Testing High Leverage Compounding

Lesson 5: Transform Emotion by Trance-Formation

Draw two thermometers side by side on a sheet of paper. One thermometer records your emotional temperature with respect to frustration; the other... with respect to confidence... Once you identify an elevated frustration temperature ... take a few minutes away from the screen and enter into a trance-formation.

The Daily Trading Coach, Dr. Steenbarger

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Today's Goal:

I am careful and focused. This allows me to eliminate trading mistakes and needless losses. In the long run, this will improve my profitability.

Long term intraday trading goal:

Make money on 90% of my trading days.

can't believe my internet dropped just before the move and I exited in a panic on my mobile because I couldn't monitor =.=

But there you go... double bottom on AUD/USD and retracement play on EUR/USD to previous day range low.

preparation is the edge in this market.

now just have to keep working on my execution.

All those 2 pip losses finally paying off.

Just a quick update.

1. I realised my mechanical system has too high a variance to work for R2R strategy, so I am back to trying to learn how to build an EA and let it trade with 1% risk.

2. I am trying to develop as a trader. I stopped posting here because I post on my personal/private blog. tradingalone.com (some posts are public...) But I am still following through with the daily routines and lessons. How can I not? I want to succeed at this, badly. I am willing to do whatever it takes.

My current level of skill as a discretionary trader is that I am struggling to stay consistently profitable. In his book One Good Trade, Mike Bellafiore states that all traders go through the same development process:

- Lose money
- Lose less money
- Flat for the month
- Slightly positive for the month
- Consistently positive for the month
- Find more opportunities in the set-ups you are consistently profitable
- Build from this positive base by adding other trading plays
- Focus on getting bigger in the plays that make the most sense to you

You can't skip steps. trying to do so is delusional.

As of now, with the screentime I have under my belt, I am getting glimpses of the potential of good discretionary trading. But I am struggling to make it to consistency. So it's gonna be one small step at a time. But right now, I can easily make an average of $20 on a $50 account (with daily loss limit at $10) everyday if I follow my trade plans. It does not depend on market opportunity because FX has so much opportunity. It depends on whether I can follow through with my plans. If I can, I make money; If I can't, I am flat or I lose.

So I am seeking to grow from that base. Every 2 weeks of profitability, I will add 0.01 lot to my Tier 1 trade size (or 1 unit). After a year, I should have a thick playbook and be trading at 0.10 lots and bringing in $200 everyday on average. Another year and I will bump the number up to 0.50 and then 1 lot.

3. I am really grateful for the opportunity to trade and learn from the markets.

4. Are you better today than you are yesterday?

One thing that I have learnt

Professional traders think about trading very differently from most people here. And after these few weeks I am starting to see why.

I used to think levels aren't important, but now I realise they are supremely important. So I was wrong.

IMO now, the order of importance goes something like this..

- Sentiment/changing fundamentals/fresh news
- Trend
- Levels
- Tape/Price action patterns

Most people here either focus too little on sentiment or too much. There's hardly anyone doing a balanced approach to the market. Moreover, trading is like a game of chess. I realise when I think ahead 3-4 moves for all my plans, I usually do a lot better.

To give an example, let's say you think eur/usd is going to go up, but that alone is not going to cut it as a trade plan. You will have to know how to enter into a long trade. That depends on the chart and you have to think about which areas are good for entering and which areas suggest you should be more aggressive in entering. etc.

Also, people here don't scale in. That's the stupidest thing ever. The stupidest thing you can do is to start with a full-sized position. It's literally retarded. If you do that, you are basically saying, MARKET you have to TURN HERE. RIGHT HERE. You may be right in your trade idea and still lose money if you adopt that kind of thinking. Prepare to be wrong 4-5 times before you are right. Use very very small size and predefine your risk. make sure it is SMALL relative to the reward. When market starts proving you are right, add more.

Wait, actually not scaling in is not the stupidest thing. The really stupidest thing is averaging down. you are basically scaling in the opposite direction. That's suicide literally. It works 90% of the time, but the 10% that doesn't work you'll blow your account.

One Good Trade

1. Proper Preparation
2. Hard work
3. Patience
4. A detailed plan before every trade
5. Discipline
6. Communication
7. Replaying important trades

These are the components Mike Bellafiore writes in his book for what defines a good trade. It has nothing to do with P/L or win/lose. But most people here I would say 99.9% of traders here, including myself in the past, have NEVER executed a good trade in their entire life.

Usually, 1 is missing. Proper preparation is HARD. Trading the london session, I am up by 5AM everyday preparing. This requires looking at the previous day's news, looking at the charts, thinking about ideas, and then writing them down and mentally rehearsing.

2. is misdirected usually. Hardwork has to be purposeful. You need a structure and routine to follow. Just staring at charts and "trading" is not going to cut it. I know because I did that for 10,000 hours and I am still not great at trading. Don't be lazy.

Patience is also missing for most traders. They can't wait to jump in on a trade and when they see price moving area from their target area they start getting worried and jump in. Also, impatience manifests in ways people think about trading and themselves. They are delusional. They think they can go from losing money every week to sudddenly being profitable. It doesn't work that way. First focus on trying to lose less and then try to go FLAT. It is a development process not an overnight transformation. PATIENCE.

4 goes hand in hand with 1. If you are not preparing you probably don't have a detailed enough plan.

5 is crucial. DO you stop trading when you hit your loss limits? Do you always cut your losses?? DO you trade on TILT? Do you trade stuff you have NOT PLANNED? These things will kill your account when you LEAST expect it.

6 is not so relevant for the individual trader BUT we should be seeking out viewpoints that are contrasting to ours. If you are rejecting every other opinion harshly, you are probably wrong.

7 IS DAMN IMPORTANT. If you are not compiling your playbook of trades, you better start today. If you don't you will always suck at trading. Our brain does not differentiate between actual trading and thinking about trading. So the more you review and compile your trades, the more you are multiplying your learning experience.

***

IF you are not prepared to put in 10x EFFORT for 1x reward. Just quit now, it's not worth it. Find something else you are passionate about.

Either do it well, or don't bother because you will fail.

Hi Shellsnail, Looks like you have been putting a lot of time into trading. For me trading is one of the most rewarding things I have ever done. started trading back in 1998. I am retired and just trade for a living. I have read ever book under the sun in the last 17yrs. I really do not have a system other than I follow the news and more importantly price action. My charts are simple with few indicators as that is how I seem to trade the best. I only trade or have a position on if I am if front of the computer. Today I started down 2200.00 but finished up 1600.00. I was trading against the trend (on purpose, trying to make a little on a pull back) but I had to step away for a few hours so I closed out my position. So when I got home I had sit down start earning my money back.

I learned from a friend back in the 90's that simple is better. Seeing as He was a retired trader from the Chicago Stock Exchange I paid pretty close attention to what he had to say. I use three charts, two different time frames, each chart has a different indicator per pair that I trade. When they are in unity I go when they are not I sit and wait. If I miss a move I do not chase as there will always be another move coming.

Do not ever quit trading I think you have a bright future!! The goal is to be able to trade any market any where any time.
Blessing to you: kthrapp350

Here's one of my trade plan (summary) for later:

- USD/CAD
4H/1H/15min Trend down
More good and fresh news for CAD.
USD bad unemployment rate balances out good NFP numbers. Neutral view.

Europe/London Session:

Possible trades
1. Short on a bounce to the 4 line. (Tier 1, add after major support breaks and retraces.)
2. Short on a bounce to TL. (Tier 1, add after major support breaks and retraces.)
3. Short on false break-out of role reversal level (pink line) (Tier 2/3, add after major support breaks and retraces.)
4. Wait for classic (my signature trade) retrace set-up or EW retrace after major support breaks (Tier 3/4 target RDL)

For all my trades I may try 3-4 times around that area, but SL is around 0.5pip-3 pip manual close with emergency stop 10 pips each time. Tier 1 means smallest unit. Tier 2 means twice of that, Tier 3 thrice and so on. I start with Tier 1 for all my trades and add more as price moves in my favour.

Example EUR/USD yesterday




EUR/USD Friday



Both were planned out exactly and I traded them according to my plan.

Good luck to all!

Wouldn't be posting here for awhile as I focus on my development.

You can check tradingalone.com from time to time I will still post some updates there but mostly they are private entries for myself to refer to so don't be disappointed..

Good luck shellsnail, and enjoy your break from FF. I'll be sure to check out your website when I have more time. And thanks for the nice trading journal so far. There's good stuff in these posts

Thanks NorthTrader! It was nice to have you share your experience and wisdom too.

This trading thing is tough isn't it?