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Clockwork 71's Psychology Thread

  • #1
  • First Post: Edited 10:53am Nov 6, 2018 7:04am | Edited 10:53am
I'm starting this new thread because Silent Service has gotten so long in the tooth and so jumbled that I think it would do a huge disservice to what I believe is the most important part of trading: psychology. I'm not exactly sure what this thread is going to be about as far as content is concerned, it might just be the ravings of a madman before it's all said and done. However, the longer I trade the more I realize that the technical set up truly doesn't matter, nor does the methodology.

I have no credentials in the field of psychology, but can only offer my thoughts and my professional experience as a trader and Forex analyst. This thread is going to be dedicated to the idea that when you look at the chart, trading seems to be so simple. However, I suspect that if you spend any time doing it, you know just how untrue that statement is.

For example, all you had to do a short the GBP/JPY pair since 2008 to make money. It looks so simple doesn't it? Or, if you had bought stock in Apple over a decade ago, you would've made a fortune. Again, it looks so simple.
In this thread, I will talk about why it isn't, and why that's so important. Feel free to chime in, nothings being sold here although I am technically a commercial member. This is more or less for my own amusement.
  • #2
  • Edited 10:53am Nov 6, 2018 7:06am | Edited 10:53am
I would point out that occasionally I will use a chart, but more or less just in the aspect of the psychology of the market, or perhaps decisions that you may or may not have made on a trade. Beyond that, I hope to look into why it is we trade, what type of trader we are, and perhaps many other topics that aren't even coming to mind. I am truly doing this off-the-cuff so to speak.
  • #3
  • Edited 10:53am Nov 6, 2018 7:16am | Edited 10:53am
The first thing that you need to do is accept the fact that you have no control. There is a popular thread here called "Technical Analysis Fallacy." While I don't necessarily think that technical analysis is useless, I think I understand why those types of thread to do well also. It's because you need to accept the fact that there is a certain amount of randomness in the marketplace with the exception of specifically defined areas.

In that sense, I think that both random walk theory and technical analysis are correct. For example, if you have a lot of banks selling the Australian dollar and 0.72, then obviously that's an important level. It makes sense to try to sell there as well, as the bulk of order flow should be able to help you with your position. However, anything that happens between that level and the next major support level is essentially random.

Making things even more messy and psychologically damaging at times, is the fact that those levels can't be trusted entirely. I mean, if something was reliable and a surefire bet, trading would be easy and we would all be rich. As a trader you have to understand that there is a certain amount of risk that you are taking with every trade. You have to accept the fact that just because the 0.72 level has offered so much resistance in the Australian dollar, that the market can and probably will eventually break above there. You may or may not be short the market once it does. If that happens, your job is to understand that order flow has been taken out in that region and the selling has been satisfied. You also need to understand that your position is incorrect, and it's time to leave the market.

Unfortunately, far too many people get upset at this point and that's the beginning of compounding losses. These compounding losses are brutal, and can cause major problems with your trading account. This begins the snowball effect, meaning that it gets bigger and bigger, as your losses pile up. By not accepting the initial loss, and perhaps doing something like revenge trading, you've only made the situation worse. What was once a minor and fairly unspectacular event is becoming terminal.
  • #4
  • Nov 6, 2018 10:48am Nov 6, 2018 10:48am
Like looking at past price action and then looking at the right hand side of the chart and realising you are still guessing which way price will go. The left side of current price is the past: it might help you guessing the immediate future. But that is what trading boils down to -taking a gamble on which way price will go. It helps if you have an idea where it might go according to the past and where you will get out if you realise your guess was incorrect. Then the biggie - can you handle the stress of watching the price oscillate between positive and negative; can you follow your road map or plan without letting emotion over ride your logic. can you stick to your plan or do you always fiddle with it when you have a loser. How do you react to a loser?
Psychology -you don't realise how powerfully it affects you until you put money on the line ( some one once wrote that to get a real feel for trading you should put some "skin" into the game -"micro lots" for example.) I am just a small time trader but I guess the bigger traders might give a nod towards these paragraphs.
every Saint has a past. Every Sinner has a Future
  • #5
  • Nov 6, 2018 10:52am Nov 6, 2018 10:52am
Quoting turnip15
Like looking at past price action and then looking at the right hand side of the chart and realising you are still guessing which way price will go. The left side of current price is the past: it might help you guessing the immediate future. But that is what trading boils down to -taking a gamble on which way price will go. It helps if you have an idea where it might go according to the past and where you will get out if you realise your guess was incorrect. Then the biggie - can you handle the stress of watching the price oscillate between positive...
Yes they would. I think that the longer we trade, the more we understand that there is a certain amount of luck involved. The skill is how you handle the luck - be it good or bad.
  • #6
  • Nov 7, 2018 8:40pm Nov 7, 2018 8:40pm
My first trade: (And a bit of rambling about my story.)

I can still remember my first trade like it was yesterday. I was so excited to get into the game, and once I got word from GFT that I was up an running, I just had to find a trade. This trade was going to be the first taste of just how uncomfortable trading can be. It was the first time I got to see just how much I had to learn. For my first trade, I thought I would trade the USD/ZAR pair. Seriously. My first trade was the South African Rand.

What an asshole.

Anyway, I can't remember which direction I went, but I remember that it took hours for it to go in my favor. I was a bit frozen by the fact that the trade was drifting away from me. I suddenly understood that there was a real chance that I was going to lose money. This wasn't something I thought much about before.

Here is a funny thing I just remembered: I was trading my first account, with a deposit of $2,500 in order to come up with enough money for a down payment on a house. (This was about a year before the financial crisis hit.) Seriously, I figured I would just turn that $2,500 into something like $50,000 to get the ball rolling. I had a new baby after all, and needed to get it together.

Back to the trade....I was into it for about 3 hours if memory serves me correct. I had no stop loss, because the idea that it wasn't going to work really didn't occur to me. Considering the pair I was trading, I am lucky I didn't blow up. Eventually, I closed out the trade with a roughly $12.50 gain. However, I remember thinking that it was the hardest $12.50 I had ever made. My girlfriend at the time thought I had lost my mind. She said, "You know that's like $4 an hour, right? Why in the hell would you be worried about that?" Good point. She's now my ex-wife and I still admit that. When you are right, you are right.

The point of this is that the emotional part of this trading thing is by far the hardest part. Any idiot can read a chart. It really isn't that hard. Want to know my background? I was a painting contractor. Yep. I painted houses before getting into trading. Some of the fellow analysts I work with have degrees in economics. I do have a degree, but its in Web Design and I don't use it. Honestly, a lot of the analysts that I deal with on a regular basis couldn't trade if their lives depended on it. Hell, half of them can't even read a chart that well. (I know I am putting this out there in public, but I tell them these kind of things all the time in real life. They probably deserve it to be honest.)

At one point or another, you will hear how two traders can have the same system, and come up with totally different results. Its actually true, and its because some people will get scared or angry, and screw things up. I know, I have tried this. I had a friend named Bob who was a better trader than I. How do I know? He consistently outperformed me, even when we would trade the same pair and in the same direction.

One of the most important things you will need to learn is the following:

Leverage is what makes Forex trading different than most other types of trading. However, in the end its all the same. What you need to understand is what you are comfortable doing. For me, I fucking hate scalping with a passion. There are few things that will bring my blood pressure to a boil quicker than watching the markets bounce around. I learned a long time ago that if I watch a trade too closely, I will find a way to blow it up. I also have learned my risk appetite when it comes to trading - as far as a percentage risked goes. Want to know it? 1%. Seriously.

So this is the first thing you should probably do:

Place a trade and walk away from the computer. Give yourself a certain amount of time in which you aren't willing to check on it. Seriously, let it run or fail. I would also start out your position size in increments of 0.25% initially. For example, take a trade that looks something like this: Sell EUR/USD at price X, stop loss wherever....but give it room, take profit at the next spot on the chart that looks like support and is hopefully more profit than the risk you are taking on. Risk is 0.25%, and look at your charts in 6 hours. The most important part is notice how you are feeling as you are going about your day. For more people, that measly 0.25% won't bother them. For the next trade, make it 0.50% risk. See how that changes things.

Eventually, you will notice some discomfort when you are away from your trade. Guess what? You take a step back by 0.25%, and that's you risk tolerance - for the time being. This doesn't mean it can't change, it probably will, but for now that number will do.

Let's say that you take 6 trades, and the 6th one was a bit uncomfortable, and you found yourself barely being able to keep away from the charts for your designated time. If that's the case - then 5 increments would be your risk tolerance. If you are following my path with this, then it is 1.25%. (5 * 0.25%) That's it, you have found one of the most crucial elements of your system and method.

Not only does this tell you how much to risk, but it also gets you away from the desk. You don't want to spend your life sitting in front of a computer after all. Its not glamorous, and there is always more money to be made. Enjoy your life, and leverage the one true commodity that matters: time. Make money while you are out doing something more interesting. That's the dream, making money while not even paying attention to it.

Anyway, enough for tonight.....the Blue Jackets are on in a bit.

Chris
  • #7
  • Nov 10, 2018 9:38am Nov 10, 2018 9:38am
The "Pinbar Fallacy."

One of the things I think that really got me into trouble, and I suspect so many others, is the idea of a perfect signal. What I mean by this is something that seems so reliable, and you suddenly get that 'ah ha' moment - or at least you think you do. The pinbar is a perfect example. (For those of you that don't know - it's simply the same thing as a shooting star or hammer.)

Anyway, there comes a point that you learn about a set up that seems so easy. You begin to think that you found something special. However, the instructor or analyst will explain to you that 'nothing is 100%', something you typically ignore. This is where you can really do some damage if you aren't careful. After all, if it is a very successful pattern, then why not double the position size? This could be the home run you have been waiting for after all....

So here is a question: What happens if you place a short trade based upon a shooting star, and then the trade stops you out? How do you feel? I know how I felt the first few times this happened.......I felt like I was lied to. I mean, trading is really difficult at times (almost always self-induced.) and I don't need this kind of shit making it worse....

Think about what that pinbar being broken is telling you though: Its telling you that A) your analysis wasn't correct, and B) there is real conviction behind the rally in the case of a broken shooting star. This is especially true in the case of higher time frames. If you can visualize this pattern, it is a big failure of buying pressure during the day/week/hour/whatever, only to see the buyers return and push even harder. There is a lot of useful knowledge there to be had. Not only are participants bullish, but they showed it twice and overwhelmed the sellers. Use that information.

I guess another way to think about it is this: Broken signals are signals as well. Instead of feeling cheated, understand that you are paying for information. The loss of 1% of your account on a failed shooting star is worth it, if that market turns around and continues to rally. You might get something like 3% on the move higher. That is trading, and you are making money. You don't have to be 'right', you just need to be trading in the correct direction. Those are two different things. You don't get to decide where the markets go. It doesn't matter if it makes sense. You aren't in the markets to debate the world - that's what the internet is for.

However, there is the possibility that a shooting star gets broken to the upside, only to get you involved in the trade higher, that rolls over and stops you out again. At this point, you are down two trades - but you know something important - this market is extremely confused and should be left alone.

I am a firm believer in how you react/think about things that are happening is the secret to success, in trading and in life. Make sure you are thinking, and not just reacting.

Here is a tip: if you take a loss, take 5 minutes away from the screen in order to settle the feelings. For those of us that don't day trade as much - this is already built into the plan......

Chris
  • #8
  • Nov 11, 2018 1:20am Nov 11, 2018 1:20am
Quoting clockwork71
My first trade: (And a bit of rambling about my story.) I can still remember my first trade like it was yesterday. I was so excited to get into the game, and once I got word from GFT that I was up an running, I just had to find a trade. This trade was going to be the first taste of just how uncomfortable trading can be. It was the first time I got to see just how much I had to learn. For my first trade, I thought I would trade the USD/ZAR pair. Seriously. My first trade was the South African Rand. What an asshole. Anyway, I can't remember which...

Nice thread... I agree !00%... technical setups..methodology..blah... its about managing the trade once your in... Which all boils down to psychology.
Which is why some of us are successful and others not.... Given the same system .

Ahhh Blue Jackets.... My friends son is playing first year with Detroit... I watched the BJ and RW game... Now no longer a Canucks fan since buddies kid plays for Detroit lol... on the bus off the bus.. But thats a Hockey psychology problem...

Cheers and Ramble on Madman.... I like it.
Master your Mind,,,Master the Market
  • #9
  • Nov 11, 2018 8:47am Nov 11, 2018 8:47am
Quoting bluesteele
{quote} Nice thread... I agree !00%... technical setups..methodology..blah... its about managing the trade once your in... Which all boils down to psychology. Which is why some of us are successful and others not.... Given the same system . Ahhh Blue Jackets.... My friends son is playing first year with Detroit... I watched the BJ and RW game... Now no longer a Canucks fan since buddies kid plays for Detroit lol... on the bus off the bus.. But thats a Hockey psychology problem... Cheers and Ramble on Madman.... I like it.
The Red Wings? That's too bad. :-)

Anyway, yes the psychology of a trade is the more important aspect to pay attention to. The ability to trust yourself and your system/analysis is the most important thing to master in my opinion. Take a look at this chart:

Attached Image (click to enlarge)
Click to Enlarge Name: zar.png Size: 20 KB


What is the most obvious thing that you see? Its funny, because a trader will over analyze the damn thing. This is the monthly USD/ZAR pair, and people that do what we do will go on about how "Its in an uptrend from the longer-term point of view. However, there recently has been some interest in gold, and interest rates in S.A. are higher than in the US. I think emerging markets are oversold. Countering to that is that the government is about to go full Zimbabwe with the white farmers."

Ask someone more intelligent - perhaps someone that doesn't trade, and they will say "Yeah, whatever stock this is, I would prefer to buy it than try to sell it." And that is about as in depth as they get. On top of that, they would be correct - assuming that they never over levered a position. They would literally beat most traders. So why are the unskilled so much better than most of us? Because they simply do what the market tells them to do.

This line of thinking is all you need. What is the market saying? Do I give a shit about the reasons? No, I am not here to debate the validity of the South African government or economy. I am here to make money. If the Dollar is overbought and going higher - I need to be a buyer, or at the very least don't be a seller.

I will give you an example in my own world: I think Bitcoin is a fucking joke. However, all one has to do is look at a chart to understand that $6,000 is the wall of death. Until we break down below there - I can't short this market. Doesn't matter what I think, it matters what the totality of the market does.

Attached Image (click to enlarge)
Click to Enlarge Name: btc.png Size: 51 KB


My personal take is this: If we get a lot of crypto in the real world, it will be central bank crypto. Once that happens, Aunt Millie is going with the Fed or the ECB. That's a fact. People do what they are comfortable with. Yes, there are central banks experimenting with crypto such as Hungary and The Bahamas, and you can beat your ass the Fed is watching. So there - I think its a ponzi scheme, and I am paid to analyze it everyday. All I do is report the pricing possibilities, and try to remain neutral. That's how you should trade it.

Anyway, that's it for now.....just a thought. Don't trade what you think. Trade what is. I think that is the answer to a lot of problems really. Learn to accept that the world/market is telling you its doing something - even if you know its wrong. Doesn't matter.

Chris
  • #10
  • Nov 14, 2018 1:21pm Nov 14, 2018 1:21pm
Whose interests align with yours?

This is probably the most important question you can ask yourself when it comes to trading. This will be a little bit less about psychology, at least as far as taking a particular trade is concerned, and more to do with the overall psychology of trading in general. Forex is a particularly interesting place to think about this question, because there are so many different reasons that a lack of understanding of this most basic question can get you into serious trouble.

The biggest problem with currency traders is that they are subject to so much in the way of crap when it comes to marketing. We all get involved in trading based upon lies. It's very rare that you can find someone that is willing to tell you the truth about currency markets and what types of returns you will get. This is because marketers understand that the average person is going to focus on how much money they can make and how rich they are going to get as opposed to the reality.
You are out of your mind if you think that anybody has the same interest in your account as you do. This includes all educators, technical analysts, signal providers, brokers, and even proprietary traders. This is coming from somebody who has worked as everything but a broker. I can tell you right now that even though I always wanted my people to make good money, the reality is I couldn't possibly care about at the same way they do. And the sad part is, that's the best case scenario in this industry.

Most of the people are simply trying to sell you something. Most of the time it's the dream of trading currencies on the beach, or perhaps even the yacht that you have bought with all of the gains over the last couple of years. The reality is, most traders don't make money. Even professional traders struggle to make 20% a year. However, would you be willing to pay $999 for a course that suggests you might get 10% a year? Add to that the reality that the average retail account in the United States is somewhere around $2000, and you can see where the problem is.

I come to you as someone who has worked in several different parts of the industry, and makes his living doing a couple different things involving the currency markets. I can tell you now that some of the "best and brightest" are complete morons. You would be stunned at how stupid some of these people actually are. But at the same time, this is why markets move the way they do. There's groupthink out there, which shows up as a trend. Think 2006 in the housing market, and mortgage backed securities.

Your broker doesn't give a shit about you either. They have the edge that casinos do, perhaps even better than that, knowing that over time they will extract more money out of the player base than they have to put out. It's quite stunning to me that people believe that the analysis given out by brokers has the traders interests in mind. Granted, if you are trading at a place that is not a market maker, then it's a little bit different scenario. The reason that they offer this analysis is that it makes you believe that trading is simple, and it gets you placing trades, which is how they take your money. (Basic market maker structure.)

The financial channels are absolute joke. The whole idea behind those channels is to get clicks, viewers, or listeners. It has nothing to do with informing the public, because quite frankly the people passing on this information very rarely trade themselves. This is especially true in the United States where there are strict regulations on what they can do as far as securities are concerned. Don't believe me? Pay attention to the next big craze, and once it gets to be all of the headlines on one of the larger financial channels, you can bank on it being near the top of the overall bubble.

While I don't know how much this is going to help you on any particular trade, the most important statement that comes to mind is "Follow the money, and you'll find the truth." Any time you are looking at purchasing a service, listening to analysis, or doing some type of transaction, ask the question as to whose interests align with you, and how much money is at stake. Quite frankly, if you pay attention to that situation, you will probably get to the bottom of the lot of stuff.

Anyway, happy trading guys.

Chris
  • #11
  • Nov 16, 2018 7:11am Nov 16, 2018 7:11am
Quoting clockwork71
I'm starting this new thread because Silent Service has gotten so long in the tooth and so jumbled that I think it would do a huge disservice to what I believe is the most important part of trading: psychology. I'm not exactly sure what this thread is going to be about as far as content is concerned, it might just be the ravings of a madman before it's all said and done. However, the longer I trade the more I realize that the technical set up truly doesn't matter, nor does the methodology. I have no credentials in the field of psychology, but can...
Hey Chris

Many thanks for starting this thread. Your wise words are very much appreciated

Love your keep it honest and real approach to trading. Your FF thread and Trader Guy web pages are a routine port of call for me to stay grounded and honest (when the Behemoth of FX bollocks starts creeping back into my psyche)

My trading story is typical. When I first came across forex trading I thought - how hard can this be? I literally placed my first live trade on the Monday thinking I would be choosing the Ferrari colour by the following Friday.

Of course you all know the rest - several blown accounts, expensive systems/indicators, getting sucked into all the BS and hype, trading fundamental events - like NFP (that I now completely ignore - yep you heard right). Worst of all were the long late and sometimes sleepless marathon nights turning into weeks and months glued to one device or another in frozen mode, monitoring my ever increasing drawdown.

I have a family and kids and other shit to do, something had to change.

I almost gave up trading but then when researching support and resistance I ‘stumbled’ on the silent service method thread and it has completely changed the way I trade and more importantly the way I approach trading mentally.

I read the first 100+ pages of the thread (with the help of Arfer Dailys index P1). The thread was like a revelation for me, so grounding, real life stuff and brutally honest (such a refreshing change in FX and no credit card needed!) This stuff was written/posted an age ago (in FX terms) but there are still some relevant ‘gems’ in there, I would recommend to anyone.

The ONE thing above all I took from those first 100 pages is position sizing. I think you make the point extremely well and many times throughout your threads and web pages that trades/trading should be in progress while your busy (and comfortable) doing other things or real life stuff.

With trading I’m still very much a work in progress (I guess we all are) Sometimes I’m right (in the right direction that is) but often find myself going the wrong way. Difference these days when wrong I canstill think straight, manage my trades, risk and money instead of morphing into a frozen money losing zombie aimlessly staring at the charts.
Amazingly I now place trades or orders and go do other more important stuff - like sleeping. Yep really, never thought I hear myself saying that back when I was buying my first $1000 indicator package.
Plus (and you made the point elsewhere in this thread) when your wrong essentially you've paid for the information to put you back in the the right column. You just have to make sure you don't pay too much for it.

I still make mistakes/have faults (just ask the Wife) a current favorite is over trading - thinking I always have to have a position in the market. Something that you have also have covered in detail in past posts. However I (think?) I now know myself better and work hard at watching and waiting for the best setups.

Keep the sage words coming Chris.
Health Wealth and Happiness
  • #12
  • Nov 16, 2018 7:25am Nov 16, 2018 7:25am
Quoting FireEater
{quote} Hey Chris Many thanks for starting this thread. Your wise words are very much appreciated Love your keep it honest and real approach to trading. Your FF thread and Trader Guy web pages are a routine port of call for me to stay grounded and honest (when the Behemoth of FX bollocks starts creeping back into my psyche) My trading story is typical. When I first came across forex trading I thought - how hard can this be? I literally placed my first live trade on the Monday thinking I would be choosing the Ferrari colour by the following Friday....
Thank you so much for the kind words. And yes - we are still learning.

If you really want to see how bad things are under the surface - try day trading futures. All of those initial bad habits come right back. That's my latest argument with myself.

And yes - I agree with the over trading part. That's without a doubt the big one I had a lot of trouble with.

Chris
  • #13
  • Nov 19, 2018 11:11pm Nov 19, 2018 11:11pm
Trading isn't difficult.

So one of the hardest things for a trader to understand is just how simple trading is. I know this seems a bit counterintuitive, but follow me for a moment here. The average new trader gets excited by the world of finance, mainly because they don't understand how boring and simple-minded it truly can be. I personally know some really fucking stupid people that manage a lot of money. It's kind of frightening to be honest.

But think about it: if the true dullards of the world are making so much money, how difficult can it be? Here is an experiment you can run: Watch CNBC (or any other useless channel) for a week. How many times do you hear the same thing time and time again? The managers are all talking about the same stocks, (Apple, Facebook, Tesla, etc.) and the same buzzwords like "Quality companies, looking at value, strong balance sheets, etc." I mean, its the same shit over and over again.

The typical conversation is something like, "Well....investors have seen the markets roil over the last few weeks, and we are now down 5% from the top, so is it safe to step back in? Here's to talk about it are two dipshits that are making a fortune doing the same thing that all of their friends are doing. They will now tell you how 'this time it is different.'" Look no further than CNBC's incessant blathering about Bitcoin. I mean ffs - its down 75% as a write this. Yes, I understand that it was just a few hundred dollars a couple of years ago - but no, you did not buy it back then.

So why do so many fail if it is easy?

That is the whole point of this little side project I am writing out. It has nothing to do with entries, exits, and systems. (Ok, it does a little, but not much.) One of the giants of trading, Jesse Livermore, once suggested that you should never exit a position unless there is a reason to reverse it. Think about that. It means that you need to let the market tell you when to exit a profitable trade, not just because a place you thought it could go was hit. This is why trend following works, because you will sometimes do better than you thought possible with a position. I don't care how good you think you are, there is a lot of luck involved in trading also.

This is what the morons do. They make money doing that. (Following longer-term trends, and counting on the market to save them on pullbacks.) They have a system they follow, and it is probably quite simple. They can't think for themselves, and therefore are willing to stick to it. Over time, there is a statistical edge, and they make money. I cannot stress this enough: Statistics don't lie, but our emotions do. If a system works out over the long run, the only difference between a trader that makes money and one who doesn't is whether they continue to follow the system. Most will over trade or revenge trade. Most will lose. This is something that I have been guilty of far more times that I like to admit.

So what changed for me? Simple: my mother died. I started to look at things differently as you would expect. I started to understand that trading was just something I did, and it wasn't even really that important in the end. My mother didn't tell me at the end she wishes she had more money. Honestly, she said "at least I had three good years with CJ." (my son) She didn't give a shit about money. I understand that you need to, and having a lot of it makes life easier, but in the end it isn't what is important. I mean, I would give every dime I have made to have her in my sons' lives now. I wouldn't even think twice about it. I would also give it all up for about a hundred other things I can think of. Money is how we keep score, and that's probably the best way to look at it when it comes to trading.

I am telling you - trading isn't as hard as so many of you make it. Trust me, I've been there. Find something that works - even a simple moving average crossover system, and stick with it....even if you just demo it. You will see that over time it makes money. There are a lot of systems that are freely available that make money out there. Use them on the side as demo if nothing else, and collect the data. The only real data you need to be honest is the balance at the end of your trial. If it is higher than when you started - congratulations, you are in the top 10% or so.

Trading is only as difficult as you choose to make it.

Chris
  • #14
  • Nov 21, 2018 3:42am Nov 21, 2018 3:42am
I thought about this and really its about grading things,
pin bar is famous but that's a low-reliability pattern all on its own
one thing J16 did do right is add other factors

Quoting clockwork71
The "Pinbar Fallacy." One of the things I think that really got me into trouble, and I suspect so many others, is the idea of a perfect signal. What I mean by this is something that seems so reliable, and you suddenly get that 'ah ha' moment - or at least you think you do. The pinbar is a perfect example. (For those of you that don't know - it's simply the same thing as a shooting star or hammer.) Anyway, there comes a point that you learn about a set up that seems so easy. You begin to think that you found something special. However, the instructor...
On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #15
  • Nov 21, 2018 3:43am Nov 21, 2018 3:43am
there are a lot better patterns than a pin bar seen every day
On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #16
  • Nov 21, 2018 3:45am Nov 21, 2018 3:45am
imo the actual risk should be on your grading of what you're looking at,
rather than fixed amount
On-site guru & also FF member's' psychiatrist, when not drinking tea
  • #17
  • Nov 21, 2018 6:54am Nov 21, 2018 6:54am
Quoting Bones
imo the actual risk should be on your grading of what you're looking at, rather than fixed amount
I can agree with that, but you must be able to accept the fact that you can still be wrong. Also, you should have a certain amount of experience before grading any set ups. There is no alternative to experience.....
  • #18
  • Dec 1, 2018 6:38pm Dec 1, 2018 6:38pm
Why exit a position? There needs to be a reason.

I think one of the biggest issues that I ever faced was how to exit a trade. While most systems or educators can tell you how to enter a position, the exiting of the position is much more difficult. There are a slew of issues coming at you at the same time. This is typically a psychological issue, and one that is born of a lot of bad experiences.

One of the biggest issues is being impatient. This isn't simple boredom or a lack of determination. It is a situation - most of the time - where the trader has fear driving their trade. After all, there more than likely a lot of psychological damage done by things like watching a winner turn into a loser one too many times. There are also concerns because you may not have any idea on when you want to get out. This is a major issue.

I can't even begin to tell you how many times I have f**ked up a trade because I had no idea on my exit strategy. There are a lot of different types of exits you can take, and quite frankly I almost never pick the same strategy two trades in a row. However, I have found it much better to at least have a plan to get out. I mean, you have a plan to exit a loser, why don't you have a plan to exit a winning position? Unfortunately, you know the main reason: You want to keep those gains while you have them. You know that winning isn't easy sometimes, but cutting your gains short out of fear guarantees that you will lose in the long run.

So when you enter a trade, if you have a level you think it a target, you should stick to it. If you don't, but know that the trend is with you - and you want to let it run - then have a strategy to move your stops along with the trade. Perhaps you choose to move them up after a swing low forms, then so be it. Perhaps you move them up to just under a large round number once it is cleared, a personal favorite of mine, or maybe something else. The point is know what you are doing ahead of time. Do not just take profits because they are there.

Take a look at the chart below:

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When we break the (poorly) drawn trend line, you could have several options. You could simply aim for the 129 level, and take profit with a predetermined order. Alternately, you could decide that you are looking to move the stop loss to break even as soon as you are 30 pips in the good, and let it run, knowing that you will have psychological resistance at the large number of 129. Once you break above that level, you look to move your stop loss to just below that level. A little while later, the market tells you to get out by hitting your order. You work is done, and once you make those decisions, all you need to do is execute.

Do not place a trade until you know the entry, the size, and the exit. Anything else is simply throwing money around and gambling. I am not trying to tell you the best way to exit, just that you must know when, according to what you believe/know/think.
  • #19
  • Dec 2, 2018 2:04am Dec 2, 2018 2:04am
Brilliant writing It really worth the time i spent here. Subscribed & will be following each posts. Let those words keep coming. Thanks a lot.

Best Regards.
How big can you think!
  • #20
  • Dec 2, 2018 11:37am Dec 2, 2018 11:37am
I do agree ,but I know you grade it with you're history

Quoting clockwork71
{quote} I can agree with that, but you must be able to accept the fact that you can still be wrong. Also, you should have a certain amount of experience before grading any set ups. There is no alternative to experience.....
On-site guru & also FF member's' psychiatrist, when not drinking tea
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