Testing High Leverage Compounding

I'm in both AUD/CAD and NZD/USD, but opposite directions. It's interesting to watch how they are correlated.

hahahaha what a frustrating start to the morning.

CT trade in EU, by the time I switched to GU for shorts the move has already taken off. Weird morning this is. Probably cause UJ break-out affecting all USD pairs.

Well at least it isn't over yet.

GU move seems halted. Looking for a good retrace here to get short.

Demo: NZD/USD Short Scale in

Nice one!

Update on Live Testing

This morning on GU, I got momentarily distracted by a combination of things -- demo trading, watching videos, surfing FF -- that "it" overpowered me for a moment and I took a trade that's nonsensical.

Shortly after taking the trade, I had the option of closing it for a small loss, but I didn't. Again, a big mistake because if you recall one of my previous posts, the best remedy to such trading errors is to take the loss immediately and close it. Instead I let it hit my SL, which I didn't really mentally accept/internalise as RISK.

Once again, at this point, I could have let it be and accepted the loss and moved on. But I made a third mistake by deciding to try and get it back by revenge trading. By definition, such trading has no edge. So the result was obvious by that point. After that point, I was just trying to see if luck can bring my balance back so I don't have to top up in order to resume the experiment.

***

Lessons Learnt here:

1. Stay focused during trading. It's easy to fall into the trap of multi-tasking but "it" tends to get out of whack when we do so. What is "it"? I believe "it" is greed, fear of missing out, and that desire and impatience to get everything in life easily and quickly. I've developed over my trading journey to be able to spot "it" better, but sometimes it still gets me like today when I am distracted.

2. When an error is committed, immediately take the loss. I admit that I am still bad at this one. Often once a bad decision is made, irrationality takes over and convinces me that I can somehow make another bad decision to make up for the first one. I have no idea how my mind convinces me that is even a good idea. But I am starting to see it more clearly as the days go by.

3. If the first two safe-guards fail, it's ok. Just accept the loss and move on. Do something else for the rest of session and come back stronger the next time.

***

Will be starting with the 3rd attempt soon. Probably a break here until next week for some reflection time.

Good trading to all and hope my mistakes are of learning value to you too.

Thanks for posting this shellsnail. I've made the same mistakes so many times in the past, and probably will again sometime in the future. It's makes me feel a bit better that I'm not the only one, though of course I'm sorry for your loss.

I wonder why we keep doing the same stupid things over and over again? Maybe a psychologist can answer that. Or maybe it's simply because some of these mistakes turn out well for us due to sheer good luck, which helps dull the pain of the bad ones. But a mistake's a mistake, however it turns out.

That's why in trading you should never beat yourself up over a losing trade that was taken for the right reasons. Maybe treat yourself to something small after one of those, like a nice glass of scotch. But a revenge trade or something else we shouldn't be doing is a different matter. No scotch for that! We have to condition ourselves as best we can not to repeat the mistake in the future.

Enjoy your rest and see you next week.

Great Point and well taken for the Forex Wisdom Shell and North.

I think that we internally have a problem accepting that we make mistakes. Because once we CLOSE the trade manually, we make it concrete that a loss occurred and we admit it. Letting it close because of a stoploss still leaves room for hope "maybe it will turn around" but it's actually fear to close it manually and lose, fear to admit you're wrong. The fear for pain is so high apparently, we tend to delay it as long as possible. All these primal emotions seem pretty strongly hardwired. I'm by no means a psychologist btw, so I'd like the opinion of a professional as well, but that's just how I experience it.

Hey ExForX, this reminds me of a great book I've got about the psychology of trading called The Daily Trading Coach by Brett N. Steenbarger. I started reading it a few years ago but didn't finish it at the time, wasn't in the right frame of mind I think. It's a great book though, and anyone interested in the psychology of trading (which should be most of us) should take a look. I'm going to start reading it again now, so thanks for reminding me!

(needless to say, I have no affiliation with the author)

The order flow these days during US sessions is not trading... it's slaughter. dollar bears getting slaughtered.

I was just talking about SMB the other day and...

http://chatwithtraders.com/ep-022-mike-bellafiore

Got to check this out. This is what trading is really about. An incredible trader talking about trading.

It frustrates me that I only have one edge and it can only be applied during certain hours and on selected pairs.

The next step in my trading journey is to expand my arsenal of edges and look into algorithmic trading so that I can have multiple systems running at the same time to diversify risks and reduce drawdowns. I already have the technical proficiency to analyse data and write some code, now I need to learn how to write specific programming languages. Delving deeper into C++ programming now. Also started a couple of CENT accounts (with $1 - $5 balances) at various brokers to test out live trading at low costs.

While doing that, I need to continuously improve my psychology and habits with risk and money, which are now the biggest impediments to my trading success. I've taken @NorthTrader's advice and started reading that book he recommended. In fact I had it a few years back but never took it that seriously because at that time I didn't have an edge and it didn't really make sense to work on psychology without one. I'll be posting extracts from the book daily and update all with my learning so that you can learn together as well if you wish.

So here's my plan... What's yours?

Lesson 1: Draw on Emotion to Become a Change Agent

Try this exercise. Before you start trading, seat yourself comfortably and enter into a nice slow rhythm of deep breathing. Imagine yourself — as vividly as you can — starting your trading day. Watch the market move on the screen; watch yourself tracking the market, your day’s trading ideas at your side. Then turn your goal for the day into part of your visualisation: imagine yourself performing the actions that concretely put that goal into practice. If your goal is to control your position sizing, vividly imagine yourself entering orders at the proper size; if your goal is enter long positions only after a pullback, imagine yourself patiently waiting for the pullback and then executing the trade. As you visualise yourself realising your goal, recall the feeling of pride that comes from realising one of your objectives. Bask in the glow of living up to one of your ideals. Let yourself feel proud of what you’ve accomplished.

Extract from The Daily Trading Coach

Thanks for the recommendation, will take a look at it, seems interesting. Comments also pretty positive, though these are easy to fake with the right social engineering tricks.

Our job is not to make money. Our job is NOT to be right. Our job is to make excellent risk/reward trades- One Good Trade.

http://mikebellafiore.tumblr.com/pos...e-of-the-month

http://mikebellafiore.tumblr.com/pos...-on-tilt-video

Some Quotes for the Weekend

"Great traders can barely be right more than 50% of the time, yet still be legendary traders."

"If you can't be scalable then why are you actually in this game?"

"Many people say I know it when I see it, or feel it. No you don't." -- EXACTLY my sentiments... you cannot rely on intuition, you need to be able to quantify your set-ups in terms of variables if not you can NEVER scale up. The first 2 years of trading live should be dedicated to this process of quantifying/measuring/understanding your edges.

“We are not here to make $50K a year!” (we are here to make 7 digits a year)

"You can be better tomorrow, than you are today."

Mike Bellafiore

Trading cannot be the most important thing in your life.

Mike made a brilliant point in one of his videos that I think few people would understand and pick up on. But here it is: to succeed at this game long term, trading cannot be the most important thing in our lives.

It's a bit paradoxical but it predicates on the idea that if trading were to be such a core part of our identity, we would over-associate our P&L to our sense of self. This is the infamous ego-trap, with a slight twist. Trading cannot become the one thing in our lives that matter. There must be things we care about more. The volatility in this business makes it impossible that anyone relying on P/L and trading to provide that pillar of support for our self-worth will ever make it in the long run. Because inevitable losing days, weeks, months, will eventually destroy the trader's psyche.

Van Tharp studied top traders for many years and listed the top 5 mental beliefs they share:

1. Money is not important.

2. It is OK to lose in the markets.

3. Trading is a game.

4. Mental rehearsal is important for success.

5. They've won the game before they start.

"You could spend 12-plus hours per day researching the markets but if you don't have a consistent way of making decisions, then it's all for naught. If your trading logic is flawed, then each marginal hour of work may worsen your returns, rather than improving them."

Bruce Bower, Peak Performance Trading and Investing