TheChalleger's Journal - My Trading Journey

When people hear that I am an active trader and a professional psychologist, they naturally want to hear about techniques for mastering emotions in trading. That is an important topic to be sure, and later in this article I will even have a few things to say about it. But there is much more to psychology and trading than “trading psychology”, and that is the ground I hope to cover here. Specifically, I would like to address a surprisingly neglected question: How does one gain expertise as a trader?

It turns out that there are two broad answers to this question, focusing upon quantitative and qualitative insights into the markets. We can dub these research expertise and pattern-recognition expertise, respectively. These perspectives are much more than academic, theoretical issues. How we view knowledge and learning in the markets will shape the strategies we employ and—quite likely—the results we will obtain. In this article, I will summarize these two positions and then offer a third, unique perspective that draws upon recent research in the psychology of learning. I believe this third perspective, based on implicit learning, has important, practical implications for our development as traders.

http://www.forexfactory.com/showthread.php?t=7486

Think about some problem you have with your trading. It could be almost any problem. Perhaps you have trouble taking profits too soon. You might get angry when a trade gets away from you. Perhaps you frequently second guess yourself. Whatever your problem is, write it down. You can apply this exercise with almost anything that you think might be a problem.

Once you have that problem, write down several statements about the problem. Why do you think you had the problem? What caused it? What's your reaction to the problem? Your statements could be almost anything. You might say things like: "Why do I keep doing that?" "That behavior just shows that I'm stupid." "I just can't seem to control myself." "The problem is really nothing, but it just seems to continually repeat itself."

These statements are all your interpretation of the problem. In fact, without this interpretation, you probably wouldn't even have a problem. Thus, perhaps it's important to now work with your inner interpreter.

You need to use your imagination with this exercise. Be willing to play like a child.

http://www.forexfactory.com/showthread.php?t=7505

Even in a pure technical sense, completely understand a trading method is not equal to the proper implementation of the method.

When I look at the chart to predict the price or confirm the consequence of a setup, I find the method work well and price movement may be predicted to some extent. It seems that I understand the method and its validity completely. Nevertheless, when manually implementing a method, the results are worse than expected.

Let alone mental demands during actual trading, a reason to explain the gap between observation and implementation is mainly hindsight bias. Observation is like a mathematics problem are presented to you, and then without thinking deeply about the problem, you go straight to the sample solution.

Having understood the mathematics concepts and found solution completely makes sense, it is easy to think that you have mastered the concept and it is an illusion that if you encounter similar problems, you can handle it.

In fact, there still is a gap between understanding and implementation. To master the implementation part, you have to do the exercise at the end of the book chapter. In terms of trading, it means you have to practise.
And only through practise, it is possible to optimize your usage of the method and modify the method to suit your personality and life-style.

1. I took the trade point by the red arrow (Fig 1). It's max drawdown is 8-9 pips, more than my normal stop-loss. The reason for this big drawdown is wider range of the S/R, on H1 (Fig 2). I think I should choose only to-the-pip S/R for fading. The best and more reliable to-the-pip S/R is those can be seen on H1 with a recent to-the-pip confirmation on M5.

2. The first rectangle showed a breaking of a S/R, the eclipse that can be put in the space there is small. So, it is not a good fading opportunity.

3. The second rectangle are those setup for fading. A huge eclipse can be put in the space.

On the figure, the sizes of the eclipses (especially the height of them) are small, the S/R next to them should not be faded.

I have a failed trade fading the 93.00. The rebound is too short for profit taking. The reason for this failure is the closeness between the S/R 93.00 and the S/R 93.035. The 93.035 was later acted as a resistance and limited the rebound of the price from 93.00. As a result the price mainly move between 93.00 and 93.035 for the next few bars. Next time, in case of two close S/Rs, fading should be limited to the first S/R being hit.

Today is a sideway market, possibly because of US holiday. I expect the price movement would be different from most of other days.

Although I don't trade breakout, but breakout from consoliation patterns are usually very strong, fading near them should be prevented.

This is also a breakout from consolidation.

Today Target: Make 3 1:1 trade.

Made First Winning 1:1 trade shorted USD/JPY at 92.55 (althought turned out to be much better than 1:1). I got 6 pips immediately, but it turned out to give 26 pips. Nevermind, practising only.

Did not fade this one. The fade could be perfectly to the mini-pip, but cannot react that quick and the momentum seems strong, I may hesitate.

I wouldn't fade something like this. here 1.4420, the momentum is strong together with the huge uptrend. It would have hit my tight stop-loss, if I had placed.

A breakeven trade

I want to trade pullback at 1.4415, nevertheless, price retraced at 1.4417 for more than 10 pip. The trade triggered but I hesitate and quit at breakeven. Later the price did hit my 1:1. Missed a winning one. Two bars later it gave 1:2.

I can rightly identify the key level, but just cannot get the juice. Turned out to be more than 3R.

Wow. Almost 10R, stupid me.

Was away from the screen for a while, otherwise, it is almost certain I would fade the 133.4 for 1:1 and end my day.

92.1 is not a to-the-pip S/R, I manage to make an about 1:1 winning trade. It is not an example of good setup. Perhaps, I want to end the day soon. Need more discipine.

1. Win 1:1 JPY (turned out max ~1:7 within next 12 bar)
2. Breakeven EUR (turned out max ~1:13 within next 12 bar)
3. Win 1:1 JPY (bad example, blur S/R, turned out max ~1:3 within next 12 bar)

Result: +2R

On screen time ~ 3.5 hours. Missed 1 good trade in JP2.

Today Target:

Three 1:2 Trades.

Shorted JPY at 92.55. Too stressful. Unable to wait for 2R closed at 1R, and also it seems the rebound taken too long if it is a strong S/R.

I've said this before on this forum and I'll say it again.

You set a goal for yourself today, to make a 1:2 trade. You get into a trade that is going your way and then you shut it down. You did not do what you said you would do. So now, what the hell are you going to do about that?

If you were my employee and everyday you said you would do xyz and everyday you failed to do what you said you would, I'd fire your stupid ass. The problem is this: You keep on saying you're going to do something and you don't. Yet, there is no punishment. There is no deterrence to keep you from breaking your word.

This is what people are talking about when they say trading is a head game. The problem is there are no bosses or parents to make you do things. You have to do it yourself, and as we've seen on these boards, many, many people are incapable of being their own boss. Perhaps it is no mystery why 90% of the people in the world work for the other 10%. Because only that 10% are capable of controlling themselves while the rest need someone to control them.

So, what the hell are you going to do about it? And posting platitudes doesn't cut it, pal. Stop kidding yourself with the self-help shit and do something concrete about your problem or go get a job where someone will make sure you do it everyday.