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I Can't Make a Friend of the Trend
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I Can't Make a Friend of the Trend

  #1 (permalink)
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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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  #3 (permalink)
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Leon of Pizza View Post
I could use some help with my mental problem. I find it difficult to participate in one-sided markets.



Try simulated trades on the other side of the market. Either you will be successful and therefore excited or you will see your system needs correction and therefore work on your system. Either way you will make progress

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  #4 (permalink)
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Leon of Pizza View Post
This is a wholly psychological problem.

I happen to think it is a real perception problem - in a full on trend (at any timeframe) the chart on screen looks 'full' and the reversion to mean just 'looks' more likely.

For many of my charts I now automatically add +/- 20-30% of the day's range above or below depending on current price location, to allow space for the imagination to compensate 'where price could go' as opposed to where 'we think it is more likely to go'. Of course in a strong trend the 'could go' is in fact more likely than where we usually think. The irresistible force of momentum versus the immovable objects of support and resistance.

It is a similar situation with targets in trends, better thought of as places that might get hit and blown through with or without a pullback rather than places to trigger a full scale reversal, although they obviously can and do when the deck folds.

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  #5 (permalink)
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...in a trend...the reversion to mean just 'looks' more likely.

Agreed, and its also statistically probable. So I did some thinking on this and made an analysis. Before I started, I was certain that the buy / sell distributions would look bad, but I don't think that after looking at it.

I used this HTF bull channel for the last 6 days. My perception of mean prices comes from channels. In a bull, I see mean price rising (its a crude approximation). Magnetic curves are short term means.

Anyways, the buy / sell distribution looks reasonably placed in relation to what I think the mean is, imo, but performance deteriorates as the trend accelerates. So it was inconclusive. Also, the character of the problem changes from one end to the other and that's confounding. If anything, I would say that I was too inflexible with the channel. In hindsight, its very usable if I accept the possibility of the upside break out. It's just an ascending bull flag, but I have difficulty accepting that possibility in advance, because I think ascending bull flags are outliers. So, by the time day 6 comes, I'm just paralyzed and useless on the buy side and that's the best intra-day buying environment on the chart.

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  #6 (permalink)
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Leon of Pizza View Post
...
...
I welcome any comments on this or anything else related. Thank you. - LOP

...

lots of wisdom in sayings 'trade with trend', 'trade what you see', 'Focus on the Process, Not the Results (monies) etc...
So you want to train yourself to trade with trend this time.
>I may have an unconscious fear of trends,
If you trade against trend you will be in a world of hurt! But if you trade with trend and you don't know when it ends you will be in the same situation.
Step 1, decide what is 'trend' for you, for me it is 2 daily candle bar of ES and NQ, if bars are not doji bars and they are of the same color then we have a trend day. You may decide on something else to be your 'trend', be it a 30m channel, be it bunch of renko bars of the same color etc.
Step 2, once you recognize your trend then you can mark your entry and watch the chart unfolds from that point forward. There are 3 scenarios, price hits your entry and take off, congrats; price hits your entry and goes down, so sad; price doesn't hit your entry and goes in the trend direction without you, give yourself a pat your back for getting it right, congrats. After a week or so you should know whether or not your trend is working or you need find a new way to detect a trend.
Step 3, now you find your trend, you need pull the trigger 1 car at a time then find out when you want to cut loss when you want to take gain, it will take a whole another discussion so lets stick to the trend subject for now.

>I've always generally dismissed sim and replay practice
I endorse sim trading 1 car at a time 100%, if you can't make it sim what is your chance to make live? nil, nada.

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  #7 (permalink)
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Leon of Pizza View Post
Anyways, the buy / sell distribution looks reasonably placed in relation to what I think the mean is, imo, but performance deteriorates as the trend accelerates. So it was inconclusive. Also, the character of the problem changes from one end to the other and that's confounding. If anything, I would say that I was too inflexible with the channel. In hindsight, its very usable if I accept the possibility of the upside break out. It's just an ascending bull flag, but I have difficulty accepting that possibility in advance, because I think ascending bull flags are outliers.

Exactly. The most destructive times occur in fractal shifts (moving up a degree in EW terms) where a trend becomes a strong trend becomes a very strong trend becomes an extremely strong trend. These are always the most difficult to foresee unless we have a good HTF scenario going beyond left hand side history and a decent view of buy/sell pressure, and we accept that wave 3's/C's shouldn't be blindly faded and that this change is also more likely to be accompanied by rising/falling/truncated corrections which are often confused with ending diagonal formations, until the bomb goes off.

I am personally struggling with the confidence to hold exactly these sort of trades, I can put them on at great ultra low risk entries, see them move in favour and yet still find it easier to disbelieve the magic of letting the market force work. Reading the market like a hawk but trading it like a sparrow is numero uno on my modes to change list.

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  #8 (permalink)
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Hi Leon,

Interesting that you've posted a thread about this as I posted the same problem in my own journal.

Past 3 trend days in 2 weeks in DAX, I had problems with it.

It's clear that systems that work for range, don't work for trends.

So, the simple solution is to have 2 systems in place: 1 for ranges and 1 for trend.

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  #9 (permalink)
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...The most destructive times occur in fractal shifts...where a trend becomes a strong trend becomes a very strong trend becomes an extremely strong trend.

Oh yeah. that works a real bad effect on me. However, I'm embarrassed to say that the current period (described in the pic) hasn't gotten that bad yet. If they buy it up above the broken blue trend line and like those prices for awhile, then that will be an acceleration in the blue channel time frame. And I will have a low participation problem because of it.

Another element of my problem is bargain
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  #10 (permalink)
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Leon of Pizza View Post
Joining the trend here is at the worst prices. I feel attracted to the short here because its where the patient sellers get motivated.

Indeed, and it is certainly at a cute spot, but evidence needed methinks. Pattern could be complete but doesn't look it, and it is still preferring to hold supports rather than respect resistance, for now. Pullbacks anytime of course. Holiday tomorrow, phew.

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