I Can't Make a Friend of the Trend | Psychology and Money Management


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I Can't Make a Friend of the Trend

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St. Louis
 
Trading Experience: Beginner
Platform: thinkorswim, NT8
Favorite Futures: equity and fx futures and options
 
Leon of Pizza's Avatar
 
Posts: 133 since Sep 2013
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I Can't Make a Friend of the Trend

Greetings all, I could use some help with my mental problem. I find it difficult to participate in one-sided markets.

I've had this problem for years and my record shows that during these periods, my trade count is lower and my scratch count is higher. Obviously, both the W/L and R/R ratios are lower as compared to that of the trend trader. My confidence is always under pressure, hence the high scratch count.

I do OK in 2-sided markets and during these periods I can meet my trade count and expectancy goals. I have a system that I'm comfortable with and it includes all the tools I need to execute during trends, but I don't engage.
So, I'm not looking for setups, or indicators and such. This is a wholly psychological problem. For a long time, I thought that this situation was OK and I would justify it with the logic that most of the time markets are two-sided, so I'll just sit out the periods when it's not.

Now, I'm thinking that I've been denying the problem. Firstly, even though I'm a day trader, my system's inputs are derived from the previous day, especially its range and also from the day's prior to that. So, even if I get a two-sided day, my plans for that day may be derived from several days or weeks of strong trend. I'm consciously aware of the inter-day trend and also aware that its causing a counter-trend bias that causes me to not engage. If I get a sideways day that follows a couple of trend days, I'll take more trades at the extreme side, knowing full well that probability favors a continuation of the secular trend. Secondly, I'm now thinking that the number of two-sided days is lower than what I've perceived (US equities in particular).

In two-sided conditions, I'm more likely to take the side counter to the secular trend rather than working the reversal at the end of the pullback (the continuation entry). I find it difficult to reverse at the pull back's conclusion and more likely to try for the continuation trade if I sat out the pull back. When I do make the continuation trade I have difficulty holding it.

I'm going to start replay trading in an attempt to get some of what the experts call Exposure Therapy. Normally that's used to help people confront their fear and it doesn't seem to apply to me but I'm willing to accept that I may have an unconscious fear of trends, a need to self-sabotage, or the undeserving bias. I've always generally dismissed sim and replay practice for the usual reasons and I still think they are valid reasons. Especially replay, because its difficult to have a clean slate when it comes to side bias. I'm generally aware of the various environment for any month in the last ten years, so I'm not likely to pick days at random and be completely surprised. However, I can intentionally pick good trend days and just work them from the proper side for the conditioning value. This is probably obvious to a lot of you, but its only now occurred to me because I've always
presumed the intent of replay practice was to hone one's side picking skills, or just to practice mechanics. Is this a valid use of replay? I welcome any comments on this or anything else related. Thank you. - LOP

P.S. No lobotomy jokes please.

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