Put yourself on the other side of your trade. Think what can be done in price action that will head fake a trader to let go of their position, do the wrong thing, or get a trader to do what you want in terms of mind games. For myself I often ask myself how can I hurt the most traders. For me it works. Do you play poker or have you read the "art of war"? Poker is another head game or mind game. The art of war tells to show your weaknesses as your strengths and your strengths as your weaknesses. Get the other army to attack where you are strongest not your weakest point. Mother nature does it as well. A mother bird will fake it is injured to lure you away from its nest. Then you go after, and she flies away. A example of how they do it in trading is you will see price to begin to climb aggressively and you fear you are going to miss out on a big move so you pull the trigger and go long then price immediately goes down. All of this is psychology. "They" do it all day long, every day. "They" (the "smart money" or "big money") make money by you losing money. "They" have the best weapons money can buy and they know how to use them.
A setup is what you need to see to enter the market. What pattern are you looking for. For me I a pullback person, it fits me. I am looking for price to retrace or pullback to a support level, sometimes it never does. When other people are getting out, I am getting in. Some people who have seen me trade say I am crazy and like a person who is stepping in front of a an oncoming bus. Here is more psychology at play. Most traders will not step in front of price when it moving quickly. Would you step in front of a moving train or bus? I doubt it, but I do. Most traders wait for the bus to stop and begin to go the other way, they want that confirmation or they use indicators that have so much lag or delay they get in late. so when they are getting in I am getting back out just before it backs up over them. This plays out every day. I was once a road pizza myself, got the scars and skid marks to prove it. I am also a stalker or sniper. I will track a trade for hours. I have to read the big picture or real move. Then I wait for the market to come to me. If it doesn't then it wasn't a good trade for me. Don't look for where price is, where do you want it to be. say to yourself "if price comes to X price than I will take a trade". If it doesn't then walk away. How many times have you taken a trade because it just wouldn't go where you wanted so you stepped out front to get in and then bang it went right where you thought. "They" dangled that carrot in front of you long enough and you finally grabbed it. Stop falling for the sucker plays.
what fits you? Well there is the $65,000 dollar question! Unfortunately it is like what shoes fit you. You have to try several pairs of shoes on before you know what fits best. Yes you have to learn several methods of trading to see what works or fits your personality. You must have something to compare it relative to. Maybe someone else knows a better way but I don't. Call it trial and error if you want. But you don't have to trade it live to find out. Time expensive, yes, money expensive no. I am very lucky as I was a software developer for 30+ years so I was used to developing custom solutions to problems and doing the analysis. How I trade was hand built by me for me, so it fits like a custom made pair of shoes. I have 10,000 plus hours invested so it didn't come cheap, but it is killer, for me at least. I doubt you will step in front of a moving bus (which there is nothing wrong with by the way) so my setup or way of trading will never work for you. Waiting hours for a setup may not work for you. Usually a single trade a day may not work for you.
I have a good friend, a smart trader as well. He was in construction for many years. He sees geometry in things, he can't turn it off and is as natural to him as breathing to you and I. He looks for wave symmetry. He can show me and I can see what he sees when he shows it to me. But he sees it intuitively and instinctively. For him that works, but it doesn't work for me so I can never trade it even though it works well for him.
When I say a pair of shoes that fit, this is not just ones you can put on your feet but ones you can run as fast as possible and run all day in. It is like eyeglasses, if they don't fit the more you use them the worse it gets. You get headaches or blurred vision. In trading you lose money if it doesn't fit.
I see people spend thousands of dollars on some software or indicators but won't spend $20 and a couple of hours on a book. If a person spent that same money on books they would be farther ahead but you will never convince them of that. They is also the same person who later was laying dead and broke on the side of the road because they didn't read those silly books.
Once you have climbed to the top of Mt Everest you can then see the easiest way to get up.
Last edited by ctnz; November 12th, 2012 at 06:25 PM.
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I have enjoyed your thread ctnz, thanks for taking the time to write.
Any other books you recommend besides Market Mind Games and Tharp's? I am going to get a couple on amazon to take with me to read on Thanksgiving vacation. I was looking at getting one of Steenbarger's books but would like to hear any other recommendations (I assume Market Mind Games is your "top pick"?).
I think Steenbarger is ok. I like his "The Disciplined Trader" and "The daily Trading Coach" books. As I said read all you can. Every book will give you something, even if you find you disagree. It is the cheapest trading education you can get. Read every book once then read it again, you will glean more from it. yep I think Market Mind Games is awesome. My issues were not technical but mental. You must conquer any demons you have in you or you will never get there. Most likely these are things you have had in you since childhood. Some simple couch time with Denise's people changed me immensely. My battle was inside me not with the markets but I have since found this is common.
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A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or held in inventory, hoping to make a profit on the bid-offer spread, or turn.
You always need to see both sides of the market not just a long or a short but either, be neutral. If you think just one way you will get blind sided as you won't see the torpedo coming from the other direction at you until it hits, then it is too late as you are sunk. If you think long that is all you will let yourself see. If you look at both directions all the time you are always ready to go the other way or at least take a draw down.
You shouldn't see long or short but opportunity. But your analytics you are basing your decisions on needs to be solid. None of this namby pamby indicator stuff but reading price action alone and understanding what it is telling you. Initially it will drive you nuts but gets easier with time, then it is automatic and you can't look at a chart any other way. You will still take a trade with the torpedoes coming and in sight but you know to exit before they hit. It actually gets to be more fun like a chess game but there are hard yards to get there. Don't think it is easy and quick. It is work but with a payoff.
Does that help a little?
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