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Trading the Hill
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Trading the Hill

  #1 (permalink)
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Trading the Hill

I'm so dumb. After spending thousands of hours honing my trading system I still tend to make rookie mistakes. And no mistake creeps into my into my trading like that of trading the Wrong Side of the Hill.

We all know markets gyrate up an down and most of us even know the reasons for the gyrations. But it's crazy to think that any one of us is so good that we can pick the exact top or bottom of any particular move. No one is that good.

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I find myself waiting and waiting for a good setup, sometimes for hours, before making a move. And when I make that move I have a preconceived number in my head where I think the market will turn. Now there's nothing wrong with having hunches about market direction or general turning points, that's what trading is all about. But to think I can pick an exact number is just a fantasy formed in my head due to my brain's propensity to bend the market to my will.

Guess what? The market doesn't care a bit about what I think will happen. It's going to do what it's going to do. So why not wait until the market commits to a particular move and confirms the preconceived notion in my head?

If we were market wizards we could predict perfect entry and exit points.
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But we're not wizards. Instead, we have to "make an educated" guess where to enter. So we use our own particular trading systems to pick entry points where we think the market will turn.

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Again, no one is so good that they can consistently predict where the market will turn. So why not wait a little longer and let the market commit to a move? The odds of success are greatly increased if you enter on the right side of the hill.

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Sure, you'll sacrifice a couple of ticks by waiting on a confirmation, but isn't it worth the sacrifice if your odds of success dramatically increase? And how many times have you realized that you made the right decision, you just entered at the wrong location?

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Personally, I find myself at the end of the day frustrated when I tally up my total trades. I know if I could have eliminated one or two losses my good day would have turned into a great day. And when I analyze my individual trades most often I realize I made the right decision, I was just entering on the wrong side of the hill.

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  #2 (permalink)
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Excellent post.

Most traders feel that faster/quicker is better. They keep trying to get a "jump" on the market. And they blow up...

I still struggle with this every now and then too, where I go long on a huge push down without waiting for some upticks. I used to use a smaller chart to look for a turn before entering, something that I have got away from now that the smallest chart I look at is 5m.

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  #3 (permalink)
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Hondo
The way I look at your statement is the "wrong" trade that you marked would only be actually wrong after the fact or in hindsight. Alternatively, your "right" swing trade is only "right after the fact or in hindsight. You will actually never really know, but you can place a limited risk entry that is backed up by your solid trading methodology. If we knew what side of the hill the lower risk high profit entry would be, well then, we would be wizards each trade. I agree with you that there comes a point when entering a trade you need a confirmation and that may require those few extra precious ticks, which could in fact turn your entry from a R:R from 1-1.2 to 1.5 or even 2 if you only entered at that exact turning point of the swing.

Another thing Hondo that I find helpful for myself is to look at my trades at not simply profitable, but are they EXACTLY performed according to my methodology. If they are and you are still not on the "right" side of price action, then maybe there needs to be a tune up or fine adjustment. Before I stop rambling, something I look at more closely is not to just focus on your entries as to pertaining to being on the right side of price action, but to look at the exits of your methodology as a even bigger link to the chain. According to your chart of "right" and "wrong" trades you would have exited too early in possible and sometimes reasonable price chop. What can you do to enter, stay on the pulse of price action, not get chewed up with chop, and exit with a profit on the "right" side of the action.

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  #4 (permalink)
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I agree 100% with your statements FarmerJohn. And I'm definitely making some assumptions with my theory.

1] Trading with the trend only
2] Trader using a tested methodology that works
3] No preset profit target

The main point being why jump the gun? All that's good for is letting you brag to your friends that you picked the exact top or bottom of a move. If you think the market is going to turn that's great! But why not let it show you first before risking any hard-earned money?

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  #5 (permalink)
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Hondo69
I agree, let the tops and bottom pickers blow up and brag while they still have a few dollars in their accounts, though it won't last long. For us mere mortals, a confirmation is something definitely worth living with for long term consistency.

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