Just curious, I noticed in your trading setup pics that you always have a notepad and pen. Do you journal manually or are you using that for something else? I've gone back and forth between manual journals and software so I've wondered what others like to use.
Yep, that's the paper and pen journal. I use it as an in-the-moment note taking system. Reasons for decisions as they occur, feelings I'm feeling (desire to move stop or take quick profits), things I notice about the market structure I want to go back and look at, etc.
Honestly, this journal has also become somewhat of a part of what I do, as far as journaling goes. It's more of a part of my end of day review.
Hope you're doing well in life and trading.
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Great start to the month...appreciate the video recaps also.
Quick question...I have recently stripped my indicators away and am going straight price action...and I have noticed that I struggle a good bit when we are near the lows or highs of the day. Today was a perfect example...I placed a few ill advised long trades when the market was near the lows...do you do anything different when the market is at these extreme levels during the day? What is your thought process?
I used to constantly fight the trend and try and pick reversals. Cost me a lot of money.
First off, we can only see that we're at extreme levels (highs/lows of the day) in hindsight, so it's irrelevant for our real-time analysis. I think if you focus on the proper analysis in real-time it will remove the tendency immediately. Try:
1. Define S/R structure on a longer timeframe chart than the one you're mainly trading. Somewhere between a multiple of 5-10x that timeframe will do. Don't pay attention to anything you see on that chart (trends/patterns/etc) because it will be very irrelevant in your trading timeframe. (I used to make the mistake of trying to trade signals on one timeframe, on another timeframe chart. It doesn't work).
2. Define your trend/range on your main trading timeframe. This is the key one to your question. We don't care whether we might "think/feel" like we're at an extreme level or what not. We simply define whether we're currently in an uptrend, downtrend, or range-bound. This determines what type of trade (long/short) we're looking to take. Picking tops/bottoms is a fools game (in my humble opinion, maybe there are guys out there that are fantastic at it, but I think the majority of the time it's bad business.) Now, if we're in a downtrend and heading into one of the longer term support levels we drew in step 1... AND we're analyzing the momentum of that downtrend, AND it's showing weakness on the down legs, and more and more strength on the up legs... then we can take a long trade which is still considered a counter-trend trade (and managed accordingly), but the key is that our analysis of strength/weakness led us to this counter-trend trade... NOT a thought/feeling that we're over-extended/oversold/at an extreme/"price can't go any lower it's gone so far"/etc.
So no, I don't do anything different at these levels. My thought process is the same. The only thing that's different is that sometimes you feel "naked/exposed" because we're trading at levels that don't have any recent S/R to give a framework... we're just floating out in space so to say. We can still rely on our trend analysis and will always have that, regardless of where we're trading.
Hope this helped. Let me know if it didn't, and clarify further.
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Great explanation. I take it from this response that you do not execute any anticipatory reversal trades based on levels from a higher timeframe (or even the same timeframe)until you get a reversal signal of some sort from your time frame. Is that correct? I have had the problem of picking reversal points since I can fool heartedly think I can get a smaller stop. It has become my achilles heel and I agree with you it is a fool's game(and I have been one).How did you overcome this tendency short of losing a bunch of money and do you have any recommendations for stopping this tendency? No.. it is not in my plan and yes I am violating my trading plan when I do it. It is the biggest obstacle to me making consistent profits.
Also, I take it a great majority of your trades are with trend. Is that correct and what rough % would be with trend versus countertrend?
Hey, I just want to put a disclaimer on some things I say in this post. They may come across as harsh, condescending, or pretentious, but they're coming from a good place in my heart. Text is hard to pick up on emotion sometime. I'm taking the time to do what I think will help you based on my own experiences, which is all I have to go by. Ok, here's the post.
I may sometimes take what looks like an anticipatory trade on the trading timeframe, but that's when I really want to take a trade against a S/R level for whatever reason. and then (this may help you a lot) I drop down to a lower timeframe and look for some type of reversal pattern/signal/candle and use a stop order to get me in if that pattern follows through there. It's the best of both worlds as it gives you a good R:R, while also giving some confirmation to take the trade.
How did I overcome the tendancy? I found what works for me ^^. Once you do find what works, you don't have to fight against anything. We will do what we believe is best. It comes down to belief systems. Evidently, you need to work on yours. If you truly believed that picking tops/bottoms was a fools game... and I mean truly believed... then you 100% would not do it. There wouldn't be any internal struggle or anxiety or even discipline required. Beliefs! Beliefs! Real beliefs!
Another thing Wolf, is that you may have something else in the way (if you do already believe it's a fools game to catch falling knives), you may know this... and be seeking the thrill of trying to pull off this low % trade! You must find out for yourself. It could be tons of things.
Here's something I want to say about discipline. Some people say that trading requires discipline. I don't believe that. I don't want to insult anyone, but I think it's an "immature" level of a trader if they do. (Not referring to you Wolf, just ranting a bit here.) Think about this... If you know what movie you want to see, and you know how to get there and see it, and you're available to go see it, does it take discipline to go see it? No. Trading is no different.
From some other things in my trading journal (paper) from 5-6-12:
Finding an edge isn't the hard part. It's fairly easy to find. Self awareness is they key to self-management. We can't really control our emotions, we can only control our actions DESPITE our emotions.
Must have ability to tolerate discomfort, and be ok with disappointment.
Self confidence is resilience in the face of discomfort. We try to avoid the discomfort, and the problem is in our actions to avoid the discomfort. Avoid boredom by taking marginal trades, avoid fear of missing out by chasing/impulse trades, avoid anger of being stopped out with a revenge trade, avoid being wrong by hesitating to enter a trade or not exiting a bad trade quickly. All this behavior is some type of discomfort avoidance.
Learn the patterns of your discomfort. This requires a high degree of self-awareness.
Discomfort is unavoidable in trading. It's a big part of it.
Willpower and a desire for money are not enough to change one's behavior. Need to be more open/flexible - motivated to understand yourself. Open minded = more awareness = see things you didn't before and CHOOSE your actions.
Discipline isn't willpower - imposing a demanding "must do" thought. The emotional consequence of not following a self told "must" is huge and counter-productive.
In trading the going always gets tough at some point. The discomfort is a part of trading, hiding them with willpower won't help. Realize the emotion and understand why you're feeling what you're feeling, then CHOOSE (a different) action. To deal with discomfort you must have self-confidence which is resilience in the face of disappointment and self trust.
Learn to control what is WITHIN your control and let go of the rest.
Next time you feel threatened (example, when you want to book a quick profit) think about what you would typically do - what did you do last time? how did that work out?
Anticipate your emotions before they're fully formed. Stress and discomfort are on the way, are you prepared?
Uncertainty is a certainty.
Successful trading = a lot of trades that aren't winners. Focus on doing what's right, not being right.
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