This is probably not a fun read so if you, a nexusfi.com (formerly BMT) forum reader, like stories of profits and success, you can happily skip this post.

I have to detail some of this stuff here because this is my journal. Slightly embarrassing that it's totally public but only slightly. With massive irony as I was writing the previous session review, I decided yesterday late that I'd trade for another hour. Ironic because I decided I was trading too much and not actually assimilating the trading experiences because I wasn't doing the necessary donkey work.

Made several major mistakes in that hour and need to write them down along with all the consequent thoughts on the matter that occurred to me afterwards.

Like I stated in my previous post I spend too much time trading and not enough time researching what I am trading. The late afternoon US session is one of those items that is on my research list. I need to go back over the year or two years or 5 or whatever it takes to get a handle on what these late sessions are really about and whether there is anything that I can trade there. Never did the research, always had a vague idea I should be able to trade there, got caught out.

Despite knowing I should do something else, I decided to trade as the initial trend down from 1.3530 was slowing down after breaking 1.3450. My decision to trade was based on the snap decision that the low of the day was being made. This was scarcely a conscious decision and it drove my decision making afterwards.

The reasons I had for thinking it was the low of the day were only 50% real, PA-based evidence. The rest was crap like I mentioned above about the late US session.

I stared at the screen trying to analyse the chart, but I was absolutely certain it was going to go up. My entry trigger to go long was actually a lower low which left a small tail hanging below. i.e. not bullish.

I was certain about it going up - major lock-down in my mind about any evidence to the contrary.



I got stopped out to almost to the tick.

Such an indulgence, allowing myself to take that trade. I Trader was not in control there. Something else was. Shields were down. Body armour was half-off.

Getting stopped out to the tick made it worse. I allowed myself the indulgence (2nd now) of a revenge trade.

Then when the trade went positive and looked good, I targetted 1.3450. I knew the FOMC minutes were coming out at 7pm and I planned to bail the bar before that. If only. I just plain forgot. Normally I would put a vertical line on news event time, but I didn't and I was actually writing some stuff up when I heard the order filled sound.

10 points slippage. At least I know now how tradeable these news events are with stops in a live account. The sim account practically goes offline during volatility news events so I didn't know. Actually I would be pleasantly surprised, if only it hadn't been my account.

I have now lost $500 from my broker account which was a minor line in the sand for me (major line in the sand $2K) and I was expecting a surge of cortisol to make me feel depressed about the whole situation but it didn't happen. The point is, I had identified at exactly the same time as I was trading just what was wrong with my trading. The trading snafu just confirmed it, mostly. Stupid to trade and to carry on writing up my previous session too - another mistake to add to the list.

I traded roughly March to June without making much progress, and now I've traded half of September, then October and mid-November and I seem to be in the same situation. I have to do the non-trading research work. While the psychological stumbling blocks seem to be massively important and I can come up with plans to overcome them, the main problem is not doing the research. It would take me a year to get real-time live experience of any certain market situation, e.g. late US sessions - the efficient way of doing it is to go over the historical charts and check them all out. And sacrifice the trading time to do so. There is also other time I can use for it too.

This in turn will help with the psych stumbling blocks.

I'm not going to worry about falling victim to the certainty bias or taking a revenge trade or plain forgetting to do something. Before, I would invent steps to take and checklists to check to try to put a process in place in my trading to stop me doing this stuff. Now I know they don't work - it's just got to become habit. I'm getting better at enacting what I am meant to do, slowly it will become habit.

Adamus 

I was certain about it going up - major lock-down in my mind about any evidence to the contrary

One of my great weaknesses too, I now know that if I am certain about anything I should stay out or do the opposite...., its just still hard to catch them live. You are aware of it and working it through, that's the good part.

ratfink 

One of my great weaknesses too, I now know that if I am certain about anything I should stay out or do the opposite...., its just still hard to catch them live. You are aware of it and working it through, that's the good part.

Yes, fiendish. I normally take a look at the trade from the other bias just to make sure I'm not missing anything, but it didn't occur to me to do that here.

Only had about an hour's screen time watching the market ranging with a passion between 1.3455 and '77.

Then I had to leave suddenly to take care of some family stuff and that was it for the day.

Unsurprisingly I failed to find any time to do any trading research.

Co-incidentally Lance Beggs posted a really relevant & useful article on the same subject today on his YTC website.

I've heard a lot of criticism of him recently but I still can't find anything wrong with what he writes. His actual trading methodology is probably only about 25% of what he writes about, and the rest is always really useful stuff, often stuff which you might think 'right I know that' but more often than not, you still need someone to tell you that. At least I find that.

Over the last 2 months I built up a list of trading research that I intended to do but stupidly never found time for. Doesn't sound so bad but I think what has happened is that these things I want to research are all trading ideas that infiltrate my decision-making when I'm in a setup.

Part of my problem is my 2 decades of programming. When you are building a technical solution, you are always looking for the best way to do stuff and considering a ton of different options. I think I apply the same mindset to trading when I should be sticking to the plan.

I have loud and clear on my psych awareness bullet points card "stick to the plan" but my brain is always offering up a ton of different options and at decision-making time I have to throw these all out when they're not in the plan. I can write them down for consideration later, but the problem is, I haven't been considering them later. I think it's because I haven't subconsciously accepted the plan for each setup - and of course it gets called into question with every loss.

First task on the list is to go over the YTC PAT setups again, digging out 30 good examples of each from the last year. I need 30 screenshots of 3-min and 1-min candles, marking up why it's good.

I guess I should be looking at losers for every 2 out of 5 of the setups - but I guess I should go over the year's history again after finding my good examples, and also identify the good but losing setups.

Of course my alter-ego would rather be trading......

It always takes me ages when I'm starting something new and I've just started a review of 2013's YTC PAT setups as part of a plan to give myself the confidence I'm sorely lacking. Of course it's taken me ages to work out what I need to do but it's good now and I'm going to try to do as much as I can before or after my trading sessions - in fact I'm going to shorten my trading sessions for this reason.

here are the columns I've got in my spreadsheet for recording the low down on each setup:

Trade Date/Time
HTF Trend / Range
Daily Volatility (ATR20)
Hourly Volatility (ATR20)
TTF Trend / Range
Choppiness (H/M/L)
Future Trend Rule
Long / Short
Setup
Positive PA (present/absent):
- With-Entry Legs Getting Longer
- With-Entry Legs Getting Sharper
- Counter-Entry Legs Getting Shorter
- Counter-Entry Legs Getting Slower
- Counter-entry Legs Choppier
- Large Tails
- Swing Count Broken Twice
- Failure to Continue
- Up-down or down-up Pair
- ....
Negative PA:
- Counter-Entry Legs Getting Longer
- Counter-Entry Legs Getting Sharper
- With-Entry Legs Getting Shorter
- With-Entry Legs Getting Slower
- With-Entry Legs Choppier
- Large Tails
- Swing Count Broken Twice
- Failure to Continue
- Up-down or down-up Pair
1-min Entry Trigger
TTF wholesale entry trigger
Avg With-Trade Cycle Len
Avg Anti-Trade Cycle Len
3-min Volatility (ATR20)
Last Wholesale Price (Points from Level)
Entry
Initial stop
Target 1
Target 2
MAE
MFE
R:R (Calculated)
Profit (Calculated)

The idea is to be able to come back and do what-if scenarios to see what the results would have been if I'd for instance used an all-in all-out approach instead of 2 targets.

It's also an exercise in objectivity which is having a serious impact on my trading plan as I seek to define what I'm doing to the point where I can say exactly what I should have done for setup after setup for the whole of 2013.

This is the first setup I've marked in what is rapidly becoming quicksand under my feet.







To date, I've been winging it with a lot of the specifics about the setups, order entry and position management and now to make any use of the stats that I'm collecting on each setup and trade, I've got stick to the rules. It's totally obvious now when I actually don't have a rule for something.

Defining all these specifics is going to take me a while and worse, I'm not confident about making the ideal choice - yet. i.e. I could decide something now and after reviewing everything, deciding it was the wrong choice. But I guess that's why I'm doing it. Now I'm being stupid and trying to put the cart before the horse.

My current quandary is with this setup above, which goes up nicely 5 points but immediately retraces into a bit of congestion, asking me at what point if any I would have bailed out of the trade early based on either (a) price action or (b) just dragging my stop up behind by a specific number of points, e.g. one or two times the ATR20.

In my plan are two ways of managing a position - tight or loose (I'm not talking about the initial stop, which involves more factors than this). I use loose stops on with-trend trades or range break-outs. I use tight stops on break-out failures and reversals against the trend or in ranges or choppy conditions or frankly when I sense it's low probability but still take it.

By tight, I mean I would place both targets T1 & T2 at the same place. For tight stops I would move both stops behind the big candles - and I have to define what 'big' means. I would also move the stops based on PA - paranoid PA, e.g. bear bars breaking and closing below the previous bull would get the stop below it.

By loose, I mean T1 goes at the next level where the market appears to be heading, and T2 goes at the level beyond that. For loose stops, behind the previous swing and only really obviously bad PA like big shooting stars.

I use 1.5 points buffer between where the stop is meant to go and where I put it (+ 0.5 points for the spread when buying back because I chart the bid, not the mid- or ask) The chart here demonstrates brilliantly how sometimes the market just goes and puts in 0.5 or 1 point over the high/low that you're using - here's the close-up:



I'm trying to be really honest about hindsight and looking at that congestion. If you look at it and imagine you've got a trade on. The setup was a reversal, a test of the Asian low. The market slackened off as it moved into the European session and the trend down was halted, so this is a counter-trend trade and I would be looking at managing the position tightly. I don't think I can see any reason to bail out during that congestion. In my current state as a trader, who knows what I would have done - probably something random in my anxiety. But in reality, there was a down-up pair so I would have put the stops below that. I'm looking at bar 183 and wondering if I should have moved the stops in relation to that - a higher high has been made (just) and 183 is a 5.5 point candle ending down. The ATR20 was 4 points at that time.

I'm just going to bite the bullet and do this review with those rules. Tight stops mean moving the stop up behind big bars - calling 'big' anything bigger than 2x ATR20 (e.g. 8 points at bar 183) or behind price action patterns as described.

Happy New Year all you traders out there reading this!

Had to do my tax return for 2012/13 as my input to my plans for 2014 and it was a shock to the system to discover I had conveniently forgotten my estimates from back then... so it's back to the grindstone to earn some cash the more reliable way for 2014.

There is a huge amount of work to do on my trading plan which would have kept me away from trading anyway. I plan to fit it in on the side while working 9 to 5 as a hired freelancer on Java / database / web-based stuff. I might even find a position where the C# stuff I've learnt comes in handy too.

The setups review I'm starting for my trading plan is likely to produce some interesting stuff that I'll post up here so my journal won't go into complete hibernation.

Make 2014 a good one!

All the best
Adam / Adamus.

Very salient psych stuff which I've culled from Lance Beggs on his YTC blog where he talks about being fit to take re-entries after getting stopped out:

I've rewritten it and incorporated it as the intro to my psychology section in my trading plan.

Quoting 

My critical decision-making ability can easily be overwhelmed by the emotional reactions of my subconscious. I need to create a mental foundation for emotional stability and unimpaired critical decision-making step-by-step by: 1. identifying a positive expectancy strategy 2. creating a belief in the strategy 3. gaining the appropriate skill for trading the strategy 4. believing in my ability to trade the strategy 5. ensuring losses are small enough to not cause any concern 6. mentally accepting potential losses before taking trades 7. internalising the need for profit over a series of trades rather than from each individual trade, i.e. believing that losses and drawdowns are inevitable

My setups review that I'm doing at the moment is going to provide a lot of the input to most of those steps.

I'm starting out on the review now and I'm facing a major challenge in nailing down the subjectivity / objectivity disparity, or call it hindsight bias if you like. There are a few options in how I approach this and the main one is the question of how long it's going to take me. I could do a review of every setup, recording all the data as I outlined earlier, by running the data in Ninja's market replay module but I don't know whether I can get the forex data with the half-point resolution.

Lots of options to think about but first I need to land a contract for some paid work.

I'm still going over the 2013 setups and I am still finding more and more price action that I need to define. This time it's really elementary: market state - is the market in a trend or a range? Without having a definition of that, I was deciding on the hoof and probably randomly but there's no way to tell what influenced my decisions beyond the price action.

The give-away that I was winging it here is that I never realised that it's actually a 3-way decision, not just an either-or. So there's a market state of trend, or range, or neither.

I'm still looking at it but I think at this stage I'm going to go with the swing points - a swing high is a point with 2 lower highs on either side, and a swing low has 2 higher lows on either side. I'll look at the last 5, and a trend up is when 4 out of 5 are higher and the last low is higher than the first high.

Ranges are defined by the swing highs being all higher than the swing lows, allowing for 1 aberration in 8 swings.

Anything that doesn't fit those criteria is neither trending nor ranging.

I'm going to code that up as an indicator and go over some charts to see if it fits my idea.

Adamus 

I'm still going over the 2013 setups and I am still finding more and more price action that I need to define. This time it's really elementary: market state - is the market in a trend or a range? Without having a definition of that, I was deciding on the hoof and probably randomly but there's no way to tell what influenced my decisions beyond the price action.

@Adamus

a few months ago I was facing the same problem you are facing now, and I was rescued by Barry Burn's approach.

I liked very much his way of defining market states and elements to be taken into account before putting on any order. His main idea is to look at the various "energies" in the market.

I actually never bought his course, but integrated his structure to filter my previous buy-the-dips strategy, resulting in a positive expectancy method, that I have just started to test live.