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Finally Turning the Corner, tha "its 80% Psychology" thing...
I like knowing what my entry setups are in advance and then deploying them discretionally based on the adapting market and the framework I use to decide what its up to and what opportuniites seem to offer a higher probability of a trade setup working. Without any predefined setups or trade plans (ex: if/when it gets to this level and shows weakness I will fade it with a X point stoploss looking for targets A, B, C etc), most traders monkeys will take over the trading imo unless they have a ton of experience and success and are in the unconscious competence zone.
From what I see, your definition of a 'setup' is nothing more than higher timeframe context + trade location + appropriate entry conditions. Not to confuse with fully quantifiable setups in automated trading.
More like: perceiving this sessions action according to a specific narrative, context and sequence of events including opening range, initial balance, developing volume profile, price action behaviour (choppy or directional), market's behaviour in contrast to the overnight session and the following RTH session, size of rotations.
This helps determine whether the action was locals or "other time frame" (large market participant) at key areas of the day which expands the narrative for determining directional bias and seeing which price levels are likely to be opportunity points.
NEXT: look for renko patterns I like to trade and determine whether the area and direction is a good fit with the narrative I'm viewing.
NEXT: look at footprint and bookmap to finetune entry
NEXT: determine what the risk/reward would be like based on where I think a smart place to put my stop would be.
If that all fits my criteria, I open trade, set stops, manage effectively, record and rate trade, rinse and repeat.
Well, now you've expanded your definition of 'setup' even further, completely beyond any quantitative parameters
That was precisely the point in my first post.
The only thing that matters in the end is are you getting the results from your trading that you want. I am achieving that finally after floundering for years in discretionary trading. I like systems trading because I can literally trade every market if I wanted to. With discretionary I would be limited to trading just a few because I can only devote so much attention to it.
After watching one of the FT71 vids from 5 years ago I saw he was keeping track of TSB (time standing by) for his prop traders. This gave him an indication of whether they were waiting patiently for a setup or trading reactively. That was the first time I'd heard of this and have updated my trade log with 2 columns:
Time In
Time Out
For me the Time In marks the beginning of a new trade idea, and Time Out is when I'm completely done with that trade.
So lets say I get into a new trade idea with 2 lots, and then scale one, then it retraces and I add one, then I scale again, then take profit on the trade and am flat, that marks the Time Out.
Some traders who are using a professional approach may find this very useful.
Thank you for this thread, lots of great valuable nuggets from the passionate journeyman
With your permission, i'm dropping a few notes that have helped me in my journey.
godspeed everyone
Mark Douglas classic / "all change is a function of desire" and clear intent!
- Manage risk
- Stay humble (VERY IMPORTANT)
- Trade with an edge
- Continuously improve
- Know they can be wrong
- Focus on what they do best
- Never let ego get in the way
- Know when to stay out of the market
Mark Douglas quote
Learn to accept what the market is offering and wait for your next edge.
The outcome of each individual trade is statistically independent of every other trade.
Market analysis finds behavior patterns in the collective actions of everyone participating in a market.
1. Anything can happen in the markets
2. You don't need to know what is going to happen next in order to make money.
3. There is a "random distribution" between wins and losses for any given set of variables that define an edge
4. An edge is nothing more than an indication of a higher probability of one thing happening over another
5. Every moment in the market is Unique
- Mark Douglas
This information is excellent - in truth though, its likely not enough. Just like a post-it note on your monitor saying Be Disciplined isn't likely to change an undisciplined trader when their emotions are high - further is needed.
I listened to Trading in the Zone at least 10x. It was helpful, but it wasn't enough. It's in the details where the magic happens. So you may want to break each of those bullet points down and define your your relationship to them. (but only if you're really sick of losing or not realizing your full potential..)
Example.
1. Manage Risk
My maximum daily limit is X $. If I hit that limit I will stop trading.
( If I have made rules like this before and broken them, I need to take this a step further. I will either a) use a Rithmic connection with a forced daily loss limit that automatically exits my trades for me or I will get an accountability partner, etc)
My maximum weekly limit... (same)
My maximum per trade = X contracts, X points, etc. If I break that rule I will do XYZ
I can afford to lose the money in my trading account without it hurting my lifestyle or causing me huge suffering.
I have proven to myself that I am a consistently profitable trader so I feel confident when I am trading with real money.
--- If you get into the details and really bring this to life and really be accountable for your actions, you will find yourself in the upper 5% of traders sooner rather then later. If you keep this as a lifeless post-it-note, its not likely to help imo.
Remember the adult learning model:
Level 1: Unconscious Incompetence (you don't even know you're incompetent, or maybe you're in denial) Level 2: Conscious Incompetence (you realize you have a challenge/problem/some learning to do)
Level 3: Conscious Competence (you experience being competent, you need to focus on it, you may need to remind yourself things, post-it notes can be handy in this stage, you might have notes you read before every session, you will have rules to follow and actually follow them most of the time)
Level 4: Unconscious Competence (you experience your competence as a state of FLOW, you know what you need to do and you just do it)
Be honest with yourself on where you're at each day. We don't just arrive at one level and stay there, often we fall back before we stabilize at a level. You may be at Level 4 and then a fight with your spouse brings you back to Level 2.. It's a journey..
Yes, we have to have a plan = The rules of engagement.
The worse thing for me is/are discretionary overrides.
It happens when i trash my rules of engagement in the garbage bin and start fishing expeditions for the tops or the bottoms.
Then the market really lets me have it
Up to 90% of my losses come from those "fishing expeditions"
and clear intent!
