Trying to catch the beginning of each move - a seductive poison

Trading Discussion
1

I just wanted to share an aspect of my trading that I hope will help a few out there who may also be prone to it, and that is trying to catch the beginning of every move. This tendency until I was able to control it took me within a hair’s breadth of ending my short trading career. You know the scenario: you think the market is about to go your way, and there are indeed some pretty good signals that it is,and you don’t want it to go off without you, so even though you know it is probably too early, and that you haven’t got nearly enough confirmation to either buy or sell, you enter a trade in the hope that you have struck it perfectly, in fact, you even have a clear vision of the price rocketing away in your direction with you on board. The reality is however, is that it does the complete opposite, wiping you out instantly before it stops and turns, only then to begin to move concertedly in the direction you hoped it would. Then there is a really nice entry signal, but you either don’t see it or you are too disgusted with yourself to take it. It goes off without you and you have a losing day because you simply did not have the patience to let things unfold. You wanted it all, you were greedy, impatient, impetuous, and rash, and there is no place for any of those qualities in trading.

Even though I still succumb to this horrible trading affliction from time to time, this morning being one of those times, hence the post, I do not suffer from it nearly as much as I used to, and my trading is so much better because of it. What I do before I make every trade, this morning being an exception, is ask myself whether this is a trade I can be proud of , win or lose. If the answer is no, because I am pre-empting my strategy, I walk away, simple as that, I get up and leave my office, go and make a cup of tea or whatever. If the answer is yes, then I am happy, much happier with a win of course, but philosophical with a loss because I know that I made a good, solid trade that conformed to my strategy. This morning I bought the euro at what I hoped was a pivotal low, but I felt guilty when I did it. It dropped quickly through my SL, before turning, going sideways for a bit, and then rallying strongly without me.

If this is you, even sometimes, then I hope this might be of some help, because unless you can control this urge to get in ahead of the major moves, it is unlikely you will get far. I still trade like a clucks from time to time, but eliminating to a large extent my bad habits has been the key to moving forward.

" Insanity is doing the same thing over and over again and expecting different results " - Albert Einstein.

2

Picking a bottom usually just leads to smelly fingers…

The next time you find yourself in a situation like that, instead of hitting “market buy” or "market sell"when you THINK it’s right, place a pending order at the point you determined your stop should be at. Then use a stop that is half the size of the one you originally were going to place.

That does a couple of things for you.

It kills the urge to jump into a trade somewhat irrationally, and it lessens the loss should one still be incurred. It also increases your R/R ratio, and your profit.

Have fun kids:)

3

Ha ha, LOL cracker.

Pending order’s a good idea, especially with Oanda, it’s really easy to do, but you also need an entry method/setup, so that the setups make the decision and not you, in the end it will always have a discretionary factor, but with a method you will have more success.

4

100% of my orders are designed to pick market tops and bottoms. Either a bottom of a pullback in a retracement of a longer term trend: ie - buying the bottom of a pullback in a trend; or true “counter trend” trade…buying the low or selling the high.
90% of my orders are limit orders… and ive’ been thinking to upgrade that to about 95%.

I trade for a living, and this is how i do it. If you want tops and bottoms… ask yourself if you have a method that you have proven gives you an edge… a winning system of rules for picking tops and bottoms. If you are just going long or short on impulse however… I don’t think any strategy will work…be it finding market turning points…or trading with the trend.

Jay

5

Hi Jay,

If you have a system that works on getting in at the beginning of each move, and it works, then good for you. My strategy, which certainly doesn’t include trading on impulse,otherwise it cannot be a strategy, gives me signals soon after there has been a change in direction, and works well enough for me to be able to get by on trading alone whilst I build my account. but when I pre-empt it by getting in too early, I usually lose, that was my point.

Cheers for the reply, and great trading to you.

6

Ahhh… i gotcha. I thought it was a “don’t try cuz i can’t do it then no one can” sorta post… my mistake. To your credit…you can follow a system that signals soon after direction change! I doubt I could do that for even a single trade…nevermind enough to string together a career on. for what it’s worth…whenever I preempt my entry point, I increase my risk, decrease my profit margin, and overall lose money as well.

Hey… guess there’s theme going here, and I completely agree with you, emotional impulsive reactions in the market have…well…no place in the market :slight_smile:

Jay

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No Jay, I wasn’t implying anything other than the recklessness of straying from your strategy in a pre-emptive attempt to be smarter than the market, except of course on a demo account to see what works, but absolutely no place for it in the arsenal of a professional trader.

Tim