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Postcards from the Right Edge Fog


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Postcards from the Right Edge Fog

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  #31 (permalink)
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My guts ran out of steam (or my intuition warned me) whatever - I got out right now.




I really do not have a valid reason for this exit (no major bull trendline break etc...)

BUT I exited.


Well I did have SOME valid reasons, some being:


Hence this journal.


[EDIT]
Adding thoughts floating in the backwaters of my mind:

1. The trend channel line which can be drawn between the highs of 1720 and 1740 has been broken by this uptrend push.
2. Go back to H1 in previous post - if 83.78 is exceeded (which has happened right now) this forms an H1 on the hourly chart :-) so probably there will be a down move then an H2 and then uptrend will resume.
3. (Weakest) this upmove appears to be climactic

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  #32 (permalink)
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  #33 (permalink)
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A fresh looking bird hops ahead of my actions whispering "Risk only a little... risk only a little". This is our mind telling us intuitively to take the low risk entries.

But a goblin of doubt then runs across that idea and perhaps makes us skip a valid low risk trade and... whoosh ... the market is soon on the other side of the trading range (or whatever) and the opprtunity is lost.

The thrid thing that can be done wrong is to shoo away the bird and take reckless adventurous entries ... then move stops farway since the entry was bad to begin with.



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  #34 (permalink)
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USDJPY is going to go down pretty fast these holidays.

Look at the crazy size of all the tails.





Thus there will be a pullback after which it is expected to continue a long journey to 92 ish levels!

USDJPY bottoming action is complete so it won't dive and give back half of its gains or something, but a deep pullback is on the cards....

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  #35 (permalink)
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Early Warning Signs

- When I have a large winning day and am feeling elated.

- When my body and mind are feeling 'blurry' or 'numb'.

These are the periods when I can easily give back three weeks of profits in two days.

These days are to be identified and are NO TRADING ZONES.

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  #36 (permalink)
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Let me state the lessons learnt upfront.

Since they will make sense only in context to my readers the explanation will follow.

But the learnings first!

Learning 1: It is better to pass on a trade if intuitive functions are ringing warning bells than to take a trade

How the learning experience can be practically applied: When intuitive judgement provides 'doubts' then the doubts must be respected and interpreted in that fraction of a moment and the trade must be passed.

Learning 2: It is better to muster up courage and execute with imperfect information than to wait for confirmation.

How the learning experience can be practically applied: When there is enough information and the probabilities are on my side, I must take a trade.


Note that both learnings are internal - while market structure, setups are inseparable from above, the quality of the moment of observation and action are what I am trying to improve upon - finally action triumphs everything.
Everyday I discover the real nature of trading and how difficult trading is.

The precepts, to summarize:

1. Do not aim for non-existent perfectionism.

2. The best trades happen fast and at a precise orchestrated moment - patiently lay in wait for such moments and execute precisely (pounce!) when the moment comes.

The first one needs the practice of detachment.

The second one needs the practice of patience and the power of being in the present moment.


The complete blow by blow learnings follow in the next post, with an accompanying chart.

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  #37 (permalink)
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Here was how I interpreted it:

- The trend was up up and up.
- However price was now vertical, which is unsustainable behaviour, so any countertrend momentum would be deep.
- Also, the trend would have to test yesterday's close before resuming.

Here is the 30-min chart roughly from 10 Apr to 22 Apr:




Here is today's action:




Inflection points that passed thorugh my brain - "turbulence centers":



The upward momentum and today being an uptrend day was confirmed by the big bull candle at the open.

Post the opening spike a wedge three-push pattern unfolded. At the end of three pushes a pinbar printed and the down move started.

I was not watching any of this! I was late to my desk!




I have this 'weakness' that whenever a double bottom is not exact to the tick then I get suspicious and expect it to be broken since it wasn't a real double bottom in the first place.

I forgot to mark Point 2 on the chart, sorry, but it is the double bottom before the red line.


WARNING BELLS WERE RINGING when I went short at the break of the pinbar.
Why? There had been significant upmoves which had broken the moderately steep bear trendline - price could easily move up!

Yet I shorted.
Why? I was afraid of missing the move.

Note to myself: When something seems urgent and needs to be done in an unnatural haste, that is a warning sign that it is not worth doing it.

ALSO, I had intended to go LONG at a clear point but shorted 'to avoid missing the small countertrend trade'. This indicated I had a casual approach and was daring the market. At this point I should have taken only longs as I had come prepared with the idea of taking longs only as they would still be with trend as the rend touched newer extremes! That happened but I was (painfully) short.



Double doji formed - more upside momentum was registered subtly in my mind but I was locked into a 'will reverse downwards soon' mentality and I did not want to miss the short trade profits.

WARNING BELL: Trading is about minimizing risk and not risking on future profits while eroding current capital. Remember - if this would have been a more patient entry I could at least have been long here.

It is amazing how clear price action becomes ONCE IN A TRADE.

However I am hoping to concentrate to the same point of focus BEFORE getting into a trade.



It was a clear sign of reversal here.



The market took out stops and the reversal continued downwards



Double top bear flag!

Reversal confirmed!

How many times do I dream of taking the perfect trades and alas I have no ammunition left to fire at that point because it is all locked up in a premature battle!

Between 5 & 6 it was likely than the pullback could have easily continued.

In the market, as Mark Douglas says, anything can happen and we must be psychologically prepared that anything can happen.

After 6 the market came down to very near my opening price.

I do not seem to have learnt anything (on execution level) from the corn trade of Friday.

I should have covered as did everybody else who happily bought, glad that the market gave them a small loss instead of a huge loss. Not I!

BIG FLASHING WARNING: Do take that loss the next time it happens!




At 7 it was clear that the market would breakout.

There were so many warning signs - yet I held on.

Then the story opened with the chapter 'When the Breakout Happened' I actually paniced - see how I covered at the highest possible point at my highest loss of 1% of capital. I HAD to cover and I respect myself for covering but hey, I should
1. take better entries
2. Instead of taking the full stop loss I should cover when it becomes apparent that soon my stop would be taken out!

Two learnings!



When 8 came I actually did not get into a short trade again...

Mistake! Don;t let past trade outcomes affect the taking of beautiful signals like this!

The market offered me a gift and I did not take it (perhaps angry at it having jilted me earlier).

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  #38 (permalink)
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Motto:
Everyday in some way I keep improving.

Action triumphs everything.

Humility is the key - assume every trade is going to be a loser unless market proves otherwise. (But keep a positive outlook due to net positive expectancy)


Instrument:NSE:NIFTY

https://www.google.com/finance?q=NSE:NIFTY

Gap down opening

Recognized an inverted channel early (+1) - the target is the height of the gap. However covered swing trades quikcly like scalps (office commitments is an excuse BUT real reason is I chickened out -1)





Technical analysis improving!

Market directional bias improving!

Entry patience improving!

Exit patience - need to improve!

Risk aversion - need to improve!

Loss aversion - need to improve!

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  #39 (permalink)
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Some notes:

The market went up a few points after I exited both lots.

The exit was a dramatic pinbar so if I had been watching I might have shorted there (around 60% probability if I can put a probability on myself).

Then it fell sharply, dropping first towards my entry prices. At this point I might have covered and stayed on sidelines.

Or I might have been TEMPTED to enter (there was no valid setup, but...)

However the moral of the story is: bias and preference are bad trading companions... it is best for a scalper to approach the market with a clean slate and trade when a trade presents itself.

Thanks for reading!

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  #40 (permalink)
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The single thing I can improve upon is I jump into countertrend positions quite easily. (its a big bear trend here on the NIFTY - based on the chart to the left on all timeframes you can see the clear downtrend which has refused to die in spite of dropping 500 points.

If I "Trade with the trend" and take valid setups "with trend" I will do much better.

e.g. I did not take the shorts (not shown in charts above) but took the longs and covered where I expected the countertrend move to peter out eventually due to double pressure (new shorts arriving - in a bear market both new highs and new lows get shorted!)

This means I usually am inclined to see reversals rather than with trend entries which seem difficult to take. - need to improve on this and I would notice an immediate difference to my bottom line.

Edit: An addition post-facto is that the market has dropped further and my 'prediction' of the target was way off. Breakeven stops are still a bad idea nevertheless. Correct target estimation needs more experimentation.

Here is the current chart (the hand symbol is where my target was)


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