ETMA_The Evolution

Hmmm... Yummy !! A real trend Following System, look @ these trend lines, anyway watch out for a breakout of these Ascending, descending and Symmetrical triangles followed by an 2x ATR trailing stop .

What the hell !!!...

9.5R Trend Trade has come to an end today with an 1:8.5 Risk:Reward Realized profits.

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January 31, 2015

A sorry tale

Every few months, a close friend of mine who I've known for more than twenty years calls to me to talk about how well he is doing trading the markets. He runs his own business, which allows him time to watch the markets during the day. As a result he trades short-term, sometimes holding positions for a few hours, sometimes a day or two if the markets run. He occasionally sends me screenshots of his trading account to proudly show off his gains.

Then he goes quiet and doesn't talk about his trading for a bit. I used to ask what had happened in those quiet periods, but in reality I didn't need to ask - I knew. And the worst thing was, it was the same fault every time.

This week, with the volatility in the markets, he had made a lot of money from Monday through Wednesday. The phone calls had started again, so I knew what was happening.

Then, Thursday night, I got another call. Only this time, he was in despair. I'd never heard him like this before. Despite there being a big intra-day move, he got in a position to go the other way. And he held on as it went against him. And he then averaged down on his position. And on those two trades, he had put on a position size ten times bigger than what he had been doing, when he was trading very cautiously and conservatively.

The end result? In those few hours, he lost all his winnings for the week, and most of his trading capital.

What had he done? Simple. He got over-confident and thought that, on the next trade, he'd make a LOT of money. So he pumped up his position size, and was now risking a significant amount of his equity on a single trade. As the loss started to grow, he waited, hoping that the trade would turn back in his favour, so he could at least get out at break-even. Then he started worrying about the loss of money. So he doubled up his position, even though the markets were clearly moving in the opposite direction. He then sat there almost paralyzed, until his stops finally got hit.

So he is now back at square one. Will he carry on trading? I don't know. In the past he's brushed it off, got back to trading very small, and started to build his capital back up. This time it has really shaken him.

He's read the books. He knows what to do. He's got a method which can make him money. And for a while, he can do it. The proof is there - his equity increases. Then all hell breaks loose.

Ultimately, the discipline and control you need as a trader comes from within. Poor risk control will destroy you. Strong risk control, on the other hand, can take you a long way.

Don't end up like my friend.

TREND FOLLOWING ON STOCKS - WITH TRADER STEVE
CUT LOSSES. RUN PROFITS. MANAGE RISK. DON'T PREDICT. FOLLOW PRICE AND ITS TRENDS.
Posted by Trader Steve

February 03, 2015

Early 2015 - the recovery continues...

In this post I talked about my trading plan for 2015 and the areas I was going to concentrate on. Well, despite all the volatility and lack of a clear direction in the markets this 'new-old' approach is continuing to show promise, not only for me but for other traders in our mentoring group.

Simply by concentrating on the price action and its trend in the stock or instrument I am looking to trade, the results are starting to show.

Given the lack of direction in the US markets in particular, focusing on the indices too closely would have probably meant very little in the way of trading. As it is, the indices and their movements - interesting though they are - can almost be treated as going in the 'file the news' drawer.

Just as importantly (if not more so), I am 100% comfortable in what I am doing, and have full belief in it, which experienced traders will tell you is a major part in succeeding.

While seeing profits is great, the focus continues to be on the process, rather than the outcome. January gave us a positive start to the new year, and there are a number of positions remaining open which are all in profit. All the while, exposure is being slowly increased where set ups which meet our criteria trigger an entry, in accordance with our risk parameters - no jumping into a whole bunch of trades in one go here!

It would be very easy for a trader to see a few months of non-performance and consider making wholesale changes. but instead this period proved that the risk control remained strong. It also showed the trader (me) that while, yes it has been a frustrating period, it reinforced the need for patience and discipline. Just like the markets, trend following returns can go through trending or non-trending phases. So, if anything, my resolve and patience has hardened over the last few months. And that can only be a good thing.

Posted by Trader Steve

Many thanks for sharing these resources Bass. :-)

Hey bass, sorry to hear about your friend.. perhaps his profound experience might once and for all flush out his demons that allow him to be trigger happy when the reality is maybe he should go flat for a few days to re-set his mind.. I hope he moves forward in a positive manner. Some traders are naturally risk averse ( i am ) sometimes this effects the trader in holding back instead of being slightly more aggressive when the landscape warrants it though..I would choose risk-averse over a high risk personalty though.. preservation rather than squander..

I trade trend too but preferring the non-volatile markets to volatile, though in recent years being able to cherry pick hasn't really been an option, maybe now with interest rate hikes on the horizon the environment will be more beneficial for us guys looking for an edge..I enjoy your posts..Thanks for the links..

You welcome guys, J. this is not my friend but the author's, follow the link in the article to see who he is.
Very interesting article from a trader-author that I always follow, that's why I shared it here.

Sorry bass, got it... sometimes i read to fast .. thanks again for the links..

Paul Rotter – The Legend, The Myth, The Man

Interesting Bass. Quite a force to be reckoned with. I had to laugh when the complainants realised he was sitting right behind them. :-)

Should I Trade in Simulation?

In the course of my 20+ years in the trading world, the question of when or how to use ‘sim’ has come up dozens of times. When I traded full-time, I used to wonder. When I added coaching, I got the question all of the time.
This week a client told me of an educator who is telling people that once they know how to use a system they should NEVER use sim. The latter is obviously ridiculous as clearly the option to trade in sim is a tool that can have many benefits.
The first most obvious one is this – if one cannot be profitable in sim, the odds of being profitable with real money are low. But even with this, it’s a subjective question in that some people can’t get serious in sim and need real money to even pay attention. So it’s clear to me that the question is, like so much in trading, a personal one.
Here, on the other hand, is what a different client (who is also a pilot and a PhD in Behavioral Finance) wrote about the question.

Why I Love Trading in Simulation by NA

Have you ever flown out of Aspen on a dark snowy evening wondering why you cannot see the lights on the mountain and then all of the sudden hearing a strange noise coming from the engine? Your mouth becomes dry. Your pulse races. Your palms sweat. Fire shoots out before you. You are 700 feet off the ground and panic is not an option. You have to get back on the ground, but you have just entered the “impossible turn” scenario. What do you do? Aviate, navigate, and communicate. Cut the fuel to the engine. Set the plane up for best glide. Make a standard rate turn back to the field. Call in May Day to the tower.
Then you hit the mountain. Why? Because you forgot to reset your altimeter before takeoff and you were only at 600 feet—not 700 feet—when you set up for the turn back to the field. Fortunately, you are in a simulator in Wichita and not in a real airplane. If you were in this situation for real, the NTSB would be calling your loved ones.
Trading simulators, just like airplane simulators, are designed to keep you safe while you practice difficult tasks. Whether it is a million dollar account or a million dollar airplane, you don’t want to crash it. Even if you manage to survive, no one will let you near either again.
I love the sim to test new strategies or just to hotdog around when I am feeling like it on a day when I am already up and I don’t want to give my profits back. I actually love to test heuristics in various time frames in the sim. I actually used it for my dissertation.
But it is more than that to me. The sim helps me manage my emotional state. If I got a letter from the National Mafia (aka the IRS) beating on me for a larger cut, or I had a fight with my spouse or the kids maxed out my credit card, or my partner made up lies about me, I need to get in the sim. It is like going to the gym and punching the bag. I can just punch all the sim trades I want and act as crazy as I want. It is a home for my alter ego. That bad ass kid that did not get loved as a child can find total forgiveness in the sim. It is a 100 percent total nurturing experience for me. It is like having a parent hold me gently while I kick and scream until I am worn out and at last calm again.

And in that moment of calm, I begin to see the information before me with a sharper eye. I am no longer taking trades for the sake of trading but waiting for the proper entry, calculating my risk and assessing the probabilities. Sim trading allows me to return to live trading as the pilot in command—sure that I can make the emergency “impossible turn.”

When I am upset and angry, I often go short regardless of the trend because I am mad. The live account is no place for that behavior. I would like to say I am so much like Mr. Spock that I never let my emotions color my judgment, but I have to confess I am a Captain Kirk all the way. I am as hot headed as the next trader, so I use the sim as a tool for working through my emotions—which are not going away magically just because I command them to. My emotions are survival tools often signaling danger just like the fast heart beat and the dry mouth are signs of danger. Ignoring them would put me in greater danger. And let’s face it trading is dangerous.

I like to think of trading in sim as sharpening my knife before I begin cooking. I can chop onions a lot faster with a sharp knife. I can make profits a lot faster if my senses are sharp and not dulled by confusion. The next time you are mired in emotional overload, try the sim.
SO… WHAT DO YOU THINK?

By DKS|January 25th, 2015|Definitions, Learning Psych Cap, Trading Education

5 Links to Great Trading Rules

Trading Rules From A Professional Trader: Richard Weissman
20 Golden Rules For Traders by Alan Farley
Dan Zanger’s 10 Golden Rules
The Art of Trading: Golden Rules. From @TraderStewie
Dennis Gartman’s 22 Rules of Trading

Enjoy,

Best
B.R.

5 Steps to becoming a Professional Trader

I searched to find the original source of this article but have not been able to locate it. This is from an anonymous source and has been shared on many websites online over and over. If anyone knows who wrote it I will be happy to link this to the original author. I do think this is an important share to aspiring traders:
This was circulating on the internet for a while, I made a copy of it back in 07 when i started trading, since then it has been republished by Charles Kirk. Trading has been a heck of a journey for me. I came in for the money at first and now after all these years Im still in but my motives have changed, Im in for the game. Trading has been a long journey of self discovery for me, something I never even thought I would have to go through. Yvan Byeajee

Step One: Unconscious Incompetence

This is the first step you take when starting to look into trading. You know that it is a good way of making money because youve heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy after all, how hard can it be? Price either moves up or down whats the big secret to that then lets get cracking!

Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you havent got the first damn clue about what youre trying to do. You take lots of trades and lots of risks. When you enter a trade, it turns against you, so you reverse and it turns again, and again, and again. You may have initial success and thats even worse because it tells your brain that this really is simple and you start to risk more money. You try to turn around your losses by doubling up every time you trade. Sometimes youll get away with it but more often than not you will come away scathed and bruised. You are totally oblivious to your incompetence at trading.

Step Two: Conscious Incompetence

Step two is where you realize that there is more work involved in trading and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader you dont have the skills or the insight to turn a regular profit.

You now set about buying trading systems and e-books galore, read websites based everywhere from USA to the Ukraine and begin your search for the holy grail. During this time you will be a system nomad you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator youll be ecstatic that this is the one that will make all the difference.

You will test out automated systems, youll play with moving averages, Fibonacci lines, support & resistance, pivots, fractals, divergences, DMI, ADX, and a hundred other things all in the vein hope that your magic system starts today. You will also become a top and bottom picker, trying to find the exact point of reversal with your indicators and youll find yourself chasing losing trades and even adding to them because you are so sure you are right.

Youll go into the live chat room and see other traders making profits and you want to know why its not you youll ask a million questions, some of which are so dumb that looking back you feel a bit silly. Youll then reach the point where you think all the ones who say they are making profits are all liars they cant be making that amount because youve studied and you dont make that, you know as much as they do and they must be lying. But theyre in there day after day and their account just grows whilst yours falls.

You will be like a teenager the traders that make money will freely give you advice but, youre stubborn and think that you know best you take no notice and over trade your account even though everyone says you are mad to but you know better. Youll consider following the calls that others make but even then it wont work so you try paying for signals from someone else they dont work for you either.
You might even approach a guru or someone on a chat board who promises to make you into a trader (usually for a fee of course). Whether the guru is good or not you wont win because there is no replacement for screen time and you still think you know best.
This step can last ages and ages in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer to three years.

This is also the step when you are most likely to give up through sheer frustration. Around 60% of new traders quit in the first 3 months they give up and this is good think about it if trading was easy we would all be millionaires. Another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does.

What may surprise you is that of the remaining 20% all of them will last around 3 years and they will think they are safe in the water but even at 3 years only a further 5-10% will continue and go on to actually make money consistently.

By the way these are real figures, not just some Ive picked out of my head so when you get to 3 years in the game dont think it is plain sailing from there!
Ive had many people argue with me about these timescales funny enough none of them have been trading for more than 3 years if you think you know better then ask on a board for someone whos been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure I guess there will be exceptions to the rule but I havent met any yet.

Eventually you do begin to come out of this phase. Youve probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now it is in your blood. One day in a split second moment you will enter stage 3.

Step 3: The Eureka Moment

Towards the end of stage two you begin to realize that its not the system that is making the difference. You realize that it is actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right. You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment.

This eureka moment causes a new connection to be made in your brain. You suddenly realize that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 minutes. Because of this revelation you stop taking any notice of what anyone thinks what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading. You start to work just one system that you mold to your own way of trading, youre starting to get happy and you define your risk threshold.

You start to take every trade that your edge shows has a good probability of winning with. When the trade turns bad you dont get angry or even because you know in your head that as you couldnt possibly predict it it isnt your fault as soon as you realize that the trade is bad you close it. The next trade or the one after it or the one after that will have higher odds of success because you know your system works. You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make.

You have realized in an instant that the trading game is about one thing consistency of your edge and your discipline to take all the trades no matter what as you know the probabilities stack in your favor.

You learn about proper money management and leverage risk of account etc. and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You werent ready then but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.

Step 4: Conscious Competence

You are making trades whenever your system tells you to. You take losses just as easily as you take wins. You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when youre on a loser you close it swiftly with little pain to your account.
You are now at a point where at a minimum you break even day in day out. You will have weeks where you make big money and other weeks where you lose big money but overall you are breaking even and not losing money anymore. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.

Youll start the day on a big win, take a big loss and have no feelings that youve given those profits back because you know that it will come back again. You will slowly begin to make consistent profits week in and week out.

Step Five: Unconscious Competence

Now were cooking just like driving a car, every day you get in your seat and trade. You do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting big profits in a day doesnt make you any more excited that getting none. You see the newbies in the forum shouting go market go as if they are urging on a horse to win in the grand national and you see yourself but many years ago now. This is trading utopia you have mastered your emotions and you are now a trader with a rapidly growing account.

Youre a star in the trading chat room and people listen to what you say. You recognize yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because theyre teenagers some of them will get to where you are some will do it fast and others will be slower literally dozens and dozens will never get past stage two, but a few will.

Trading is no longer exciting in fact its probably boring you to pieces like everything in life when you get good at it or do it for your job it gets boring youre doing your job and thats that.

Finally you grow out of the chat rooms and find a few choice people who you converse with about the markets without being
influenced at all. All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesnt change it just gets better you now have what women call intuition. You can now say with your head held high Im a trader but to be honest you dont even bother telling anyone its a job like any other.

I hope youve enjoyed reading this journey into a traders mind and that hopefully youve identified with some points in here.
Remember that only 5% will actually make it but the reason for that isnt ability, its staying power and the ability to change your perceptions and paradigms as new information comes available. The losers are those who wanted to get rich quick but approached the market and within 6 months put on a pair of blinkers so they couldnt see the obvious a kind of this is the way I see it and thats that scenario refusing to assimilate new information that changes that perception.
Im happy to tell you that the reason I started trading was because of the get rich quick mindset. Just that now I see it as get rich slow. If youre thinking about giving up I have one piece of advice for you .

Ask yourself the question How many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it?

Take care and good trading to you all. Anonymous

Simply Brilliant, @ which stage are you ?

Best
B.R.

Trading Mistakes

Neophytes think their trading mistakes will vanish after a few million hours of experience but that just isn’t true. Even professionals still make costly mistakes that should have been avoided. Trading mistakes run the gamut from mental errors to misguided opinions. The most common ones also cause the most damage. For example, just consider how much money your bullishness cost you in the last two bear markets.
Trading mistakes can’t be eliminated but you can curb their considerable influence. Start by listening to the little voice in your head, and let it question every decision you make. In no time, you’ll uncover a dozen ways you’re losing money for no good reason.
Fortunately, we can control our own fates most of the time. To this end, it’s vitally important to recognize the circumstances that place us at the most risk of making bad decisions. Realistically, the following scenarios will keep draining our accounts but their impact can be reduced substantially when we see them coming, and initiate defensive countermeasures.

 

1. Out of Synch – There’s nothing worse than playing a trend in a choppy market, or a chop in a trending market. Make sure you know the type of environment you’re trading before pulling the trigger.
2. Pressing The Bad – You don’t want to admit it when you’re wrong so, rather than cut your losses, you press on with bad positions, trying to turn lemons into lemonade.
3. Cutting the Good – You’re in a great trade but something inside doesn’t want that wonderful experience, so you exit with a small profit just before the position takes off like a rocket.
4. Being Early – You get ahead of yourself by jumping into a position that isn’t ripe and get shaken out, just before the pattern does exactly what you expected.
5. Being Late – You’re unable or unwilling to pull the trigger on a great setup, because you’re waiting to see what everyone else does. As it turns out, everyone else is ready to get out by the time you’re ready to get in.
6. Bullishness – You think the market is ready to go up after every leg down, forgetting that real buyers can be real hard to find at times.
7. Bearishness – You spend more time listening to doomsayers than reading the charts and miss buying opportunities, even when they’re smacking you across the face.
8. Ignoring Gravity – Markets go down when they can’t find buyers, regardless of how few sellers are out there at the time.
9. Forgetting The Big Picture – You get so wrapped up in current events that you forget to step back and check out the weekly or monthly charts.
10. Forgetting The Little Picture – You confuse macro events with micro plays and let the big picture obscure what’s right in front of your nose.
11. Fear of the Squeeze – The squeeze crushes short sellers in the early phases of downtrends but your anxiety is misplaced when negative momentum replaces a two-sided tape.
12. Last to the Party – The fear of missing out overcomes your better judgment, and you jump in. The trend ends immediately, and you’re stuck holding the bag.
13. Margin Fever – You have a small account but want to be a big player, so you overtrade margin and get into a heap of trouble.
14. Getting Even – You lose money and vow to get it back the next day or next week. Bad move, Charlie Brown, because you’ve just abandoned your trading plan.
15. Listening to Pundits – You shoot yourself in the foot because you let someone else tell you what to buy or sell.
16. The Agony and the Ecstasy – Pleasure makes you feel like Mr. Market, setting you up for a big fall, while pain attracts positions you don’t want and can’t control.
17. Chasing The Open – You go to bed so excited that you can’t wait for the next day’s opening bell. Guess what, you’ve just put a big target on your back.
18. Software Fever – Pretty colors can’t make you a better trader, but they can make you a poorer one. Sadly, kilobytes are no substitute for a lack of skills.
19. Lottery Ticket – How often do you carry a position into an earnings report, hoping to get a pop from the news? Hmm, I thought so.
20. Counting Your Chickens – You forget that profits on open trades aren’t real until you put the green into your pocket.

Posted on May 15, 2013 at 8:06 am by asfarley · Permalink · Leave a comment
In: Market Mechanics

A strange thing happened to me today, my thread was transferred to the commercial section even though i don't sell or promote anything, i simply post a small part of my daily research and readings.

I am now a commercial member who have nothing to sell or promote and who don't practice any kind of commerce, its not that i am upset i wish i have something to sell but i've been specifically refusing to sell or share my systems, services or any kind of indicators that i use because i don't intend to make this a selling but rather a personal Trading business and focus solely on trading.

This thread have served "and as i mentioned several times" as a Daily journal for me where i collect a small part of what i do every day instead of keeping a physical one.

Strange.
B.R.

Hi Bass. It beats me why they have done it????? Is it worth enquiring with the site moderators why this action has been taken? Your thread is the antithesis of what I would call commercial. No matter what happens it will not dissuade interested members from continuing to participate in your thread.

Thanks C., i just contacted them to enquire about this, if they are worried about my posts here they should see my twitter page, anyway i might be comparing apples to oranges.

Cool post..

Hey Bass..sorry to hear about your move...

I agree with C.....its still a good thread