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Attachments: Keep Calm and Carry On Trading
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Keep Calm and Carry On Trading

Quoting leoclarke
{quote} Daytrading suits me the best, I have no positions open at the end of a long day, I know I wont be woken up by rude shocks, but I just can’t believe the mettle of scalpers. Takes a lot to enter and exit in a fraction of minutes. Hats off to those who trade M1 charts!
Risk management is always the key
Strategy will come with time

it depends on each person mentality and availability
Like am working in my shop so am a swing trader and like I have patience to let the trade do whatever it's wants
Trading is a business
Quoting hazelj80
{quote} Thanks I have observed a lot of indicators but range/volatility remains to be one of the most useful tools for trading markets. That's the only thing I know that changes. Market volatility. When people say markets change that's all I think about. I mean 10 years ago pairs were moving 150-250 pips a day. Some of those same pairs don't even move 60 pips now Different times indeed
Hi hazelj80,
Yes, volatility is a very cyclical thing and thus a major component of market behaviour that creates trading opportunities for us. It's also observable that there can be what seems to be structural changes in volatility in markets, I have many times over the years changed markets because the volatility in what I was trading dried up. You do indeed have to move with the times, in trading as in everything else!
Quoting leoclarke
{quote} Daytrading suits me the best, I have no positions open at the end of a long day, I know I wont be woken up by rude shocks, but I just can’t believe the mettle of scalpers. Takes a lot to enter and exit in a fraction of minutes. Hats off to those who trade M1 charts!

Hi leoclarke,
Many thanks for your comments to the thread. It is, I think, a matter of trading whatever style/timeframe that suits an individual's own personality. I trade off M1 charts though I'm not a scalper in the purest sense, I just take short duration trades, it suits me. I am in turn impressed by the mettle of longer term traders who can sit and watch good open profits mostly evaporate to hold on for the bigger swing coming next, I find that almost impossible to manage.

It all neatly demonstrates that picking a method & timeframe that suits you is absolutely critical if you want to have a chance of winning long term. You really do have to take some time and effort to understand your true trading personality and psyche.
Keeping calm is easier said than done. My little advice is to think neither profit or loss you would make on the particular position. Think and focus on setups
Make all possible mistakes in Demo and rain in pips in live account
9jatrader All Time Return: 375.6%
Quoting Oldtraderman
{quote} Hi hazelj80, Yes, volatility is a very cyclical thing and thus a major component of market behaviour that creates trading opportunities for us. It's also observable that there can be what seems to be structural changes in volatility in markets, I have many times over the years changed markets because the volatility in what I was trading dried up. You do indeed have to move with the times, in trading as in everything else!
Yeah I think forex is still great but not afraid to look at the next big frontier....
Quoting 9jatrader
Keeping calm is easier said than done. My little advice is to think neither profit or loss you would make on the particular position. Think and focus on setups
Hi 9jatrader,
Thank you for contributing to this thread. I would agree wholeheartedly that focusing on the trade and trading it well whatever the outcome is a solid attitude to take. If you keep thinking about the money involved, staying calm is very difficult. I suspect this is why many trade in demo fine but then struggle once live. It is a very different psyche when your hard earned money is on the line but you've got to try to forget that and focus simply on trading each trade well - ensuring setup, sizing and exit follows your plan, each and every time. Think trading process, not money. If you do the first well, the second will follow naturally enough.

It's important because there is most certainly such a thing as a good loss; a losing trade that ticked all the boxes on your plan. Trading is an exercise in probability, not all trades will work, many solid setups can and will fail. But if you traded correctly it'll only be a small loss and you will make that back soon enough when another solid setup does work as hoped.

Equally, there are bad winners; a winning trade that you didn't fully follow your plan but got lucky on. These are actually potentially quite insidious as they can encourage bad habits, some very dangerous, e.g. averaging down a losing trade. So many times the averaging down enables you to bail out at a scratch or better, so much so that you begin to think it's a good idea. It isn't, eventually a trade will come along that doesn't come back and your account ends up losing way more than you had ever imagined on that trade, often blowing the account in one huge loss. Much the same with loosening your predetermined stop loss to give a trade a little more room to come back. So often it does and you are saved, but eventually one won't and you are on the path to being doomed.
Quoting Oldtraderman
{quote} Hi 9jatrader, Thank you for contributing to this thread. I would agree wholeheartedly that focusing on the trade and trading it well whatever the outcome is a solid attitude to take. If you keep thinking about the money involved, staying calm is very difficult. I suspect this is why many trade in demo fine but then struggle once live. It is a very different psyche when your hard earned money is on the line but you've got to try to forget that and focus simply on trading each trade well - ensuring setup, sizing and exit follows your plan,...
This is why honesty is one thing a trader must demand himself the most. Results may vary at the end of the day, but the trader must not cheat himself on his process.
Quoting 9jatrader
.......... Think and focus on setups
___
That's all i do...then feed the micro scalp setups into a merciless cocktail of bts that do 99% of the patience, and greed fights.
Hats off to you all (swingers and scalpers) with the composure to manually face off with market.

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L.L.L.T
  • Post #49
  • Quote
  • Edited at 6:56am Oct 5, 2021 6:33am | Edited at 6:56am
Hi all,

1. Discipline Seems To Be The Hardest Word

Having tackled the subject of risk management in posts #22-26, I now feel rather obliged to partner this with a discussion on discipline, this being the other topic I bang on about relentlessly. It’s just as important and will help to put the risk management posts into their proper context. Of course, risk management is an essential part of the wider topic of trading discipline and I will incorporate its role here at the appropriate moment.

But let’s start with some obvious questions:
- What is discipline in trading, exactly?
- Why is it important?
- How can we effectively go about cultivating it?

As to what trading discipline might be, I don’t think there is a single universally accepted formal definition of it but I have seen many different takes on the subject covering a wide range of concepts including hard work, patience, adaptability, mental toughness, independence, having a plan, managing risk, consistency, contolling your emotions, forward thinking, etc. etc. etc. Clearly a lot of moving parts here and all do have a valid connection to trading discipline, but hard to get your head around when lumped together like this. So I’m going to try to simplify here and narrow it down to just six words that I think is the key bit many traders don’t get quite right and it costs them dearly in their trading:

Discipline is following your trading plan.

Just that. Have a plan and follow it relentlessly without exception. It does of course require a rather significant precondition - that you have a sensible trading plan. Now, I did mention in post #25 on the management of risk that trading in essence only requires three things: a buy signal, a position size, and a exit decision. So a trading plan at the minimum needs to deal effectively and thoroughly with these three things. Rather than a long digression on trading plans I’ll just give you a summary of mine as an illustration:

  1. Buy signal is after price makes a directional move, partially retraces, and then restarts.
  2. Position size is so as to risk 1% of the account at the stop loss.
  3. Exit is either at the stop loss, at +1R, or if a strong move at first pause beyond +1R

Essentially that is the complete plan. Obviously there are lots of other fill in details, e.g. what market(s) and time frame to trade in, etc. but these three things drive everything else. I have a clear idea of what I’m looking for and when to pull the trigger; I have a stop loss and I position size off that so as to create a 1% risk; and I have an exit process that covers a loss, a win, and a windfall gain (no such thing permitted as a windfall loss, of course!). I’ll come back to the role of the trading plan in discipline when we tackle the third question posed above of how to effectively cultivate discipline.

But for now we have at least a focused definition of what trading discipline is to work with. Having got there, the next post will consider why this definition important to adhere to.

  • Post #50
  • Quote
  • Edited at 6:57am Oct 5, 2021 6:35am | Edited at 6:57am
2. The Importance of Being Disciplined

Last post we came up with a simple working definition of discipline. Great, but why is it important, anyway? Simply put, because of two things:
- the probabilistic nature of trading
- that trading offers unbounded losses

Trading is inherently a game of uncertainty and unpredictability. Price can and will do whatever it likes, whenever it likes, for whatever reasons it likes, and for as long and as far as it likes, all of this completely regardless of your views on the matter. Your “perfect” setup can and often will fail, and price can keep going the wrong way a lot longer than your account can remain solvent. It is always a game of probability, not certainty, and there is largely no limit to what you can lose.

These are absolute truths about the nature of trading. If they unduly worry you, you should seriously consider not playing the game. If you do play, you have to accept them completely and ensure the worst can never happen to you.

Markets offer an infinite number of trading opportunities, all the time, over and over. They are an opportunity generating machine and also a risk generating machine. Your job as a trader is to consistently only select those opportunities you want, and then to effectively manage the risk of trading those opportunities. This task requires, above all, discipline. And according to our working definition of the last post, it therefore also requires a solid trading plan to guide you in this quest. A solid plan and the ability to follow it.

The problem in doing this lies in the fact that markets offer so much opporunity, and markets resolve these opportunities in an unpredictable way. It’s all too easy to get waylaid into taking trades you never meant to; and even if you do manage to stick to just the ones you really want, it’s still all too easy to convince yourself it has to be right, even if the market is telling you otherwise. You can only really avoid these traps by trading with discipline, following only your plan and 100% accepting that many times you will be wrong even if you do so. Then your job is to cut that loss short, your plan needs to cover that eventuality and you need to be able to follow it without question or second guessing.

I do hope I’ve convinced you that discipline is essential in trading. If not, please do whatever it takes to convince yourself but you must get there if you hope to survive and propsper in trading. That achieved, we’ll tackle how to incorporate discipline in your trading in practical terms in the next post.
  • Post #51
  • Quote
  • Edited at 6:57am Oct 5, 2021 6:37am | Edited at 6:57am
3. A Beautiful Mind

in the previous two posts we have covered what trading discipline might be, and why it is rather essential to have it. Here we shall consider how it can work for you in action. In a real sense we have already gone over most of the necessary groundwork for this: have a solid trading plan and stick to it. And we’ve already touched on why the nature of markets themselves tend to make this difficult to achieve in practise.

What we haven’t yet really considered very carefully is our own psychology and emotions. When you look around many areas of life you see people having problems with maintaining discipline. Think about being on a diet. It just means eating less and/or better plus perhaps also exercising more. Conceptually pretty simple, easy to structure an effective plan for but really hard to keep to the discipline of it in reality. Quite a lot like trading, really. But why is is so tough? I think because we are inherently emotional creatures. What we want to do and what we should do are not necessarily very well aligned. The nature of trading (and food!) tends to exploit this inherent emotional weakness that we all have.

There is also the small matter of ego. Ego is in fact (more so in men than women as a generality) a huge matter for most of us. We like to feel good about ourselves, we like to feel successful, we like to be right, we like to be in control. All perfectly understandable but not great for trading. Trading is about not having any control over what the market does, and about being proved wrong a lot of the time, in an unpredictable way. It’s all pretty difficult for our egos to handle.

These inherent human frailities must be kept on a tight leash when we trade. It’s why trading is often described as being somewhat unnatural for us. I think it is. It requires real effort to maintain a rather unnatural emotional and psychological equilibrium. This is the essentially the role of discipline in trading and it is expressed through having a solid trading plan, making yourself follow it without doubt or exception, and having total equinimity to the outcome of any given trade. Yes, it’s really difficult to do. It’s not the concept or process of trading that’s so tough, it’s keeping to the straight and narrow that is.

So, in summary, maintaining discipline in trading in practise requires both of:
- always following a solid trading plan you have full belief in
- cultivating a somewhat unnatural emotional and ego stability

I know that’s not much of a nice, precise set of rules for you to follow in order to trade with discipline but it’s the best I can do because ultimately the discipline has to be uniquely cultivated within each one of us, in our own way. Your trading plan is a great tool but it’s of no value if you can’t handle it correctly, that comes only from within you. Good luck!
Quoting djahidait
{quote} Risk management is always the key Strategy will come with time it depends on each person mentality and availability Like am working in my shop so am a swing trader and like I have patience to let the trade do whatever it's wants
Yeah each to his own, like i won’t be able to catch any sleep if i were to leave position open overnight.
Quoting Oldtraderman
{quote} Hi leoclarke, Many thanks for your comments to the thread. It is, I think, a matter of trading whatever style/timeframe that suits an individual's own personality. I trade off M1 charts though I'm not a scalper in the purest sense, I just take short duration trades, it suits me. I am in turn impressed by the mettle of longer term traders who can sit and watch good open profits mostly evaporate to hold on for the bigger swing coming next, I find that almost impossible to manage. It all neatly demonstrates that picking a method & timeframe...
Very well said, I think that one critical trait that is commonly required for all traders is patience. No matter whether one is trading smaller charts or holding on to longer positions, within that span of time that the trader is in the market, he can ignore patience only at his own expense. It’s a very easy thing from outside, but the hardest of all to achieve, don’t you think?!
  • Post #54
  • Quote
  • Edited at 4:12am Oct 7, 2021 3:54am | Edited at 4:12am
Quoting leoclarke
{quote} Very well said, I think that one critical trait that is commonly required for all traders is patience. No matter whether one is trading smaller charts or holding on to longer positions, within that span of time that the trader is in the market, he can ignore patience only at his own expense. It’s a very easy thing from outside, but the hardest of all to achieve, don’t you think?!
Hi leoclarke,
I do like your comments on patience regardless of time frame traded; it's very true indeed. For example, I trade off M1 charts for short duration trades that typically last only a few minutes yet patience is still something I have to have.

You still have to wait until all the ducks line up and take just the 'best' setups for your method. It's too easy to jump in on suboptimal trades, I think because greed is a little more powerful than fear in the scheme of things. And even if you manage that you still want to time it right and not jump in too early when a rather better entry price would become available if only you held off for a little longer. The market so often puts in one extra wiggle before it truly moves and it usually pays to have the patience to wait for that. Of course, sometimes it means you miss the move but that's trading, you simply console yourself that your patience often saves you being stopped out on the wiggle, and that another opportunity will present itself soon enough - if you have the patience!

I have to admit I have rather less patience when it comes to holding onto positions but that is more a function of my short term trading style. I have a clear plan of what I expect a trade to do and if it starts meandering around rather than go as planned I am quick to cut. Longer term and/or trend traders clearly have to have more patience with open positions to let the move and the profits develop so it is even a greater demand on them.
Hi all,

I want to be more patient, right now.

Ever since I read leoclarke's post #53 this morning about the importance of patience, the subject has been sitting in my head and so I thought a modest examination of the matter might be worthwhile here. Patience is indeed really important and perhaps rather unappreciated in the actual process of trading, for how you execute your trading plan in reality. And it strikes me there are at least two different kinds of patience in trading, one existing before you enter a trade and the other once you are in.

When you are waiting for a good setup to form according to your trading plan you require a quite detached kind of patience. You sit there idle but alert, watching potential setups form. Sometimes they do and sometimes they just fizzle out or just don't develop quite right enough for you. You need to be able to do nothing for as long as it takes until the right setup comes along without getting frustrated, bored or itchy for action. I think it's particularly difficult if you've just taken a loss and, being human, you want to get that money back asap. Lack of patience here can be very expensive as it is too easy to jump in on poor setups or abandon your method entirely, just to get that money back. You can lose all risk control and discipline in making a series of rash trades you'll later regret.

However, once you're in a trade I think it's a different kind of patience that comes into play. It's the patience required to let a trade develop and not cash in as soon as you see a modest open profit to grab. Given prices continually gyrate you need a patience that is a sense of detachment so your emotions are not pulled back and forth by every tick move in the market. I think is a little different from the sitting-on-the-sidelines kind of patience waiting to for a setup, possibly because there are real profits ebbing and flowing now.

Equally, you need to be able to cancel that patience and act decisively if you see a trade is just not working out. Then you have to cut and get out because playing good defense and protecting capital is more important than the greed to wait for big profits. If a trade is going nicely your way then sure, be greedy and patient. But if it doesn't look right or starts giving a clear signal that it is going wrong, patience becomes a vice, not a virtue. Letting a poor trade go very badly wrong in the hope it will come back is not patience, it's poor trade management. Of course, having a firm stop loss in place that you don't get tempted to mess around with is a good way to deal with this problem if you can't do anything else. I also have a rule that I won't let a trade test a level more than twice: say I buy at 100, it goes to 110, back to 95 then 110 again, I am certainly going to cut that trade at 100 for a scratch if it drops back from 110 again. Two goes are enough for me and it's a practical way of limiting your patience in managing a trade that is not progressing.

I think these two sceanrios - waiting for a setup and managing a trade - both call for patience but patience of a different kind. You need to be able to develop and cultivate both to trade effectively.
Hi OTM,
I have found your earlier trading journal inspirational. I followed you from there to this thread. You seem to be really enjoying the activity of trading as well as the teaching of it. Whats striking to me is the contrast between your calm and measured style and the M1 timeframe you choose to trade. Conventional wisdom would hint at a person with twitchy fingers perpetually perched in a painful hover over the price action to squeeze out the last pip possible. You seem to be the opposite of that image.

How did you arrive at the M1 timeframe as your favorite cruising ground, as opposed to, say, M5 or higher? Trading literature is full of expert advice to avoid the M1 at all costs due to the chaos inherent in smaller timeframes. Was it a result of trial and error, or did you start there and stick to it? Given that you trade boxes and flag patterns, wouldn't one expect for these patterns to be more durable at a slightly higher timeframes? Would you still trade the M1 if you were trading, say, spot EUR/USD?

I truly appreciate the commitment you have shown to the denizens of this forum teaching your art. Many thanks.

Ardy
  • Post #57
  • Quote
  • Edited at 8:06am Oct 9, 2021 7:38am | Edited at 8:06am
Quoting ardy
Hi OTM, I have found your earlier trading journal inspirational. I followed you from there to this thread. You seem to be really enjoying the activity of trading as well as the teaching of it. Whats striking to me is the contrast between your calm and measured style and the M1 timeframe you choose to trade. Conventional wisdom would hint at a person with twitchy fingers perpetually perched in a painful hover over the price action to squeeze out the last pip possible. You seem to be the opposite of that image. How did you arrive at the M1 timeframe...
Hi Ardy,
Thank you indeed for your kind words, much appreciated. I have been in the investment business by choice from my very first job out of university for over 35 years now so it is a vocation (addiction perhaps?) and I do indeed very much enjoy my trading. Posting on these threads is my way of sharing my experiences in the hope it might help other traders, I have learnt so much from others over the years it only seems right to try to do my bit in turn.

Your comments on the M1 timeframe are very interesting. I used to think the same, that M1 is way too noisy, fast and chaotic to be of any use, but I believe I was wrong in that. I became convinced that market price action is essentially fractal - like the same repeating branching on a tree observable at successively smaller scales from trunk to twig. If that is so, then a M1 chart should be indistinguishable from a M5, 1hr or daily etc. chart if you took away the axes labels. My observations suggest this is true and from there it follows that M1 is as valid (or invalid!) to trade as any other timeframe, it just all happens more quickly through time.

Allied to this is that I also became convinced that trading at best only generates quite a small edge so statistically you need lots of goes for your edge to be crystallised. Analaguous to this, roulette is a game with only a small edge for the house which is why casinos spin the wheel thousands of times all day long (it's also why they have table limits and why I have a firm stop loss on all trades, but that is a digression here!).

Put these two convictions together and it makes perfect sense to me to trade M1 as it gives me just as valid setups as longer timeframes and offers me more goes per period of time. I need both to have an edge and be able to exploit it effectively. And to address your specific questions, it follows from the above that I clearly don't think all the 'expert' literature is correct, nor do I think my core patterns are more durable at higher timeframes.

I would also trade M1 on any market I traded, due to a third conviction of mine: that all liquid, active, freely traded markets essentially display similar basic price action. That said, I should add that markets do also display individual specific characteristics, e.g. stockmarkets have an official open & close that generates specific volatility at these times, whilst forex markets generally go on 24/7. So you'd do well to get used to the specifics of any given market despite the more general price action similarities.

Finally, as for my appearing calm and measured, it's true to an extent but it is much easier to write in calm and measured terms after the event as I do here than when actually trading. My screen has received rather more than its fair share of expletives over the years! What I have developed over time is an equanimity towards the outcome of my trades. Each individual trade is mostly a random event (back to my small edge conviction) so there is no point getting worked up about whether it happens to win or lose. You learn to keep plodding on through thick and thin and focus on maintaining discipline, process, consistency and risk control rather than individual trade outcomes. Think of measuring your result over 100 trades, not 1.

Hope that addresses your points OK, good questions!
Quoting terrybridges
In this constantly changing environment of trading, it is very difficult to hold on to one’s patience. Most of the time traders are too eager to jump in and trade whenever they see an opportunity, but these snap judgements apparently cause them to lose money.
Hi terrybridges,
Many thanks for your contribution to the thread. I agree, patience is a necessary virtue in trading to stop traders jumping into poor trades at a whim or snap impulse. Greed (and also perhaps fear of missing out) I think, is a more powerful emotion than fear itself. The problem is that the market gives so many false moves that it is too easy to be lured in and lose, when only a bit more patience to check it is not a fake would save them so much over time.

That the market seems to generate so many false moves is a prime reason why I structure my trading system as a failed test method (though always trying to go with the prevailing flow). Failed tests are very common, plus the failed test happens first and so gives you time to see the price action unfold before needing to commit. Also, if the test does not fail you are not in and so not dragged away to an instant loss. These are all little edges that add up to give my method the modest positive expectancy it has.

And, of course, I never trade without a firm stop in place. Trading is a probability game at best, we never deal in certainties so I am always prepared for, and willl accept (if not exactly enjoy) the worst, even when the best looking setups present themselves.
The mantra to a successful trading career is staying updated. The market keeps changing and you must know what you want to do in a certain situation. When you know what you are doing, you do it better. You must be disciplined throughout your trading career so that you know which way to go.
I think the key to calmness is the ability to stop in time. It needs to be worked out at all costs. Without it, you can quickly go to near-depressive states, and so everything will only get worse.
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