Vaya, i thought i had it all cornered, then i lost some money even though the trade came round 5 mins later like always. Took the loss, going in a bit deep, just wanted to see some profits, then the trade had no room to breath. Gave back everything i earned yesterday in one trade.

I bought at the top

I still like to see the trade move in my direction before i get in, thus i lose the first 10 pips or so. I had the OANDA tick chart open later in the day and saw first hand how llate i get in. It's either that or far too early.

I didn't have confidence in my set ups

See above. Always end up being the worst type of momentum trader.

I traded at dead times

Go home, have a life, take a break.

I let a great trade go by...

This was a screamer on all time frames saying "buy me". However i let it go by as i thought, this is just too good to be true.

...So I got in at the end

Having seen the price move 200 pips i thought, oh well, might as well catch some of this after all, seems silly just to watch it go by. Too late.

Accidentally opened another position

I had the screen open and instead of closing a loosing trade at the "vomiting point" I opened another in the same direction!! Funnily enough, the price stopped falling almost instantly and shot the second trade into a profit. Good un-expected lesson in trade timing.

The daily "lets have a look at the candles end of day" idea is proving difficult due to lack on internet at home. And the fact that the time frame seems inconceivably large.

Just sticking with one currency for now.

Decide my set ups and WAIT. God, this a true test of pacience, especially when i see price movement that's not being picked up by my set up. I feel all left out!

oh, and...

Currency showing "up" on 1 hour chart but still dropped enough pips on the shorter time frame to stop me out.

Price came round about 2 hours later later. I therefore decided to watch just smaller time frames, and then missed the great set up on the longer time frame chart. I need another two monitors.

In a past life i was a Clinical Hypnotherapist. I was reviewing the terrible habits that i have trading and found myself last night mentally rehearsing how I was going to do things differently in the future.

I visualised myself letting go of the mouse and sitting back in my chair as the 1 minute chart zoomed into overbought and the price leapt up. I rehearsed doing nothing until i saw an absolutely brilliant entry point on one of the longer time frames.

I analaysed all the times I'm tempted by price to enter poor probability positions. Honestly, I have all the information i need on my screens. The problem is using it profitably.

So, I rehearsed also enjoying the trading day, taking time to look for confirmation on other time frames, entering in peace rather than in haste and anxiety.

This morning i am 4 winners in 4 trades and have made up nearly all the losses i made yesterday. And i'm in profit overall.

Another thing, I realised i was used to taking losses. Next, I'll identify where the belief that that's OK comes from. And how i'll deal with protecting my gains. I get much less careful about trade entry when I'm up overall.

Oh, just watched a naff C-grade entry go by without entering. Yay!

Also need to look at taking profit too early. Guess I'm just glad to make a profit. Will set stop loss over break even and let some of the position run.

If I can tidy up these psychological corners then "...by Christmas we'll all be millionaires Rodney".

hi elchoco, I really relate to a lot of the issues youve run into and am trying to work on them myself. Especially overtrading, trading when tired, overload of too many currencies/time frames, trading just to put a trade on,(for excitement). Also, discretionary vs. mechanical is a issue for me as I mainly am discretionary but wonder if I would benefit from a mechanical system.

I think moving to higher time frames really would help with a lot of these problems. It would force one to plan trades more and be more patient.

Hi JMT,

Yes, I guess i'm still a novice and this lack of having a system that i know and trust means that i'm really susceptible to all kinds of influences and opinions.

I leaned a lot from skunny's (enormous) thread which really boiled down to "put the hours in and make up your own system". So I'm using a hybrid Sexy-stoch with Spud-stoch template on multiple time frames. I'm still on shorter time frames as I have yet to make the break to being able to leave trades running without me being at the screen. I can see i'll have to do the math next week. 400 pips @ $2/ pip > 20 pips at $30/pip. Still it suits me for now.

However, even with the best sytem in the world, I've still got to trade it! I've had the same screen set-up for the last week but lost the plot on wednesday and went chasing price and forgot all about the "strategy". Watching price is so alluring sometimes. Had to give myself a severe talking to. A mechanical system is a good idea if it can be automated beyond your inteference!!

Glad your in for the ride!

El Choco

I remember reading an artcle about Tiger Woods. (I think it was him). He said that when he gets ready to tee-off, he concentrates on the hole and "waits for it to get closer". Then it's much easier for him to make the stroke.

The interviewer asked him if this always worked. "Oh no," he replied, "sometimes I just can't wait any longer."

Sounds like me impatiently waiting to trade.

Right, today was the day that i finally split my head open after banging it against the wall for so long as I gave up over 700EUR in profit by entering a trade at utterly the wrong time. Again. That's it. Forever. I quit.

I hearby solemnly swear never EVER to use short time time frames ever again. I've had it with you guys, we're through. OK?

I deleted all my old Metatrader profiles and set up new ones with Daily, 4 hour, 1 Hour and 15 min time frames.

I tried to find the losing trade i entered this morning at about 06.50 and, looking at the daily chart, realised I should have entered about three days previously. Staring me in the face was one of James16's perfect pin bars on the swing high, which, if I had maintained my initial reason for starting this thread which was to do daily candle set-ups would have been an obvious entry for about 400 pips thank you very much. Aaaaaaaaaaaaaaaagh!!! How often does my own impatience stop me from achieving things in the long term??? Bit of pattern in my life to be honest.

Right, so we now have some daily charts to look at. My god it all looks like looking at traffic flow from an aeroplane. Oh look, there's an area of congestion. What was I doing getting all bogged down and anxious in a 5 Min chart (or less) when I HAVE BEEN TOLD SO MANY TIMES not to????

Just goes to show you've got to learn your own lessons. Only when the pain is great enough will change take place.

So, I spent the day looking at my new landscape and wondering at the marvellous scenery on the 4 hour chart. I didn't take any other trades today, i think it was OK, I just watched them all set up and go on their way.

Miracle of miracles I also found a really useful entry tool on one of the forums here (it's amazing what you find if you look), so, although i'm at a loss for the day (and the week), I'm upbeat and confident about the future.

However, I might have to get used to holding trades for longer (obviously).

Goal for the week (maybe next week): Hold a position long enough that I can add to it on the way. I guess I'll have to go in smaller too. Lots to think about with a time-frame change.

Anyway, I feel that I've finally, psychologically, emotionally, turned a corner and today kicked the habit of (unsuccessful) scalping. I thought it suited my personality, but it seems I didn't know my personality very well. It's been like giving up a bad relationship. The pain was just too unbearable to continue like that. I know some people scalp successfully. God bles 'em. Obviously I was doing something wrong and I just seemed hard-wired not to be able to follow my own trading strategy. Today I formally opt out of trying.

I had a glimmer of the same desire to "enter at the last minute" looking at my new chart set-up, but as the price had already moved like 80 pips even I thought it was just too ridiculous to contemplate. A move of 8 pips on a 5 min chart would probably have left me open to temptation.

Lets see if I can't begin to post some of the longer time frame trades I saw go past today. That would give me a sense of accomplishment while I find my feet in a new land.

Trading can be a frustrating and lonely place. However I still believe the journey will be worth it. And what an inner journey! It's like trading makes very visible (or let's say undeniable) all my personality flaws. And the worst thing is each one costs me money !!

Happy Semana Santa.

El Choco

Also, note to self: Forget trading on the lap top. There is NOT enough room to see everything. Stop trying to kid yourself it's cool. You're loosing money.

An excellent journal El Choco. I am sure many will empathise with your observations of the various pitfalls of day trading. How you can do 20 things well but one mistake and you have not only given back all the profit but also you find your balance in the red. Been there and i have very large T shirts also.

Hi Zones,

Thanks for the Saludo, yes it's all been a bit intense recently. However I'm looking forward to next weeks trading.

I have just read Mark Douglas' Trading in the Zone which, although is badly waffly in places, has some undeniably good content too.

I'm going to do one of his exercises which is to take 20 of only the best looking set ups and see how where your balance sheet is at the end. My major failings include (but are not limited to):

1. Taking low probability set-ups due to thinking i'm missing out when I see price move.
2. Not accepting the risk as a cost of trading and therefore minimising my profits by early profit taking.
3. I'm still refining my entry conditions so I don't really know what a good set-up is.

Gracias de nuevo por la visita, happy trading to you.

El Choco

I would also like to explore the whole concept of value in Forex, to be able to identify undervalued and overvalued pricing. At the end of the day, it's just a market with differences in opinion about value.

I have in my imagination that I'd like to be able to say "1.5902 for EUR-USD??? That's way over priced!! Let's short until 1.4900 which is what it's worth." I could set a level on the platform and then walk away for a few days.

Only thing is, price can still rocket irrespective of "value", look at the .com bubble. No value to be found there, just the hope of future value. And Value is only what people give to a product based on factors such as scarcity, fashion and hype. (Can't help thinking that the USD has been reverse hyped recently.)

At the end of the day, this concept of value has to be tradable. Yes, the EUR-USD may be over valued at 1.59 but I would have said the same at 1.54, 1.55 and 1.56. But had I gone short at these levels I'd be mincemeat! So, how best to get an indication of value knowing it will be different from the current price??

An example. I live in Barcelona. I'd love to buy a property here, but a small flat in a not great part of town is going to be 350,000 Euros. Nice idea but IT'S JUST NOT WORTH THE MONEY (IMHO). However, people are paying this. It doesn't mean i would "go short" on property here, because I think price will go sideways until REAL Value (ie my value ) catches up. In the same way, people ARE buying EUR-USD at 1.5901 (the fools), but it's just not worth the money. Yet. In a years time maybe.

All this is a vain effort to be free of staring at the screen and being confused by conflicting indicators. Support and resistance offers concensus resting places for price, is that a value level? Hmmm, not sure where I'm going with this. Lot's of seperate thoughts that haven't quite come together yet. Just trying to look for some structure behind the pricing.

Or, is it an irrelevant discussion. That we just have to follow the emotion of price and profit from its ups and downs?? That "real value" doesn't exist and it wouldn't make any difference if it did?