Care to share the basics of your strategy? Not necessarily specifics, but perhaps an overview of what you try to exploit in the market.
Hey PoPip,
I don’t go into my strategies in this journal not because they are top secret or anything but because i don’t think that strategy is the main issue. There are lots of strategies with edges and for one reason or another people still fail using those strategies or they don’t take full advantage of what a strategy has to offer.
I trade a few strategies which i use based on the time of day and the “environment”. I pay a lot of attention to [B]how[/B] price gets where it’s going to. I have a News strategy, a Ny open strategy, an end of day continuation strategy ([I]end of my day[/I]) and an end of day reversal strategy. I always trade with the daily and 4 hour trends in the same direction, never trade against that trend, except for news trades as the power of sentiment immediately after good or bad figures is more powerful than the trend, and i never hold trades overnight.
My strategies fit my overall concept, which is, that in a very good month the winners will outweigh the losers [B]but[/B] on top of that there will be 1 or 2 exceptional winners and no exceptional losers.
A swing trader might get their exceptional winner hitting an extra 100 or 200 pips by already being in a trade when something unexpected happens. As a day trader i can’t do that. Instead i know, through experience, how i expect the trade to perform under certain conditions and how it will react to obstacles and traffic in those conditions. When a text book setup in a textbook environment performs exactly as i expect it to in that environment i scale into the trade aggressively [B]while keeping the risk the same[/B]. That way instead of the good 50 or 60pips i get the £££ equivalent of 150 or 180 pips. As the risk remains the same these trades have a risk/ reward of 6:1 and upwards.
As mentioned above these are exceptional trades and not the bulk of my trades but they make the difference for me. This type of trade can happen in any of my strategies.
Sorry if the answer is not what you are looking for but there are already a lot of great strategy threads out there.
All in all it was a pretty good week this week. The “weather” was better, i got off to an exceptional start and i feel that on the whole i selected and executed my trades well.
Of course the GBP CPI (Gbp/Usd) news trade on Tuesday stands out, right weather, right strategy, right execution.
There was also something interesting that happened. I took 2 trades on 2 separate days on the same pair and when going over my trades thought, “How could i have taken those trades at that price? It doesn’t make sense at all”.
I looked at the screen shots of what i would have seen before taking the trades.
You know when you are at home or on the street and you notice something and think [B]“bloody hell!”[/B]???.. and not really because of what it is but because you realise that it must have been there all along and you have walked past it 5 times per day for months.
With these trades i noticed something “deeper” in what i already knew that [B]must have been there all along[/B].
Basically it has to do with trading a range within a range on the same timeframe. The parent range might be 100 pips-ish and the baby range might be 40 pips-ish. The child range keeps it’s shape but it shifts within the parent range.
Of course you can forget about the child range and just trade the edges of the parent range, but price spends a lot of time in the child range and you can make quite a lot of 10- 15 pip trades that move into profit quickly.
What i noticed about the 2 trades was that after a significant amount of time in the child Range there is a breakout that looks like a great entry. If you were trading a range within a higher time frame trend it would be a good entry at London close, but here is the thing. If price has been outside of the child range deeply to the downside, when it breaks it on the upside it runs out of steam and doesn’t hit the upper edge of the parent let alone break the parent range, while if the child Range holds more or less with little downside price will return to the upper edge of the parent range testing highs.
I’ve seen this move a Gazzillion times but never noticed the relationship between the bottom edge of the child range on price.
Soooooo, the 2 trades that looked crazy in hindsight but must have looked good at the time…now have an explanation.
I am also considering only trading from 14:55 GMT to 18:15 GMT when the pairs i am looking at are ranging on the higher time frames + the News of course. It looks like i make a disproportionate percentage of my money there and due to all the London and NY open info, price is much easier to read. Just a thought.
It’s crazy how much there is still to learn about the tiny part of the market i inhabit; and how those things that we already know contain components that we are unaware of. How can you take advantage of it if you don’t realise it’s there?
Anyway, obviously as a trader you have to try and standardise as much as you can, keep it simple and stay in your lane. [B]Good to know where the extra grip is in your lane though [/B]
Enjoy your weekend!
[B]Psych Sunday 3[/B]
There were a few topics on my mind to write about for “Psych Sunday 3”. The one i chose is, How to win as an underdog; or the psychology of an underdog, or maybe more correctly the winning psychology of an underdog.
Malcom Gladwell popularised the 10 000 hour rule in his book Outliers. What he wrote was based on a paper written by a Professor named Anders Ericsson. Ericsson wasn’t completely happy with the way Gladwell interpreted the rule and if that interests you, you can read about it here Can 10,000 hours of practice make you an expert? - BBC News
Anyway Gladwell has another book called David and Goliath, this short video will give you the gist of things https://www.youtube.com/watch?v=gl3c45mdmiY
People will have their own views of Gladwell and his work, personally i think that regardless of the pro’s and con’s, he looks at some very interesting topics.
So back to the underdog thing:
Can the underdog football team play the same way as the favourite? Can the underdog boxer fight the same way as the Champion? Can the small business have the same strategy as the market leader?
As retail traders we are obviously underdogs as we have higher spreads, slower connection speeds, less access to information, we don’t see on our screens what the big boys are looking at, of course we have less capital, we risk our own money, no win no payday, we don’t have industry leading professional coaches and courses to support us etc etc
So how do we approach the game?
[B]Lets look at 2 rags to riches stories.[/B]
A guy, Sasha, comes from a poor country and a poor family and ends up a millionaire while the rest of the people he grew up with stay poor. When you research his background you find out that Sasha left that poor country and studied at one of the top 3 Universities in the richest country in the world and then got a job with one of the industry leaders in his field, later on with all that expertise he started his own company and bingo…the millions flow. Essentially he works very hard to get juiced into the “Big Boys”.
The other way which is actually more difficult is to find a way to exploit a flaw that the big boys have in their business model which they are aware of but which has to exist in order for them to do business on the scale that they do it.
[B]Example[/B] it might not be worthwhile for a large supermarket to deliver a single £10 item for free in the next hour but Johnny might do it on his moped in his local area and build a business from that.
Ok back to trading… Based on what i have read in various forums the majority of Retail traders see the psychological aspect of trading as how to deal with emotions and loss in all it’s variations. I think it starts way earlier and that the early stuff is much more important.
[B]The selection process[/B]
Lets assume we all agree that as an underdog you have to work a lot harder than the favourite to win. So what is working harder? Is it trading more hours? Is it trading more pairs? Is it taking greater risks? Is it having more faith and never giving up?
Before you ever place a trade, as an underdog what is your psychological approach to working harder and what is your objective?
We’ll we have already identified the objective:
Like Sasha in the rag to riches story you can try to get juiced in to the “big boys” and their world; by fulfilling their requirements through formal education, creating a verified trading track record etc, or the other avenue is growing a business like johnny on his moped.
Assuming we are a bunch of Johnnys on Mopeds lol, how do we work harder and exploit the way the “big boys” have to do business?
Firstly, i have come to the conclusion that working harder has nothing to do with trading more, either pairs or hours. Performance deteriorates as emotional stressors increase, that hurt us. Taking more risks is probably why more people fail than they should while having more faith and never giving up when what you are doing is wrong doesn’t help either.
I think that working harder is being more accurate which involves more education, more data gathering and probably less trading.
Example: Based on time of day. Imagine if you only traded from 15:00- 16:00 GMT Tue to Friday. Imagine you noted how price moved in each environment eg when the daily chart is ranging or when it’s in a trend and also in each sub condition, ie when that particular day is in range mode or a trend mode.
All you would be dealing with is 1 single hour where london is preparing to shut down, you could gather a large amount of data, experience and expertise.
[B]Could the big boys only trade 1 hour per day and forget about the rest?[/B] Nope, but we could…
Now this is just an example but i think it does illustrate what working harder as an underdog could mean.
What would it take psychologically from you to trade that single hour per day? How much prep would be involved? In my view a lot!
Would you feel that you were missing opportunities? Could you stick to it? How would you go about it psychologically? Isn’t that where working harder comes in?
Soooooo… as an underdog our edge and objective has to be clear and achievable, our knowledge of the terrain surrounding our objective has to be extensive, we have to be at our best when it counts and know our job inside out. We have to know how the mind works in general and how our mind works in particular and concentrate on putting ourselves in the right conditions and keep away from the rest. All of this has to be done with a view to longevity so it has to be managed that way.
If that isn’t enough work for you; then there is the practice, practice, practice.
Happy now? 
Here ends “Psych Sunday 3”.
As you may or may not know i don’t take trades on Mondays, i did glance at the charts yesterday afternoon though lol WOW!
I’m guessing that some of you made some “good” money yesterday, i’m also guessing that some revenge traders out their got their accounts busted. A 500 pip drop on the Usd/Jpy at one point… hmmmm.
Who know’s the real reason behind what happened yesterday? I think the explanation about bosses being on holiday was hilarious. To be honest, it doesn’t matter really, if we control risk and pick our spots… it’s business as usual.
Lets see what today brings. I will be more cautious than usual if i get into a trade that goes negative and more aggressive than usual if i get into a trade that takes off.
Have a great day guys
That’s actually just the type of answer I was hoping for. Thank you for the insight.
I think that day to day trading should be easy and the entries and exits should be obvious. That wasn’t the case for me yesterday which meant i sat on the sidelines a lot which was quite frustrating as[B] volatility = potential to earn “good money”.[/B]
I was focused in on the GBP/USD. When the good Mortgage approvals and the CBI figures did nothing for the £££ i took it as a warning that something deeper was going on and to be extra cautious. Throughout the day the price correlations between the (GBP/USD and the EUR/USD) + the (GBP/USD and the USD/JYP) + the EUR/GBP were all over the place.
When the USD durable figs came out and were good… no movement 
… as if someone was buying into the GBPUSD shorts…then the flood gates opened. :
I did eventually manage to get in a short on the GBP USD, however, some FED dude made some noise in a speech and my trailing stop got taken out, of course price then dropped 100 pips so i ended up with 30 pips instead of 130 lol, it happens.
I then sat out until end of day looking to pick up some reversal scraps as people took profits…i got in long at 15480, price stalled and then kept going down. [B]I broke my own rule[/B] and left the trade on overnight, it’s still on as i write and is currently up a [B]massive[/B] 12 pips. I figured that if yesterday was an over reaction as is often the case there may be 70-100 pips in it, we’ll see.
Anyway this morning something Jesse Livermore wrote in “our” favourite book Reminiscences of a Stock Operator, came to mind. He knew that a trend was turning as he saw certain signs but from experience he knew he had to time it right and not go in too early. He waited 6 or 7 weeks before taking the trade and said that it was the hardest thing he ever did in trading.
Can you imagine waiting 7 weeks to take a trade???:56:
Sitting on the sidelines is hard! Yesterday the GBP/USD reacted so differently to news, speeches and to it’s correlations with other pairs, but you could see there was money in it. I couldn’t understand the potential trades so i didn’t take them at what in “hindsight” looks like “good prices”. Because i couldn’t understand it i sat out…very frustrating, i know i know…it was a few hours not 7 weeks lol
[B]Volatility : Think surfing…a very big wave can make a spectacular ride, but if the wave is too big the line between spectacular and dangerous is crossed.[/B]
Lets see what today brings.
Almost immediately after i had written yesterday’s post and logged out of the site, something i’d written started bugging me and i knew i had to address it. As stated yesterday, [B]i had broken my own rule by keeping a trade open overnight.[/B]
First lets look at why i have the rule in the first place.
Lets say swing trading is a marathon, well, i tend to run it the same pace that i would run 100m. This creates an obvious problem. I find it extremely exhausting and draining and in general my whole life suffers. Of course when you get what you think is a great price you want to ride it but from my personal experience it causes way more problems than it solves.
So why did i break the rule then?
We were in a long boring range for days, weeks, then the super volatility hit. Firstly there is a transition period however short; needed in mindstate to adapt to the new conditions, then there is that feeling of not wanting to miss out on the opportunities that the volatility brings. That is just human nature.
[B]Turning a day trade into a swing trade though is a rookie mistake![/B]
Mistakes will be made, humans are imperfect and fallible, that’s not the issue. There was no monetary damage done, that is not the issue either but it would be wrong to just brush over the mistake without addressing it.
[B]In trading all you really have are your rules[/B]. Break one and it’s easier to break another which is one reason why you shouldn’t have too many rules. Guidelines are different but your fundamental blocks should stay in tact.
I think that when i “feel” the need to trade “wider” it’s a sign that i should actually trade narrower. By that i mean that wanting to get involved in more trading opportunities or opportunities outside of my plan means that somewhere there is discontent and an underlying pressure to speed things up. What is actually needed is to remove all the noise and focus solely on what works, to get narrower.
Removing noise… you can either fly under or fly above the clouds.
This weekend i will spend some time reading over some of the things i have written over the years as well as some notes i have made in books by authors i respect. I want to remove as much noise as possible and get really narrow in my trading.
Something else i have been reminded of recently which is floating around in my mind is something in The Art of War by Sun Tzu. The gist of it is about having winning as your focus. He talks about generals wanting a[B] glorious[/B] victory , BUT if winning is your focus, if you can win without having to go to war at all…
Good “luck” out there today guys
Nope, It’s adapting.
You are stubborn or loyal to your trade ideas, you need no want to be dynamic!
I like your observations though.
Best
Kas