What it suggests to me is that either: 1) for various reasons, you do not have confidence in your strategy, 2) your strategy is not precise enough in concrete terms to be able to act on it without hesitation.
For example, you say “some of these trades” This is ok, but why not all of them? What exactly is the selectivity here based on? What is determining which you might take and which you might not? Is each one an objective decision based on your chart analysis or purely a subjective appraisal based on intuitive feel?
Another example here, you say “It would be much more favorable to wait for a retracement”. But why would it be? What is this based on? Is it, for example, because of an exceptionally long preceding candle that normally retraces before continuing? or is it based on an assessment of likely profit v. excessive risk of loss i.e. your defined risk/money management criteria? Or is it purely a subjective hope that maybe there will be a better entry point?
In a discretionary trading system, our charts only come up with identified opportunities. It is then up to the trader to decide if the current circumstances support taking the offered trade opportunity or not. But I think the discretionary element should be based on as concrete terms as the chart setup itself.
Each of the phrases in the quote should be able to be followed with another phrase starting, “because…”
Not a criticism, just a lighthouse beacon on the thought process!
Retracements is where my entries are favorable. But a gap candle isn’t necessarily a retracement. I’m not confident whether or not price will CONTINUE retracing. I’ve seen tons of trades where the entry signal is super obvious. And this wasn’t one of them. My gut is saying that price could start trending again, or it could keep retracing. It just feels like too much of a toss up.
Yes indeed! The retracement movement itself is easy to spot. The crunch comes in how to identify when the retracement is over and whether it is bouncing back into the original direction or converting from retracement into a reversal.
How are you identifying the end of such retracements?
Previous S/R levels are big clues. Not 100%, but favorable. When there’s no S/R level, it can be tricky. But you know what? None of this is 100%. You just gotta be willing to play the odds. And you never know. You might be wrong on this candle, but the next candle could be the winner! Just gotta pay attention.
This is the comment that came to mind concerning understanding the role of probability in trading. I.e. the individual tree v. the forest:
"Here’s what makes thinking in probabilities so difficult. It requires two layers of beliefs that on the surface seem to contradict each other. We’ll call the first layer the micro level. At this level, you have to believe in the uncertainty and unpredictability of the outcome of each individual trade.
The second layer is the macro level. At this level, you have to believe that the outcome over a series of trades is relatively certain and predictable. The degree of certainty is based on the fixed or constant variables that are known in advance and specifically designed to give an advantage (edge). So, even though you don’t or couldn’t know in advance the sequence of wins to losses, you can be relatively certain that if enough trades are taken, whoever has the edge will end up with more wins than losses. The degree of certainty is a function of how good the edge is.
It’s the ability to believe in the unpredictability of the game at the micro level and simultaneously believe in the predictability of the game at the macro level that makes the trader effective and successful at what they do."
Mark Douglas (with a bit of redaction)
I’m practicing charts. I’m looking at a USD/JPY chart from 2018. There’s an opportunity to open a position, then pyramid an additional position.
Oh man, it’s beautiful! Seeing how pyramiding works makes me wanna do it all the time.
But that’s where the problem arises. It doesn’t always work. Would you sacrifice your position for a chance to 2x your profits? What if price pulls back a few more pips than expected and you get stopped out, losing your initial position?
I found a CHF/JPY trade that was rather difficult. I expected price to continue bearish.
But between resistance and support, it gave an unexpected bullish sign, then skyrocketed.
I practiced the chart and got it wrong. I’m trying to understand how and why. I’m comparing other chart samples. It’s quite confusing.
I’m really trying hard to understand.
I’ve been trying to teach myself to hold during the random walk, and don’t just reverse at any sign. But this time, the signs were worth taking, big time! Bullish for about a month!
What does this mean for me? I don’t know yet. But not every trade is gonna go my way. I have to accept that even when trading profitably, I can can still miss big swings.
I just did recorded my monthly balance, and I had a green month, albeit not by much. It’s nice, but not much to get excited about yet. My goal is to have two green months in a row.
I have two systems for entry, basically. The first one involves S/R, and the second one involves retracements without S/R.
It’s like jumping onto a moving train. I could be wrong a few times, but eventually I’ll catch an entry.
The problem is that I have trouble applying this strategy correctly. For example, if I’m wrong 4 times, and I was trading in the wrong direction the whole time, then what’s the point?
One way to address this problem is to be more selective about the conditions I apply this strategy. The other way is to just put it on hold for now until I get more comfortable with my first strategy which involves a clue and confirmation, which provides higher favorability.
I have to be honest with myself. The S/R strategy application is tricky enough. The patience part is hard. Really hard.
The second one, is VERY profitable, but the risk is high. I could be wrong 0 times, or 4 times.
You know what? As I think about it, I should try to be more selective about when I apply that strategy as opposed to abandoning it. Perhaps I should study the best conditions vs worst conditions.
Maybe next time, before you hit the reply button, make a backup of your entry by copying it entirely. This is insurance against losing all you have laboured to pen down should any issue arise as in this case. This will save you the stress of having to start all over again.
I’ll rewrite part of the post that I lost…I can only remember one part…ugh
So, there are several trades that I wish I took, of course. It is what it is. Some of them were not ideal setups. Just because I see an interesting candle, that doesn’t mean I have to take a trade.
An tempting candle is NOT the same as an entry. A lot of money is wasted on entries that are tempting but not strategic. A lot. I’m trying to move away from that. And I did so this morning.
It’s dangerous to see a candle that indicates a big candle might happen next. Reason being that there’s a 50/50 chance of ending in profit. It’s too unfavorable. It’s really just a guess, because of FOMO.
However, there is a trade that’s going well. I opened an EUR/USD position during a retracement that fit my strategy and it’s been running for about 30 days. There have been some retracements since, but nothing to make me wanna close.
It’s nice to open a position, then do nothing but watch it week after week. This is my kind of trading.
Thanks, but it’s still too early for me to celebrate…
I’ve had green months before, but never two in a row…
Bah I hate when that happens. I hate it even when it’s just like 3 sentence long. I can’t imagine if it’s a full post. Sorry about that! At least you got to letting it all out writing-wise at least… that’s how I would have consoled myself lol.
For some strange reason, when I think about being more patient and waiting for more favourable setups, I focus more on the trades I’ll be missing out on.
I don’t focus on how those less favourable trades are causing me to lose money again and again.
What I SHOULD think about is how I could be more profitable.
It’s better to wait 3 weeks for one favorable setup, than waste money chasing 10 bad trades.
Sure, trading every day sounds fun. But this isn’t about fun. This is about making money.
Been thinking about the same recently. Like what if I could minimize the number of losers, or cut losing trades earlier? And maybe more medium-sized winners instead of losing trades where I was waiting for a TP to get hit.
Congratulatiooons! 