Only What Works

Trading Discussion Trade Journals
1

Intro: Full-time day trader (Brief and to the point) :slight_smile:

July was a bad trading month for me hence this new public journal. The aim is to re-focus and/or address/ adjust some issues. As well as the obvious i hope newbies get something out of this journal by being exposed to the thought process and that more experienced traders give me some feedback as well. Ideas meeting ideas often leads to growth and shortened learning curves, not a bad thing at all.

I could write for 24hrs straight as to why it was a bad month for me and i probably will, but not here and now, why bore the hell out of people unnecessarily on day 1? :slight_smile:

For now i’ll just say that the cleverest people (irony intended) have a tendency to “mess” with things that don’t need to be messed with. If (A) works month in month out why are you now doing (B)? :confused:

This journal won’t be about specific strategies, cash or Ferraris, that is a different industry and i am not a salesman :32:, but more of a practice tool for going over processes and routines, reasons for doing not doing things, precision, as well as psychology, intensity, motivation etc. In effect simplifying and reducing things to “Only What Works”.

2

The concept

To me trading badly means not following my trading plan, if you don’t have a plan…you should write one :wink:

Day-trading full-time is very different to trading as a hobby. Of course there is a certain amount of pressure psychologically to make money but it’s also physically/ mentally what you spend most of your day doing.

Everyone has “bad days” at their job for whatever reason, personal, health, or perhaps the job itself. It might only be 1 or 2 days per month. What is cetain though is that they will happen! When it’s a hobby those are the days when you blow a large part if not all of your account. As full time trader you can’t afford to do that, no money no job. You have to plan for those days in advance and try to minimise their occurence. It’s part of the job.

I find that bad days expose the strengths and weaknesses of my trading plan. If i fail to follow what is in the plan that is also down to a weakness in the plan. [B]Why write a plan that you can’t follow?[/B] Not only is it bad planning, it’s useless! It’s much better to have a plan in phases in which you step by step train yourself to be able to follow your trading plan.

[B]Real life.[/B]

I traded well the last few months and planned in a 2 week holiday in the beginning of July, as you probably already know rest and recovery is very important in this “game”, so you “force” yourself to take time off at pre planned intervals.

I wrote a plan on how i would trade the week before the holiday and how i would trade the 2 weeks after i returned (routines, reduced trade sizes, a re- acclimatisation period etc.)

Of course i get back from the holiday feeling great, i don’t follow the 2 week plan, trade like it’s entertainment and give back last months winnings. It’s not the first time it’s happened after a holiday either which is why i made a plan in the first place.

So there is a weakness in the trading plan.

Firstly the post holiday plan was too general and not specific enough. I should have done 4 or 5 days prep. The first day should have been ultra specific and time-tabled. Reading over the entire trading plan and reading over notes and things i have written in the past, psych exercises etc. I should have then done a couple of days of technical prep going over old trades.

You see if you come back from holiday and the trading results are positive you don’t see there is a weakness in the plan, but the next holiday… if the results are bad you are forced to find the weaknesses that were there all along.

Secondly and equally as important, “The concept”. I believe that the trading plan should be based on the concept you have about trading. This comes from what you have studied, your understanding and [B]your experience[/B] in the markets so far. Your concept removes all of the “noise” and BS it’s your focus. If you are ignoring your concept even on bad days, that’s a deeper problem.

The solution?
I have to go back to my concept, list everything that doesn’t fit with it and remove it completely from my trading. Example: Swing trading doesn’t fit my concept but occasionally i take a swing trade. [B]No more swing trades at all[/B].

I then have to clarify exactly what is included, detailed, specifics down to the last nut and bolt, where the bulk of the money comes from and the times of day, how many grams of oatmeal for breakfast, how many degrees the office should be and stick exclusively to that.

I could have taken the whole month off and still have been better off financially. The only consolation is that i found a weakness in the plan which i can fix. Better now than later.

.

3

A big part of forex is problem solving.

When i started out i would do a lot of fire fighting meaning as a problem arose i would “put it out”, solve it. Of course this is a very naive and inefficient way of doing things as there are so many factors and variables that can go wrong that you end up permanently fire fighting.

I evntually found that building a system which broke things down into key areas or blocks and then further into detail and building in prevention, maintenence and progression works way better. Essentially you work on the system and the system takes care of the problems; preferaby before they happen. Your daily routine is planned around the system and the system is always improving so it is continuous.

[B]Real Life[/B]

Trading is practical, it’s not enough reading or knowing about how things work you have to be able to implement them in “live” conditions. This takes a lot of planning yes but that’s only a small part of the job a bigger part is practice.

Coming back from my holiday (a live condition) 3 out of 6 blocks in my system failed. The 3 that failed were 1) Separation 2) Mindstate 3) Process

In broad terms:

[B]Separation[/B] is what keeps “life” separate from trading. A problem; or good thing in life for that matter shouldn’t affect trading if they are separate just as a problem or positive thing in trading shouldn’t affect life.

[B]Mindstate[/B] is the optimum state of mind and awareness required to have a 360 degree perception of trading on trading days and non trading days.

[B]Process[/B], the daily procedures, the small steps which make up the large system.

[B]What pressures were these blocks put under and why did they fail? [/B]

I have already begun brainstorming and over the next 4 days i will put in the ground work and make the adjustments. The work is about honesty and getting to the root of the problem so that you can change the beliefs and pattern around it. When done well this gives the solution a permanence. It is a progressive thing so again it takes time and continuous practice.

Anyway, i have alot to work on today. I hope you have all had a good week trading and that you have some good things planned for the weekend including that all important rest and recovery.

4

So i think i’ve figured it out ([I]no applause necessary![/I]).

I don’t think the holiday itself and the need to acclimatise gradually back into trading was the issue. I think the real issue is what taking a holiday and thus being in “ordinary citizen mode” reveals about the trading months prior to the holiday, despite; or perhaps because of; the fact that they were winning months.

I found 2 issues.

The first has to do with “making things fit”.

[B]Routine[/B]

I don’t trade on Mondays as i have always found it complicated and unprofitable, who needs a consistent loss to the start of the week?

I count Fridays as a half day as i don’t trade my usual strategies, i only trade the news in the NY session if there is any, otherwise i don’t trade at all. The reason i do this is down to the fact that the added information that people want to cash out for the week makes the news price moves easier to read which is why i believe it has been profitable. Non news Fridays are too Monday-ish.

That leaves Tue-Thu, PRIME-TIME. I live in the UK but i don’t trade the London open anymore as it wasn’t profitable for me. I trade the what i call pre NY session from around 11am GMT and the London- NY overlap. Having seen where the early London session and the UK and Euro news announcements have taken price is a [B]huge advantage[/B], even if on many days the potential number of pips available would have been greater had i got in during London open.

Instead of trading the London open i study for 1 hour (Study = stuff that is new to me) and then go to the gym for and hour. After that I go through a 20 minute procedure of going through block diagrams which are up on my office wall which act as reminders and put me in the right frame of mind for trading. Around 10am-ish i do my analysis for an hour to an hour and a half.

Non trading days

On Saturdays i go over my trades from the week and technical issues while its all still fresh in my mind.

On Sunday’s I work on trading psychology and my trading plan doing various written exercises as well as writing and reading longer versions of the block diagrams i mentioned earlier.

Monday mornings i do my trading prep for the week, in the afternoon i relaaaaaaaxxxxx.

There is a dose of meditation thrown in for good measure on trading days and short yoga/stretching sessions in the evenings 4 or 5 time per week for as well.

Ok thats brief enough.:32:

You see i have “made things fit”. I make money most months so it all works right?

The issue is this. It works in a “bubble” but you step into the real world and your the brain wants to do things differently and focus on other things ([I]the grind doesn’t look as good when you are not in it[/I]). You think further ahead for example.

As a daytrader tomorrow doesn’t matter, today matters and the further ahead you think in trading terms the more likely you are to blow up. Yesterday doesn’t matter either because there should be no carry through from yesterday, positive or negative.

Life outside of trading doesn’t work that way so the more intense your time is outside of the trading grind, and i use grind as a term of endearment, particularly on Holidays, the greater the potential for conflict in your mind and conflict results in??? Issues!

Make sense?

[B]Separation[/B], trading is trading, life is life. Making it fit is artificial but feels necessary to get the job done but it puts a lot of pressure on Life which at some point pushes back.

I have had an idea about non-linear time planning as opposed to the more common linear “make it fit” kind. I may go into it in the next post. I’ll leave the 2nd issue for then too perhaps. This is starting to look more like a Book than a journal post.

More brief posts to follow :wink:

5

I will do some research on this idea and see what’s out there but for now i want t get it down in it’s “pure” form. If anyone has any thoughts on it i would be glad to hear them.

As a new trader with little or no experience and minimal study hours the main focus seems to be on calculations showing how much money can be made, for now let’s call it “THAT Million” and how quickly it can be done. This thought process is backed up by the numerous posts in the Newbie section of this forum. Lets call that thought process the Natural State.

The Natural State comes from the world outside of trading and doesn’t take into account the Market and depending on your beliefs about the market, the random or partially random element(s) and the zero control we as retail traders have over the market.

Most people get over the “THAT Million” part of the Natural state. That leaves us with the time component.

As intermediate or experienced retail traders we are not concerned with making a million in 6 months but we are concerned with performance. Most general psychology as well as sports and business psychology books say that humans don’t work well perpetually but that performance is increased when we set Goals. So being efficeient individuals we do our homework and jump on the SMART Goal ride. SMART stands for Specific, Measurable, Achievable, Results focused and Time-bound. ([I]Forget any immediate thoughts on the results-focused part for now[/I])

Time-bound, hmmm. Lets look at a time-binding, the binding we use a lot in trading is “the month”. You know how much you made or lost last month and will compare it to other months or the same month last year etc, its a measure of performance. We also look to the end of the month or what s remaining in the month etc, etc.

With time binding comes another time related component of the Natural State and thats [B]Scheduling[/B].

In everyday life we schedule things to efficiently fit in as much possible and to make what we perceive to be the best use of our time. In most Jobs putting in hard work is synonymous with long hours.

In trading does price have a schedule?

No, it’s event driven. lets say i expect price to move 20 pips upwards. That 20 pip move is an event. How long until my set up appears? How long will the event take? 3 mins or 3 hours? We don’t know there is no schedule. The risk and the reward for the 3 mins or 3 hours is the same. So we are using a fixed time, time bounded, scheduled approach daily to a market which respects non of these things.

Now the next part assumes you trade a system with an edge.

[B]Human errror[/B]

Assuming you are a day-trader or intra-day trader, you can only make errors on a trading day that you trade. Lets say that on between 1-3 of these trading days in your time-bounded month the risk of human error is significantly higher than on the other days…[I]your own trading experience will give you rough estimation[/I].

We all have; or should have systems which aim to reduce the occurrence of human error and/or emotional trading and to minimse it’s effects when it occurs. [B]Notice however[/B] that some traders after a series of “battles” would rather change trading strategies or trading styles, time frames etc than take a day off on a day when they have an inkling that today the risk of human error might be higher than usual.

Why? I believe it has nothing to do with intelligence, competence or “heart” but because taking that day off would break our fixed schedule which we have been conditioned by “life” to follow.

Conflicts, conflicts :slight_smile:

[B]Can we create a dynamic non linear schedule which avoids the perpetual trap allowing increased performance but also factor in days in which the potential for human error is greater?[/B]

My idea is this:

I trade Tue-Thu and look as Fri as a bonus half day (NY sess, news only). Lets say then that my trading week ([I]placing trades not the other stuff[/I]) is 3 days long.

If I wake up on a Wed morning having not slept, and during my morning study and gym sessions i don’t feel great… taking that day off messes up my week right?

But what if i bind my weeks differently, dynamically?

If i say a trading week is 3 days, but those days don’t have to be consecutive… ie a week could be Tue, Thu, and Tue of the following week, doesn’t that alleviate the problems in linear scheduling and sub optimal days but still provide performance benefits?

In essence i don’t feel pressure or friction about taking a sub optimal day off because it doesn’t mess up the week and it’s perceived potential. The week pauses and then continues optimally to it’s conclusion.

I will trial this idea in August to see what issues get thrown up.

As discussed as Price is not fixed in regards to time but dynamic, shouldn’t our approach to time reflect this? I heard pretty early on in my trading that our biggest advantage as retail traders is the flexibility in that we don’t have to be in the market all the time. Could this be a practical way to reap a benefit?

I know, i know… it’s a bit brief.:32:

Have a great day guys.

6

Sports and performance psychologist Michael Gervais said, “Learn to fail fast”. In effect this means don’t let your failures gain traction.

As human beings on the one hand we are prone to catastrophising things, making them seem alot worse than they are thus increasing the load rather than reducing it. On the other hand we ignore issues hoping they will go away; which of course they don’t, they and their consequences grow.

Ideally you have a system that allows you to bounce back quickly from a failure which addresses whatever the issues were.

[B]Real Life[/B]

Just in case my previous posts were too brief and you missed it… :eek:

I lost one months profits by trading like a maniac after returning from a 2 week Holiday in July. I had a plan on how i would trade the week prior to the holiday and how i would trade 2 weeks after the holiday. I class this as a failure.

Of course i needed “a couple or three” days to let the disappointment, anger, anxiety, rage and all that other good emotional stuff to die down but at the same time the beginnings of a plan took place.

Initially the problem looked obvious, i didn’t follow the plan, but going deeper i looked at why and uncovered some issues. I then looked at how i could build something into my system so that these issues get taken care of on a regular basis.

So that’s it ??!!??

Noooooooo. Not even close!

I went over all my systems tightened every nut and bolt and looked to see if anything could be simplified. I made a big change, going from a “fixed time” week structure to a “dynamic time” week structure. I also started this public journal which forces you to consider your thoughts more than when they are private.

So thats it ??!!??

Noooooooo. Not even close !!!

Think of cycles and storage. As a new trader there is a crisis every trading session. You get better then it’s once a week, with more experience it’s once a month. If you are still around in the game it’s once a quarter etc etc. The cycle expands.

The question is, [B]are you really improving or are you getting better at storing the issues?[/B] When the weight of the load you have stored surpasses your ability to carry it …booom.

I won’t know if my changes have truly worked until 6 months time or so. Of course there will be adjustments and other problems along the way.

[B]Now[/B] i start from where i am and[B] focus on today[/B] paying attention to the key elements of my plan. I don’t get looser to get back what i lost i get tighter. The money is gone and not the issue anyway. Long term success is about having a vehicle that can withstand the journey, one that will take you where you are going.

Yes it is humbling to make such stupid mistakes at this stage in the game; but i find i that humility is a state in which i do some of my best trading.

Concentrate on today and executing the plan as well as you can today. The accumulation of good todays is what it’s about.

7

A Good Day: The basics.

From memory, in one of Steenbarger’s books he says something to the effect of, you can’t define a good day by the day’s PnL (Profit and Loss) because you have no control over it. This would leave your days at the mercy of the market.

Context: Assuming my system has an edge.

  1. [B]It doesn’t matter if the next trade wins or loses a long as i execute it according to my system.[/B]

This is a cliche line every 2 week old trader throws around but according to the maths and edges it’s true. The greater your belief that your system has an edge the easier it is to accept this mindset in adverse conditions. Beliefs and how to change them is a whole topic by itself but for now in simple terms, the more supporting evidence you have in something the easier it is to believe in it.

  1. [B]If i am not fit to trade on a particular day it doesn’t matter how great the market is for my strategy there is a greater potential for human error and/or emotional trading.[/B]

Following on from this, if i am fit to trade it doesn’t matter what the market does i will follow the strategy and let the edge play out.

[B]My definition of a good day[/B] (Brief super scaled down version)

A good day begins the evening before with “preparation of environment” ie the house is in order and what i will study in the morning is prepped. I don’t want to wake up to stacks of dirty dishes, a house that looks like a bombs site or spend an hour looking for a particular video, book or forum page that i’m about to study .

Sleep: Getting to bed at a decent time, around about the same time every night so that i can wake up early with energy ( [I]i’m a morning person anyway[/I]). I use an app to track and try to improve my sleep.

A good morning consists of 1 hour study, 1hour gym, doing my analysis in full for ca 1 hour, going over my reminders and not feeling rushed before my trading window start time. [B]If i can’t do this i am not fit for trading and shouldn’t trade that day[/B]. If i can do the above then it’s been a good morning.

My trading is based on the mornings analysis and what i expect price action to do around the areas of interest. Live price action gives additional information which i use as confirmation of my idea.

When i execute a trade i am very aware that i am practising and trying to improve upon any recurring execution problems i may have as highlighted by my trade journal eg: not waiting for confirmation resulting in entering the trade 10 pips too early ([I]it’s only an example[/I] :wink: )

I don’t want to spend dead time in front of the screen so i will use alerts while price does it’s thing and manage the trade once entered on the tablet while i do other things.

If i follow my analysis and am mindfull of what i am practising as i execute and execute according to that criteria for each trade of the day then that is a good session and a good day.

I find it’s important to acknowledge a good day and give myself a minor reward as motivation to do the same again the next day and to continue and strengthen the good habits.

Evenings = the usual socialising and good citizen stuff.

Recap: If i have an edge then everything that happens is as it’s supposed to be, the system will take care of the rest. To follow the system i have to believe in it, be fit to trade and know my job. The practical manifestation of this is working to achieve good days as detailed in the definition above.

Have a good day guys, whatever a good day is for you.

8

[B]Basics and reminder to self.[/B]

[B]I do not generate the profits the system does.[/B]

This makes the system primary and me secondary as a working system could work without me ie someone else could use it, but i could not generate profits without a working system.

In most if not all strategic or technical endeavours success hinges on 2 things.

  1. The ability to match/ select the “right” technique to/ for the occasion.

2)The ability to apply the technique

Working on and practising to improve these two things in order to make progress is basically the job.

[B]Understanding the question.[/B]

Even post graduate students are reminded when taking exams, “Make sure you read the questions properly.”

[B]Simple, simple, simple[/B]. Misreading or misunderstanding the question and then writing a great answer to the wrong question happens at all levels.

If your system has an edge of 5% meaning you are 5% more likely to win than to lose over time, how does that equate to waking up this morning expecting to gain 30 pips from the day?

If your expectation or job is to gain 30 pips today, how will that effect “your solution” to today’s trading?

If your expectation or job is to trade your 5% edge over time , will “your solution” to today’s trading be the same as if your expectation or job is to gain 30 pips?

9

There are “Maths dudes” (MD’s), “Non Math dudes” (NMD’s) and “Hybrids” (H’s), hybrids being a mixture of… yeah, yeah, you get the point. :slight_smile:

Personally i’m a Hybrid meaning i’m not a natural MD but i became an Engineer so i did the same “workouts” year in year out as the MD’s that like to flex their big maths muscles.

This post is a conceptutal reminder to myself and also something to think about for NMD’s.

Maths, stats and probabilities. ( [I]Steady! No life threatening content to follow[/I])

Fact: [B]Maths makes the average NMD uncomfortable![/B]

When we are uncomfortable about something we usually try to avoid the matter, get defensive and generally act weird, [B]sometimes really weird[/B]. The ensuing whirlwind of “movement” is an attempt to try and get back to what makes us comfortable.

In trading; maths is not there to intimidate us or to show us up and make us look like we don’t have a clue what we’re doing. It’s not there to take ownership or credit for what we do or to be-little the skills and effort we put in on a daily basis… [B]it’s there to help us[/B].

Help with something difficult is good right?

You don’t have to be a car designer, engineer or mechanic to drive a car, you only have to know how to operate it. [I]Note to self…ease up on the guruish one liners[/I]

Now for a forum favourite [B]LOSING STREAKS[/B].

If you google “losing streak calculator” and plug in the figures it gives you a result.

Lets say for this example the calculator says in 1000 trades at your particular winrate the risk of hitting a losing streak of 6 losses in a row is 35%…

[B]What does that even mean?[/B]

It means that you run a business. The aim of that business is to take your capital and make some profit. “Out there” is one of many potential problems, a problem that could have a serious effect on your ability to run your business and turn a profit, in this example 6 losing trades in a row.

Probability is the liklihood of that problem happening. It might never happen it might happen twice, [I]of course there are calculations for that as well[/I]) , but for now we are looking at a 35% risk of that problem attacking your business as you run it now.

Knowing that allows you to stop running around like a mad person looking in the wrong places for faults that may not exist , make some decisions and take action to protect your business ie, get yourself some insurance as it were.

“But i’ve never had 6 loses in a row, my system won’t bla, bla, bla”,…yeah right!

Your next £ or $ is not coming from the past it’s coming from the future. Before his first crash in his BMW, Frank had never crashed a car before, still had his seat belt on when he smashed into that Mondeo though and it saved his life. That risk was always out there.

As a business owner it’s part of your your job as an owner to know what’s out there.

What are the odds of a 6 trade losing streak turning into an 8 trade losing streak???..[I]yep pretty interesting if you’ve just taken losing trade number 6, not so much if the last trade was a winner[/I] :wink:

Someone or multiple members of the intelligentsia ([I]those clever dudes[/I]) have said that before the maths existed people used trial and error to try and find out what worked and learned from their mistakes; if the mistake didn’t kill them of course.

Architects and Engineers can design a 100 storey building, maths, math, maths… but give them a hammer and a few nails and ask them to get on the roof of a small home and replace a slate (i prefer slates), there’s a good chance that you’ll be staring into bewildered faces. :31:

The maths is only there to help you.

10

The aim of this past week or so has been to use the extreme clarity which a setback so generously provides, (irony intended), to reassess the core areas of trading and my approach to them. I think i have achieved that.

Revisiting the basics is like going back to the neighbourhood where you grew up as a kid. You see immediately whats “still the same and hasn’t changed at all”, you see other things and think “That never used to be there…that was a xyz when i was a kid” and you also remember how your old house, or in the case of trading a technical issue, “seemed so much bigger back then”, probably because you were much smaller…ahhhh nostalgia lol

Going back over the basics at intervals as a more experienced trader has obvious advantages. As you now have a better understanding of how things work and why they work that way, you can look at your processes and attempt to simplify them, getting rid of any unnecessary weight. Finding more practical and efficient solutions begins with your approach.

[B]It’s much easier to be objective about someone else’s system than it is about your own.[/B]

I have read a lot of forum posts this week with a view to activating my[B] Objectivity Mode[/B].

Once in objectivity mode you naturally end up shining that light of objectivity on yourself, queue music.:54:

What i got from reading the numerous posts was that psychology is an even more important factor than i gave it credit for because it begins at such an early stage of the game.

One post stands out above the rest.

Someone wrote a post about their system. An experienced forum member then made a comment pointing out a [I]“potential”[/I] flaw. The original poster then replied by saying he was not going to turn his thread into a debate.:eek:

You write a post in a public forum but don’t want a debate? What do you want then? Validation? A fan club?

How will a person with such a closed and inflexible personality and approach fair in the market? :56: Hmmmmm.

To me it’s a very strong reminder to strive to be flexible and unbiased and to take advantage of the knowledge base that’s out there.

For you guys on “non dynamic time” have a good day and a great weekend!

11

I heard an advertising exec say, " Those decisions are not made in the office, they are made in the street", meaning, response and feedback from the public is required. Merely making a decision and hoping for the best is not good enough.

In my early trading days i used price action to make decisions in “the office” as it were. In general terms price action would get me an entry and a target exit. I didn’t pay too much attention to what happened in between.

[B]Making decisions in the street.[/B]

Fast forward a few years: Yesterday (Friday) i traded the News (NFP and unemployment), I took a GBP/USD short. I added to the initial trade at a price; if based on price alone, i would never even have considered in the early days, the price i was getting just wouldn’t make sense compared to where it had been moments before, added to that was the fact that it was a news trade and a Friday.

I added to the trade because of the response in the street, or more accurately… the price action at that level, was a text book example of what i expected to see for price to continue it’s move down. Had the market’s response been different, i wouldn’t have added to the trade, i may have closed some of the initial trade.

Gaining experience is not blindly placing trades according to some criteria. Broadening your awareness, paying attention to the market’s response to your ideas, day in day out, finding patterns, now that’s …

You can now process that information and make decisions on how best to use it in real time as similar situations occur.

Example: You take a trade, early on it goes very differently to what you had expected to see. You are in a position based on price action and experience that you feel the best you can hope for is break even or a slight loss. Do you let that trade hit your full SL?

Yes, once in a while those types of trade miss your SL by 1 pip and turn around BUT are you going to sit there and hope for the best, hope for that one exception?

Some/ many will disagree, but as i see it, this worse case scenario is a different trade now. I risked X to gain Y. Now the best i can realistically expect is Z. I’m not taking that very likely full hit for a [B]potential[/B] of Z. I kill a portion if not all of the trade depending on the specific example to minimise the loss.

These moves are not random, they are based on the response from the market to my idea and the info i gain from that response, a response profile if you like.

Now for that all important rest and relaxation. :slight_smile:

12

[B]Psych Sunday.[/B]

  1. On Sundays henceforth and forthwith the posts will be devoted exclusively to psychology hence the title “Psych Sunday”

  2. The metric i have decided to use with regards to daily, weekly and monthly trading progress is the Kilogram (Kg). Further explanations will be provided in future posts.

Bear with me for a second,

In Dostoevsky’s book, Crime and Punishment published in 1866, yep that’s before the internet :wink: the main character Raskolnikov, we’ll call him “R”, is a guy of principle. As a result he is very quick to see what everyone else is doing wrong, consciously or subconsciously he elevates himself to being “better than the rest”.

In the beginning of the book “R” falls upon hard times financially, the details are not important, and when things get really bad facing homelessness, hunger and destitution etc he murders the pawnbroker that he used to pawn his last remaining valuables to facilitate access to her safe and the cash.

Now, the average guy doesn’t commit murder but our friend “R” with all the principles, the guy committed to doing things the right way, [B]did [/B]and that’s what i’m interested in.

There would have been many ways out for “R” before things got to the point of desperation and murder but i’m guessing that “R’s” principles and beliefs about himself didn’t allow him to take those ways out.

I know what you’re thinking; but there wouldn’t have been part-time jobs at McDonalds in Russia in the 1860’s:eek: there may however have been an equivalent. “R” backed himself into a corner and as his circumstances got worse, his thoughts became locked on the extreme.

[B]Back to the present[/B]

Psychology basically says we are all a mess, but we are different messes. What we have in common is that most of the mess is caused not by events but by our beliefs about those events.

[B]Example[/B]: Herbert loses his job, Godfrey loses his job at the same company the same day. 3 Weeks later Godfrey has just finished an interview and was offered a new job…but Herbert, good old Herbert, well, he hasn’t left the house since he lost his job 3 weeks ago. If losing the job was the issue, Godfrey would still be at home too in his underpants making cornflake sandwiches.

Herbert has unhealthy beliefs about the losing his job. He believes it makes him a loser, worthless, it makes him feel ashamed, he doesn’t want anyone to see him that way so he hides out in his house.

Being a trading forum i guess we better throw in a bit of trading lol

What did you believe, perhaps still believe, about trading and yourself that backed you into that corner and resulted in that extreme trading and most likely; loss?. In hindsight weren’t there ways out before it got to that stage? Why didn’t you take them?

If your beliefs around trading and yourself haven’t changed, won’t it happen again once that circumstance or condition gets triggered?

[B]Yeah, Yeah, that’s entertaining but it’s Monday tomorrow how does any of that stuff help me? [/B]

Go for a walk somewhere quiet and for 30 mins record your thoughts on your phone about why you got into trading, why you still trade, what’s gone well, what’s gone badly and any reasons you have for that.

Record what you feel is holding you back or stopping you from achieving what you would like to achieve in trading, what you would like to achieve in life for that matter. Record your thoughts on what is important to you today. Record anything else that comes to mind. [B]Be brutally honest[/B], no one else will ever hear the recording so don’t hold back.

In a few days, say Wednesday, put some headphones on, lie down and listen to the recording. There is a good chance that you will have identified your most significant unhealthy beliefs and the negative effects they are having on your trading and your life.

You can’t begin to change your unhealthy beliefs if you don’t know what they are.

13

Reminder to self

[B]3 Things for today[/B]: Work, Perspective and Focus

[B]Work:[/B] It’s not about looking or feeling busy, it’s about getting the tasks done that you have set yourself for today.

[B]Perspective:[/B] What should be with you at all times is: What is a market designed to do? How does your system address this? What should you expect from your system? What should you not expect from your system? What should you expect of yourself and what should you not expect of yourself?

[B]Focus:[/B] Don’t get distracted. You know what to do today and what you have to take into consideration , what you have to practice and how. Don’t get pulled away from that. Depth is more important than breadth right now.

I don’t place trades on Mondays but for those of you who do i hope you execute them as planned!

14

Good Morning WinPsych, I love Mondays!!

Good stuff about recording your thoughts and reviewing them.

Im actually going to write a journal, but write it like a book that evolves.

Calling it,

“Have Faith”

Keep Moving Forward WinPsych, Enjoy the day Off!!

15

Hey Money!

Yep, recording your thoughts when you have moments of clarity and playing them back regularly is so helpful both in the good times and the bad.

I’ve enjoyed reading your famous thread in the past Money so naturally I look forward to reading your upcoming Journal &/or Book.

Your enthusiasm is infectious.

Take care dude.

WinPsych.

16

Performance is a practical thing

You know your system, your setups, your psychology, your money management, your analysis, back test results and countless other things but[B] it’s not enough![/B]

[B]You have to be able to pull it all together and execute it when it really matters, on trading day.[/B]

Performance is about being able to do just that. Today i won’t go into the theories behind how to achieve optimal performance, like everything else in this game different approaches suit different people. instead i’ll mention what i’m thinking about on trading day.

My morning routine is designed to get me to my desk with plenty of time to do my analysis but also to let me know if i’m fit to trade at all today. Routine is key.

Ok, fast forward… i’m about to take a trade.

The first thing i remind myself of when a trading opportunity appears to be close is that, [B]I don’t have to take a trade at all today if the Market doesn’t show me what i want to see.[/B]

As retail traders i think that’s our biggest advantage and one of the few in-game things we actually do have control over. Unfortunately that power isn’t taken advantage of enough.

I take my trades at Market. As the setup develops i remind myself that the confirmation i am looking for may be in the next candle. This is to help myself not go in too early and make the trade harder than it needs to be and putting pressure my SL. In 15 or 30 mins (I trade off of a 15min chart) the tricky entry might be really obvious and the price better too.

If i find myself being too impatient and wanting to get into the trade and not wanting to wait for that next candle instead of going in at market i’ll place an order at the level i seem to wishing price would get to. Often placing the order takes away the impatience. I can often cancel it and then go in at market later on with full price action confirmation.

I don’t want to spend dead time watching the screens, it makes the day too draining. I do monitor the trade from a tablet though. I know where i expect the trade to go and how i expect it to get there.

If it is [B]obviously[/B] going to plan i look at the price action around a key level and look to add to the trade. If the trade is[B] obviously not [/B]going as i expect it to i look to cut my losses either by closing a portion of the trade or shutting down the whole thing.

For the majority of trades though, the trades movements are not obvious so i give the trade space to work itself out.

The above takes practice, every time i trade i am consciously practicing and trying to get better.

When exiting a trade i practice letting the trade hit it’s target. If it hits major “traffic” a few pips before the target i will shut down the majority of the trade and let the rest go. With experience you get a feel for these things and with practice you get better at making the right decisions.

Sooooo, yes i do 1hr of study on trading days and various other things but mainly it’s about performance, practice and improvement.

I will write about the theory behind performance and the beliefs going into a trading day in a future post.

Have a great day getting in that practice guys!

17

Good stuff Win, and Good afternoon!?

I need to work on my morning routine. Like I need to actually act as if Im going to forcast the day. I have a tendancy to wake up, walk downstairs, straight to the PC and make a trade. SMH, Then brush teeth, coffee, open my eyes, and BAM, im 7 pips in the hole… unreal… There is so many things to take into account, especially at 6:15am, est… I feel like Im going to miss pips, and need in the action. Maybe its a brain test str8 out of bed, IDK, but I have to stop that.

Printing up my stratagy check list today… I should have my plan set. I have 1 more varible to implement and try to follow today. SO thats the plan…

Im going to start my journal today also here, and already started my real paper journal/Book yesterday, and at 3 pages right now.

The evolving Story, *shruggs, keeps me intune of my goals. Which I need very much for me to succedd… Kinda like being held accountable, like a game.

Win, many pips to you today Bud,

ANd please, dont stop posting in this journal, lol…

18

Good afternoon Sir,

This game is full of illusions and “missing pips or trades” is definitely one of them lol

You have the advantage of being in the possession of a wealth of experience Money, your new structure and routine is bound to be another plus.

Personally i find if i implement plans in stages, like the components of a new morning routine for example, it gives me time to condition my mind and my body to it gradually. Seems to work much better; and last much longer that way than if i dive in and go all out from day 1.

Thanks again for the encouragement!

Keep working hard mate.

19

A lot of us have problems thinking in averages. Of course we know what they are and how it all works but that doesn’t translate to us feeling it on that functional level.

Example: lets say our winrate is 60%. We naturally think that we will win 6/10 trades. So we take 5 trades and we have already lost 3. The mind starts thinking i’m not going to make that 6 wins and then the problems start.

Of course we are not stupid, we know it doesn’t work that way but our minds seem to have a need to know where we are right now, and when we don’t… we feel uncomfortable, emotional.

We also look at our account balance, we look at much we won or lost on a trade for the very same reason, are we doing well, making progress?

For some; when a trade is a winner it’s like New years eve in Trafalgar square, the Champagne flowssssss and when they lose it’s like their girlfriend just left them for their uncle, the miserable one with the limp :frowning:

Averages and Cash, [B]assuming we have an edge[/B]

A [B]legitimate trade[/B] is one where you have followed your system. It has entry and exit criteria, Money Management and Trade management built into it. Over a large enough number of trades we can calculate expectancy. An illegitimate trade doesn’t follow your system and has nothing built into it so it’s expectancy is not measurable.

Again, assuming legitimate trades and a system with an edge, [B]how do we get around not being able to functionally digest this averages thing?[/B]

Let’s say over 500 trades with winners and losers the expectancy of each trade works out at 5 pips. Lets get rid of the pips thing and say the expectancy is (5), then our true value is (5).

If a [B]Legitimate trade[/B] wins £100 it’s true value is 5, we don’t let the number of pips we gained or the £100 and how much food we can buy with it in Tesco fool us. No celebrations, we just took a (5) trade.

If a legitimate trade loses £50 it’s true value is also (5), again we don’t let the number of pips we lost or the £50 that could have been used to pay our parking fine fool us. No depression necessary, again we just took a (5) trade.

[B]There is no difference between a winning legitimate trade and a losing one, it’s an illusion they are both just (5) trades.[/B]

Now some people like running totals, so if you are one of them you could say after taking 3 (5) trades that you have “done a (15)”.

At some point down the line your true value , the (5’s running total) and your overall pnl will converge.

So the job really is just to find and execute [B]Legitimate trades [/B]to the best of your ability, day in day out.

Of course it will take time to get used to thinking this way if you haven’t before and there may be variations that work better for you but it’s obvious that the averages way of thinking is not practical for many, it just hasn’t worked.

Tip: [B]Don’t fall into the trap of expecting your level of conditioning to increase immediately just because you have found what may be the right track for you. It still takes time and reaffirmation and practice.
[/B]
In my next post i will discuss “the hard part” ie how to apply true value, “the (5) mode”, in all weathers particularly in weather where Illegitimate trades seem to thrive; and yes, we all make mistakes :wink:

Happy trading guys!

20

This isn’t the post i was going to write, i will write that post shortly however.

The reason for my change in subject is because i read a post in the Newbie forum and it “struck a chord” as they say.

A guy with only a months demo experience had gone live, taken his first “hit” and reached out to the Newbie forum. It was great to see how some of you guys responded not only with good advice but with encouragement too.

In my opinion; that’s when a community, be it in “real life” or online, is at it’s best right?! When it provides help and support to it’s members… people learning from each other etc.

Who knows if in 3 or 4 years time the Guy will be a pro trader or if he is just passing through? It doesn’t really matter, what matters is that people responded both respectfully and with understanding.

It reminded me ([I]should i really need reminding[/I] :slight_smile: ) of how ruthless this game can be. The industry “hype”, will part a new inexperienced retail trader from their money quicker than… we’ve all been there.

Thats why it’s good that a resource like babypips exists, it has a bit more substance and a little less “hype” than some of the others. To a new trader some of the advice may seem a bit “dry” and not what you want to hear when setting out on those “Lambo dreams”, but a few years down the line you see the true value of [B]some[/B] of the advice given by the more experienced dudes.

Give yourselves a pat on the back you guys who on a daily basis provide help and support on these forums. It doesn’t go unnoticed.