While you wait: Trading philosophy (excluding trades)

Hi, here is set of my thoughts on trading based on my private experience and approach.
There is no calling trades and trading methods in this journal. Just wandering of mind and some self reflection.
In this first post I would like to give you a little bit of taste of what to expect here.

My great idol is Jesse Livermore. You may have read about him in "Reminescences of the stock operator".
What I have recently noticed rereading the book - the trading foundationn of the "boy plunger" is totally oposite to what most of us - FX fans - present. Standard approach would be to watch the chart, find a method, hone it and start trading. But look how Livermore came to trading.

He was writing stock quotation on the board in a bucket-shop. He would do it for a living. He could as well be a waiter or newspaper delivery boy.
When doing quotation board thing he started noticing due to his good memory for numbers, that there are some repetitive patterns in stock prices behaviour. He started writing these down and for personal amusement when he noticed some particular pattern occuring, he would write it and write what this stock would do the next few days as a continuation. He than check if he was right. BUT HE WOULD NEVER THINK OF TRADING! He was rather poor boy making a living and having this little hobby of his - remembering quotations and spotting patterns (it's really stupid hobby if you think about it - he didn't even paper-trade!).
His first trade was just an addition to his hobby. Kind of "let's see if my notebook is worth anything". Had nothing to do with making money ot work.

That's how I would like to see my trading. Minor addition to chart watching.

I would like to call it "jogging approach". If you think of jogging - there is nothing exciting to it. You run for 30min day-in-day-out. You do as yesterday, and you repeat this tomorrow. Not everyone can do this, but you can, and you do it. It's useless.
You may smoetime run to the bus and catch it because you got fit. But it's not what you have in mind when you jog.

I would like to make chart watching this kind of excercise. I watch it, when I see something, I screen-shot it and write it down. I can do it every day, and probably get some consistent accuracy in it. But accuracy is not my goal it simply comes with time, because things are like this. They come with time.
Consistently runing 3 miles in 30 minutes comes with time and is nothing to get overexcited.
Taking a trade is like chasing that bus. I may do it on occasions, but it's not a goal. It's just a thing that you would do as a natural cosequence of your hobby.

So this is foundation of my trading and of this journal. If you like to read about it - please be my guest!
I'll apreciate a feedback a lot and I will see you soon!

Chirs

My trading day starts in the morning. I need to wake up before 7. I would take a shower and than open my laptop.
If there is something I would need to write down (somethinh I would like to think about later, or maybe a dream I need to write down. I need to write it, or it will walk behind me all day.

Next I would open some bussiness news website, read through headlines and if something would catch my attention I would read it.
At this point I may want to look at some chart if particular article refers to particular stock or index.

When I'm done with reading I will watch charts. Than If there is something of praticularly interesting I would look at different TFs and make screen-shot with some description maybe I would even enter a trade...

During a day I like havin charts open, I like to observe daily, 4H 30M and 5M. If something looks like good trade I would make a screenshot, maybe open demo position and consider opening live one alongside. I will make notes in my notebook as it's quicker then computer noting and I can still keep my charts open. At the end of the day I will organise my screenshots and ad notes from notebook to them.

I will aldo check how my predictions turned out in reality.

One thing I can say for sure there is much more bounces than breakouts. Especially in places where we look for those breakouts (like ranging markets).

Secondly, fibs are so thick, that any reversal candle within 23% to 62% wil be considered a reaction to fibs, moreover price rarely moves straight up or down. It will advance a bit than move back, advance more and so on. So within fibs area those retracements will simply be called fib reactions.

Ok, but sometimes price bounce right off the fibs - up to the pip!
Right. But if it miss it by one or two pips - you still consider it reaction to the fib. Even if it miss it by seven, ten or fifteen pips or even twenty, but it retraces back to it or below it, it still is reaction to the fib. But I say that if fibs are 30-50 pips away - there is extremaly high probability, that price will bounce somewhere within this area, or otherwise - take a moderately trending market, draw a fib from daily top to daily bottom, than move it up or down by 15% and see how nicely price plays with those secret levels, and more importantly - how next day price plays with it even better...

But this is not the end of my story. I believe you if you say you trade fibs profitably! I honestly believe this and what's more I can play them too! I believe however that the secret is not in correct application of fibs, but in having the edge. It's easier to enter the trade, when you can give your "reasoning mind" a reason, and something to get busy with. I believe we are all skilled tape-readers, but some of us are not confident enough to admit it to themself and feel better, when can give credit for their own success to some external factor like fibs or MAs.

When you are at this point when you see your set-up, but feel not comfortable enough to trade it. You feel or see something that stops you from opening and you decide to not to enter, or leave early - then you know what I mean.

If you are not at this point - I recommend you more backtesting, applying your lines, moving charts candle by candle (F12 button) and you will get to that point in no time. (Ok it may take some time, but you will nail it)

PS

Attached chart is of EURTRY - 7.06.2013 (Non-farm friday).
Iplotted two fibs on it:

1) Light Slate Grey
I took previous day high and low to plot it and than move it 20% down (90 pips)

2) Dark Olive Green
I took this day high and low for fibs top and bottom and moved it 20% down (85 pips)

green and red lines and triangles mark, where price INTERACT with those fibs. I am sure you can see how confluence areas get the most attention and price needs more time to get through them...


PS2
I hope I deserve some comments to keep me on

So there is nothing wrong with trading systems...

Today thought crossed my mind, that trading is like looking for a girl. You can't look to needy. You can't chase the girl. You rather wait for her to find you interesting. The more you chase the more repelling you look. You will scare them off and in trading, you will loose too many times.

Being you may have a look on the street, see how many good looking girls are there, but you're not gonna chase each of them (unless you are like Varney Stinson) same with trading. There will be plenty of attractive things, but watching and liking is not enough. You need something more to know that this is "the one". Otherwise you waste your energy and money.

When you made your mind, you will of course look for more opportunities to hang around the chosen one, but still you should rather wait for good opportunity to present itself.

There will be moment to ask her out and there will be moment to enter the trade. This is how far the comparison goes and this is the reason why you should never open the trade as soon as you opened your charts.

There is also the "dark side" of this seduction comparison.

If you got stuck on an empty island with one other person, you will get attracted sooner or later. At some point look (and maybe even sex) of that person makes no difference.
Same with trade. If you got stuck with the charts for too long, anything will look "setupish". So be careful!

eur/try will be 2,5560