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Trading spot fx euro using price action
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Trading spot fx euro using price action

  #451 (permalink)
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Thursday 2012-04-12

This is going to be difficult to write concisely because I am still coming to terms with my own stupidity on the matter, in other words I might not have grasped the whole situation yet.

I had another rotten day in the markets, not helped by the fact that I've given up coffee.

Even before I started trading, I knew something was wrong and I spent about 45 minutes reading thro my notes trying to find the problem which I wasn't clear on. After my trading session today, I realised exactly what it was that I've fallen victim to.

The exit rules in YTC PAT's trading plan are simple. Find your initial stop position before entry by working out at which point the trade premise will become invalid once price gets there. E.g. the wrong side of the setup. Then either get out when price action dictates, or have your stop taken out.

The phrase "as price action dictates" is what has led me astray as I've been developing as a trader. The worst case scenario after entering a trade is that the entry bar then goes straight to the stop without a pause. Now I asked myself several times: is there any price action in that situation which would get me out before my stop is hit? I think now the answer is 'no'. Perhaps the price could do a sort of cartoon-style wheelspin as it accelerates down to my stop? I can't think of anything that price action can offer if it's going to give me a signal to get out on the entry bar.

Basically price action needs to have room to exist - you can't have much price action when you only got 5 pips to play with. So "as price action dictates" refers to setups where the initial stop is at least 5 pips away or more.

But what I ended up doing in my head is distorting the concept and believing there are entry points where I can get in and have the opportunity to bail at 2 ticks max loss, because I figure sometimes price action sets up perfectly and so after entry, it won't retrace at all.

In my fear of losing on the initial stop for 5, 8 or 10 points, I developed this belief by twisting the YTC PAT 'price action exit' rule. I started hoping for setups where I could get in with 2 pips risk.

I think my losing streak for a while now is due to this false belief.

I have also not been using the full initial stop at setups. I've been pulling my stop in too soon and getting hammered every time.

Today was pretty crushing. It's difficult to take when it happens, but the analysis afterwards makes it better. I just have to try to develop some kind of check to make sure I'm not just another addict with a serious delusion

I'm going to revisit as much as I can over the weekend of past trades and see how much difference to my trading it would have made.

You can discover what your enemy fears most by observing the means he uses to frighten you.
Attached Thumbnails
Trading spot fx euro using price action-2012-04-12-market-structure.jpg   Trading spot fx euro using price action-2012-04-12-trades-.jpg   Trading spot fx euro using price action-2012-04-12-daily-sr.jpg   Trading spot fx euro using price action-2012-04-12-hourly-sr.jpg  
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  #452 (permalink)
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Stops

A question, on the chart.

Reality or rose-tinted hindsight?

I didn't manage to hold. I moved my stop up due to line of lows forming at the doji's low.

You can discover what your enemy fears most by observing the means he uses to frighten you.
Attached Thumbnails
Trading spot fx euro using price action-2012-04-12-trades-b.jpg   Trading spot fx euro using price action-2012-04-12-market-structure-2.jpg  

Last edited by Adamus; April 13th, 2012 at 06:07 AM.
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  #453 (permalink)
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Adamus View Post
A question, on the chart.

Reality or rose-tinted hindsight?

I didn't manage to hold. I moved my stop up due to line of lows forming at the doji's low.

Hi Adam,

several ideas came to my mind:
  1. the trade idea looks good, long continuation, clear stop placement
  2. the bars have long tails, range area
  3. you could implement a time rule for moving a stop, f.ex. wait at least 10-15 min before moving a stop closer
This is one of the trades where you don't get a direct response from the market (positive or negative). It stays in/below your entry area. If you are trading 2 parts you could have taken out 1st part below that doji and let the 2nd part on the initial stop.

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  #454 (permalink)
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eboarder View Post
Hi Adam,

several ideas came to my mind:
  1. the trade idea looks good, long continuation, clear stop placement
  2. the bars have long tails, range area
  3. you could implement a time rule for moving a stop, f.ex. wait at least 10-15 min before moving a stop closer
This is one of the trades where you don't get a direct response from the market (positive or negative). It stays in/below your entry area. If you are trading 2 parts you could have taken out 1st part below that doji and let the 2nd part on the initial stop.

True, but I'm not trading 2 parts now. Just the one. I didn't have fun yesterday! This was one of only a couple of trades that I thought were OK, despite losing (and the reversal afterwards)

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #455 (permalink)
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Adamus View Post
A question, on the chart.

Reality or rose-tinted hindsight?

I didn't manage to hold. I moved my stop up due to line of lows forming at the doji's low.

Difficult to say what i would have done but in general i wait until a bar close above my entry level before moving my stop and not necessarily at break even either. In this case, the first bar to close above your entry level occured at bar 318 if i read correctly.

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  #456 (permalink)
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trendisyourfriend View Post
Difficult to say what i would have done but in general i wait until a bar close above my entry level before moving my stop and not necessarily at break even either. In this case, the first bar to close above your entry level occured at bar 318 if i read correctly.

OK - if you do that though, what proportion of your losing trades are from your initial stop?

I got caught today a couple of times by big moves against me after entering.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #457 (permalink)
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Friday 2012-04-13

So actually this week I had slipped back into "unconcious incompetence" again because until yesterday I hadn't realised what the mistake was that I was making.

Anyway I think I can safely say I am again now making mistakes that I know to be mistakes, so I can start learning to do what I am meant to be doing again, rather than trying to learn something that is impossible.

Today was challenging from the S/R point of view, with a whole block of S/R that I couldn't distinguish, congesting my chart.

But out of that, during the session I traded I identified 6 YTC PAT setups and I took 4 of them and goofed the exits on every single one. Came away down $35 after commission, when there was $400 on the table.

The exit problems were from getting the setups wrong at the start and putting the initial stop too far away, and then twice on good trades getting out too soon. The first problem is just practice recognising the right stop location for the setup, and the second problem is FEAR. The thing that makes it difficult to deal with is that the fear is bad when the previous trade was a loser. I need to neutralise the emotions generated by the previous trade somehow. I can recite my mantra and all that jazz but I found it quite a powerful factor despite that.

You can discover what your enemy fears most by observing the means he uses to frighten you.
Attached Thumbnails
Trading spot fx euro using price action-2012-04-13-market-structure.jpg   Trading spot fx euro using price action-2012-04-13-trades-.jpg   Trading spot fx euro using price action-2012-04-13-trades-b.jpg   Trading spot fx euro using price action-2012-04-13-daily-sr.jpg   Trading spot fx euro using price action-2012-04-13-hourly-sr.jpg  
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  #458 (permalink)
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Monday 2012-04-16

I have an idea to continue learning trading while working on an IT project full-time. I figure I will try to put in an hour's sim trading in the morning before going to work, from 6 to 7 London time.

I will have to streamline my prep work and do the review in the evening.

Today though I'm at the cross-roads so it's been difficult to get started, with thoughts going round my head about what I can do in this situation. So for today I decided to take just one setup and then stop.

With one trade it's easy to write up, that's for sure.

I made the same mistake that I'd made on Friday, not watching for the next setup while managing the position. Don't know why but I rushed into trading this morning and didn't have my position management mantra running through my head as I should have done. It would have been a 'excusable' trade if I'd bailed out at the right place and it would have been a great second trade if I'd seen it coming.

Instead of entering late and possibly compounding the error, I figured I'd stop and give some serious reflection as to why I behaved like this - I think it's due to the immediate change in my everyday life with 9-to-5 work coming back on the agenda.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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Trading spot fx euro using price action-2012-04-16-market-structure.jpg   Trading spot fx euro using price action-2012-04-16-trades-.jpg   Trading spot fx euro using price action-2012-04-16-daily-sr.jpg   Trading spot fx euro using price action-2012-04-16-hourly-sr.jpg  
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  #459 (permalink)
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I was thinking to myself the other day, like you do. If I were an apprentice footballer, rugby player, golfer, or cricketer I would be coached and monitored by qualified and experienced coaches that have been there and done it before being thrusted into action. But as self appointed and trained traders we thrust ourselves into the thick of things and place huge expectations on ourselves. It is quite remarkable really.

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  #460 (permalink)
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Trafford View Post
I was thinking to myself the other day, like you do. If I were an apprentice footballer, rugby player, golfer, or cricketer I would be coached and monitored by qualified and experienced coaches that have been there and done it before being thrusted into action. But as self appointed and trained traders we thrust ourselves into the thick of things and place huge expectations on ourselves. It is quite remarkable really.

The number of serious mistakes I have made is large and the direct result is that I have to earn some money now.

I always wonder how I can avoid making more errors like that. I've tried forums (like this, with no disrespect intended) but the help is strictly limited, I've tried getting one-to-one coaching but it's impossible to find anyone who I would trust who wants to do it, I've tried joining a 'trading tribe' but they had no spare spaces, I've tried my girlfriend but her help is strictly limited too despite being able to explain things in depth (no surprise there though), I've tried one-to-one with partners but that was the same problem as with coaches - anyone I wanted to partner up with didn't want to partner up with me! I tried organising my own trading group but couldn't get anybody interested.

I've read one urban myth about a successful trader who swore he got his trading advice from extra-terrestrials using a coke can and a biro, maybe I should try that.

In the end though, I think the only thing I can do is increase my objectivity over and over again. I just have to keep asking myself about my trading plan: why am I doing this, why am I doing that?

I don't just mean, how far away do I put my initial stop, I can go over old charts to work that out. It's the non-technical stuff, e.g. what hours should I trade, what market, how much leverage, how much review & logging, how much psych work, do I need to do it, is it right or am I deluding myself, am I doing it because I want to, if so, why do I want to, is there some emotion there or is it logical?

You can discover what your enemy fears most by observing the means he uses to frighten you.
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