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Postcards from the Right Edge Fog


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Postcards from the Right Edge Fog

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  #1 (permalink)
 iqgod 
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The Map - The Forest of Price Action

What a fantastic journey it has been!

From outside it seemed like wonderland – if you stand by its sides you can hear peals of laughter, the clink of gold coins being tossed about, yours simply if you take the time to keep your hands outstretched to grab them.

But nothing is as it seems.

I have been wandering, nay, meandering in this wild forest full of clever traps.

So many times that I ventured, or rather staggered confidently into it and more often than not I’ve been robbed, waylaid, mugged, beaten up and left penniless in tears.
I had been busy climbing the price action slopes, sliding down tumultuous streams of corpses (I could see that they had once been people with piles of money).

The fog makes it all the more difficult and dangerous. One wrong turn and you enter quicksand.

It also makes it enticing enough to make one enter. You can see the bottoms and troughs and the path to the peaks looks easy enough – the fog parts just enough to show how a tantalizingly easy path carves itself hugging the mountain and curving slightly enough to make it seem like armchair entertainment – a light stroll rather than a full haul mountaineering trip.

Alas, how I wish that were true.

This journal then, is a truthful, incisive, brutally honest record of my journey in the Market.

Enter at your own peril….

P.S.: My old journal “The 22 Days of Price Action” was as its title said, was supposed to be a boastful self-worshipping saga of doling out tidbits of how to do it – how to go to riches quickly – from a (or so I thought) master of price action and self-control.

It quickly turned into a quagmire – how could it have been otherwise when I had not exorcised my demons, had not really trusted in my plan, had not faith in the plan to survive the deep forest of the market? The first few scars and the sight of blood and down went the plan into the abyss, and with that also had gone my dream. A good Samaritan named @GaryD helped me on the way – asked me to pause and strengthen my armour before I really went face on into the deep.

I have done that – nay, its an endless journey so I am doing it still – but truthfully I have become tougher than I would ever have thought I could become.

Indicentally, along the way (I state it so very softly lest the magic flute that guides me through the forest might stop suddenly and leave me stranded) – I have started making money consistently.

The slopes I slide down are shorter than the peaks I climb high into. The equity curve progresses now more like the tortoise than the previous doubling run of the hare. The risks are calculated earlier and earlier – never does this traveler allow himself to slide down into a chasm without first assessing the hurt that could result from the fall.

What does not kill you makes you stronger.

And the market – its always there, waiting, whispering its flute song to those who really bother to listen. And those that REALLY want to listen. For the rest it is enchanting and terrifying at the same time.

I will mail postcards occasionally from this fog.Perhaps the postcards server no better purpose than signposts. Herein fell a traveler into a deep hole. Herein lies the path not to be taken. Look yonder into the sky – some signposts can only make sense to a truly a weary traveler seeking direction.

The postcards will not be easy to decipher. They would not be intentionally complex either – the postcards are just a reflection of the tangled overgrown forest and of the giant sea in the middle of the forest!! – but I sincerely hope that they will brim with the wisdom of the sages and the wit of the ages and like a lighthouse keep someone out of troubled waters on a winedark greedy bottomless open sea that whooshes in and grabs the pile of gold each ship tries to accumulate. One leak is enough and no one can ever put in more vigil than necessary.

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 Goldstone15 
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Well written. Good luck on your continued journey.

Before you attempt to beat the odds, make sure you can survive the odds beating you.
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 iqgod 
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On Friday the 5th of October 2012 ominous rumblings in the forest were afoot. A great crashing sound sound later the giant redwood at the center of the forest AKA the NIFTY tilted and collapsed 900 points. The sound of the great crash froze the machinery of the forest, arrested creatures on their track and needless to say took away the nuts from small furry creatures and a great cesspool of liquidity flowed into the coffers of the grand masters who had opened the sluice gates wide believing they shall receive.


In a few moments it was all over. The NIFTY rose again towering above all the puny trees as if nothing had happened and the whole episode was forgotten and the market creatures went about their way as if nothing had happened.



Much more likely is a downward move which grinds down slowly to the bottom of the “Flash Crash”.




I am short from yesterday onwards (two full contracts) from where price almost touched the bear trend line. Close is close enough.

The stop is above the top of the "Flash Crash". If that is exceeded without the price falling below 5400, which is likely too in this secular bull market then I will stopped out and will further be long.




The major trend seems upwards, but charts morph in the fog.




The great picture, useful to the surveyor, perhaps immediately not much for the aspiring trader

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 iqgod 
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Humbly captured full move.

Its just a statistic so must not become bloated.

To clear my head I have sold everything and am sitting on my hands for clarity to emerge, as it always does.

2nd target:


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  #6 (permalink)
 iqgod 
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After the super confident short at the top of the channel I find shorting a smoewhat risker proposition now. Maybe I shouldn't have gone flat yesterday.

But now that I did I have taken this short today (see below).

Keep head cool, body relaxed, breathing normal. Stop is faraway because the market does not know where I exited yesterday. It is a logical place to place my stop and I risk giving back half of my profits (trading half size today - one contract).






The virtue of patience in trading cannot be overemphasized. Ever.

Yet doing is different from preaching.

The law of the jungle eliminates those who cannot wait. And wait more. And even more till clarity emerges. And not only that it also rewards those who act quick when opportunity presents itself. But in order to capitalize on opportunity one must learn the art of waiting. And waiting.

The cheetah is the fastest animal on earth.

But in order to attain its top speed of 70 mph it must be well rested and fit.

More on the cheetah later. The market does not reward scribes as much as it does the doers. But scribing during waiting is a blemish less past time.

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 iqgod 
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Am in Cheetah mode today. Goes against my old fibres, but feel a need to do a youthful sprint every now and then.

This is how my scalp played out:


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  #8 (permalink)
 iqgod 
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"Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading."

Mark Weinstein

Back to the live NSE India session:

I just had the following conversation with my broker:

Broker: Sir the market is nicely down

Me: What do you mean by "nicely" down.

Broker: Sir, you have a NIFTY Nov12 lot short at 5706 and the market is down at 5620 so I thought....

Me: Now wait a minute. I was under the impression that I had covered all my positions yesterday at 3:15 pm

Broker: NO sir, you had a buy order go through and then you had put a sell order again...

Me: Scratching my head (vexed at my execution, secretly happy at my profit) Weeellll, keep it open. No orders yet.



Now this has happened to me somewhat often lately. I get amnesia at market turning points. I hem and haw and heckle and procrastinate at important moments.

It is almost a subconscious decision to be handicapped when deep inside I KNOW I have to be at my desk and all my senses are telling me 'Be alert. Your systems are going to need you.'

And I am absent. Or doing some menial task.

WHY?

Why does my mind harbor a secret ambition to fail?

The budding psychologist in me once said - You secretly want to not admit you are better than your father. So you set yourself up to fail so that you will always be below him.

(Well, realization stated succinctly above. But has no effect on behavior.)
Problem identified.

Need suggestions to overcome it and get a working solution to be the winner that I know I always was meant to be.....

This time it worked out in my favor. I have lost huge amounts because of this sloppy forgetting / silly execution / silly mistakes / buying twice... you name it. Need help. SOS.



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 iqgod 
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The end of last month saw trading becoming so predictably easy that it became the most difficult thing for me to stay awake in front of the computer.
First – How had trading become so easy?
Answer: It became easy when I simply followed my plan.
Day in and day out I followed my plan.
I was just a goal-keeper who would wait terse for the ball to be hurled at me by the market. Some balls would be out of reach and I knew I would not be able to do anything so I would be left with nothing to do. But when the right opportunity presented itself I would hurl myself with all my might against the ball and try to arrest its rapid entry into the goal-post.

Until…..
I started off with a capital of Rs.1,00,000.
Followed my plan and the max drawdown sent it down to Rs.88,000 which was the MAE (too risky as a percentage amount but it was stated in the plan that the MAE is 25% on one trade – I know the risk managers there are shaking their heads with disapproval) and then the capital finally rose to Rs.1,48,000 and almost hovered at the 150% magical mark.

Then two things happened:

1. The success went to my head
2. Something inside me awoke and tried to kill me. Some deep psychological barrier.

The first thing was simply ego and I could tackle it by being humble, helpful and continuing good karma (one of my belief systems).

The first thing also causes me to start outguessing the market, thinking I am smart. It thus attacks my performance at the point I am feeling most sublime and at points where I lower my guard.

The second thing is what is making life difficult for me.

How?
1. The moment some part of me realizes that I am nearing perfection I at once become sloppy, absent-minded, depressive.
2. I try to avoid doing the things that have to be done in my best interests.
3. I do things that will prevent boredom.
4. I do things that will make my life exciting – SUCH AS TAKING LOSING TRADES.
5. I start finding my day job boring and start trading on stealth and then missing turning points when I can no longer monitor trades and then my performance suffers.
6. I do not place stop losses –watching my trades become profitable INSPITE of stop losses gives me a rush. Example? I was long AAPL yesterday at 588.63 FOR NO APPARENT REASON and then I went to sleep. I was sleeping soundly while AAPL fell to close at 576.80.




7. I make life into a muddled soup and then I start feeling depressive.
8. Making Money becomes a secondary pursuit – then I further fill myself with thoughts of how materialistic the world is, how we waste life in seeking money etc. (though deep inside I know that it is a little demon talking inside my head – the real pursuit of trading is the ultimate path to achieving perfection both intellectually and at many fulfilling levels)
9. To top it all, I technically KNOW the market is going to XXX level (and am right in HINDSIGHT) but everything inside me talks me out of taking the trade –
a. What if I cannot monitor it?
b. What if I take it and it is a loser – won’t it add to my image as a failure?
c. What if I take it and it wins – what is the purpose of stealing somebody else’s money in this world? (images of a crying loser somewhere out there – that’s the demon speaking and not me – deep inside I know that loser clicked with his own hands and exited at a loss with his own hands and PLAYED with his own money willfully and I have WON the money as a RIGHTFUL acquisition – it is in my possession because I did what he did not do i.e. researched and studied for thousands and thousands of hours, backtested, executed without faltering AFTER determining the point where I would be wrong, placed a stop-loss at the point where the market would prove me wrong, exited at a correct place with no other emotion that being correct this time, Rinse. Repeat.)
The result of both these things is that I avoid following my plan.

Sigh. I know many would now rush in to suggest Tradings Aanonymous at this point. But that is not the point. I run trading as a business…. Till this point kicks in. I believe that once I snarl and trap that furry little devil inside me (and he has been kicking and alive for a long time) who make this happen I will be well on my way to full-time trading success. Right now I also believe that there is no pyscho-wand that will take the debris outside me and make life smooth. I believe that clearing the debris is nothing but hard hard work, long hours of toil and endless backtesting, endless learning and while seeking perfection ACCEPTING that there is none and yet continuing on the path.

This journal then is not REALLY about the fog that is on the right edge of the market. It is more about the fog that sets within which is conspicuously absent while looking through crystal clear eyes of hindsight post facto closing a trade.

Staying focused when the fog sets in is a difficult thing to do. But pushing forward in the desired pre-determined direction is the only thing that will help me stay on course till the fog lifts.

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 iqgod 
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From today onwards I will be going into to explain my methodology (essentially the method is a combination of Al Brooks Price Action and Wyckoff Theory optimized for Pinbars) in great depth.












Because of the great depth part the commentary needs editing and will be coming soon.

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 josh 
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@iqgod, thanks for starting this thread and for your posts. I can relate to some of what you are feeling. I look forward to further posts. Maybe a little off-topic, what is it about the nifty that you like so much? Just curious, never watched it.

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 iqgod 
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Josh: It is the NIFTY because my plan says NIFTY. :-) I am focusing on one market, one timeframe till I am consistent.

I am much less prone to doing random things if I post a plan which I can then base my day off:

Plan for Today

0700 Wake up (completed :-) )

0700 – 0730 Workout (completed)

0730 – 0745 Plan for the day (this post, and the one that follows)

0745 – 0800 Hot bath (on a blustery November day, aah heaven)

0800 – 0830 Review plan (COMMIT not to trade against the big picture UNLESS a VERY GOOD setup presents itself) and have the following things ready – What to trade, where to trade (physical place), where to trade (entry price, stop loss, target – all this for EOD), when to trade, what sub-sections of plan to execute (e.g. preparation and practice for TopStepTrader combine, familiarize yourself with atleast one new aspect of your setup everyday, what to do when waiting for setups e.g. post on BigMike when chop detected), BIG plan (EOD trading), MIDDLE path (), SMALL encounters (sudden revelations of setups during intraday swing points which I check hourly, not any lesser so that I can execute my day job with proper dedication)

0830 – 0900 The Daily Commute – drop wife and kids to their office / school and go to own office

0900 Reach office. The First Hour is for trading – the rest of the day is for putting in EVERY EFFORT to satisfy your employer and doing your best for him.

0900 – 0600 Promise to give all your time to your employer – you need this job for raising capital, for bringing stability into your trading, and even if you feel you would be better off trading full time currently you MUST carry on and give your fullest in these nine hours (except, take time off from 0915 to 1015 for yourself – lock yourself up and trade, this is YOUR time and not your employers time)

0915 India Market opens. You should be ready, logged in into brokers terminal and calm, composed, waiting for setups, not hurrying, fumbling or entering randomly. Enter only based on plan. 2 minute charts allowed only in this one hour.

1000 India commodity exchanges open. Enter only if you have your plan ready.

While taking entry, use vvScreenshot to post the entry into BigMike. While watching the market enter your thoughts on the journal too – this will help you cross check if you are taking rational decisions.

Every hour i.e. 1015, 1115…. 1515 check what the market is doing and plan for the next hour (take five minutes) – DO NOT REACT for that hour, your plan must be followed from previous hour.

1800 Free. Pick up wife, go home.

1830 Reach home. Play with the kids till 1900 or 1930

1900 Plan for the US market open (standard time so US markets now open at 2000 here)

2000 US market opens – Previous hour you should have checked – are you are ready for the combine? Did you achieve a profit target they expect in your chosen 20 days? If yes, then START the combine! (not taken yet, not achieved target yet, more consistency needed)

2000 – 2300 Stop trading, hit sack and sleep tight.

Repeat next day till weekend arrives.

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 iqgod 
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Bar 0 i.e. the opening bar of the day was a magnificent pinbar and hence one should go long one tick above its high. The stop limit order was filled at Bar 2 and the stop was below Bar 1 low to accommodate a situation where a double bottom might have formed with Bar 1 low to take out stops.

Bar 6 completed two legs from the pinbar open and the next inside bar was of opposite color, so placed an order to go short below its low.

Also one could be prepared for the Bar 7 low to be tested later on and then a two legged sell off. This came at Bar 14 where a limit order at Bar 7 low got me short again with a stop limit buy above Bar 6 high.

The lower high at Bar 22 did not take out the stop and the market sold off for another leg in a medium trend channel (not too steep, not too shallow).

The channel was confirmed by the alternating bar colors and lower highs at this point.

Bar 36 formed a pinbar below which another lot could be safely sold with a second stop above its high. (aggressive traders could have reversed above its high since the minor trendline formed by connecting Bar 6 high and Bar 13 high was already broken to the upside by Bar 22. However that trade never triggered and the market sold off sharply after the pinbar low was taken out.

The bear flag from Bar 47 to Bar 51 was no need to get nervous as no major bear trendline was violated till this point and one should have kept on looking to short. The third short presented itself at Bar 51 which was a slightly inferior pinbar.

Note that two down legs were completed at Bar 52 shaved bear bar and one could get ready to book the windfall profits as the market offered them.

One lot was covered above Bar 55 high since it was a High1.

The market entered a trading range after the huge selloff but the goal was to be flat at the end of the day so covered the remaining two lots - second at at Bar 68 High2 and finally held the last contract till market close to cover at Bar 74.

A nice trend from the open day for dedicated chart readers.

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 iqgod 
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Here I present my plan in snippets (each may be expanded further in future posts, but this is the essential gist):


Trading for long term is not a gambling venture but a practically safe business when conducted on sound business principles.

PLAN OBJECTIVE: Capital preservation.


The maximum risk per trade is NOT a goal to be achieved. If a technical stop fits all risk parameters and still leaves room to increase lot size take the trade with the lower lot size. Leave no room for the market to decide your fate.
A wonderful result of abstaining from trading full size: It allows for pyramiding your positions if the market moves favourably.

知彼知己,百戰不殆;不知彼而知己,一勝一負;不知彼,不知己,每戰必殆

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.

- Sun Tzu (from "The Art of War")


This is the best advice I could take or give a new trader.

"Know yourself"


What are the two mistakes that destabilize me?
  • Getting in wrong
  • Getting in right and getting out wrong

The first one makes me:
  • Hold on to losing trades
  • Jump in into trades without thought, preparation, or plan (not letting go of mediocre non-intuitive, technically poor trades)



So how do I get in right and get out right?

"Know thy enemy!"


What is this zen practitioner's toolbox?

Tools for Measuring Continuation (Trends):


Trendlines - for "measuring" trends


Tools for Measuring Reversals:


Pinbars
Head and shoulders
Wedges - in general three-push patterns
Trendline break, extreme of trend tested, reversal signal (any of above)

Tools for Measuring Ranges:


Double Top Bear Flag
Double Bottom Bull Flag
Breakouts failing at edge of range can be traded with a stop outside the range edge.

Also, the important note here is simple: in general expect the trading range to breakout in the direction of the trend that lead to the trading range.

Measuring Ruler:

  • 20 EMA:

Why? Can assist with entering with trend.
  • Targets:

The keyword is "Two legs". To make it psychologically easy: get in with two units (shares/lots/contracts whatever), cover one at end of first leg, move stop to breakeven and if stop is not taken out then ride till end of second leg for short term trades. For long term trades keep stop at breakeven and exit at major reversal only.

Steps or Parts of the Plan:



Trend asssessment


Higher highs
bull trend

Higher lows
bear trend

That is simplifying it a bit, but true power lies in keeping things simple.

NEVER TRADE COUNTERTREND UNLESS THERE IS A TRENDLINE BREAK



Risk assessment


Maximum allowable risk per trade is 1% of account equity.

Trade on active markets with proper liquidity

Trade with the trend. (most important). Only execute if you are sure of the trend and if you are sure that you are with the trend. (trend is defined for a timeframe which you are trading! No referring to a higher timeframe for 'trend') – if doing that it means two bad things – predisposition or confirmation bias

Capital divided into ten equal parts AMONG TEN BROKERS (sounds bizarre but this is to prevent the all too often habit of mine to bet it all on one market and one trade) - if anything it will slow me down to place orders on ten terminals and make me think.


Signals (getting ready for taking confident entries)

Buy one lot only against double and triple bottoms. Place stops AND reverse below these areas. Reversal trade so only trade based on if there has been a PRIOR TRENDLINE BREAK.

Buy one more lot against a Pullback that tests the extreme of a trend after a GOOD trendline break has been seen (not a piddly move that couldn;t close above the trendline, a proper trendline break)

Trade only when you have definite signals. If in doubt sit on your hands. Sit for some more time if a creeping doubt arises. Observe your mind if you see a technically valid setup but the 'doubt' is actually 'fear' in disguise - if so TAKE THE TRADE.

There is NO TRADE THAT IS WORTH TAKING if it BREAKS RISK MANAGEMENT your guidelines.


Execution (placement of order, two stop orders and two target orders)

ALWAYS PLACE stop order WHEN FILLED, not 5 seconds later or 10 seconds later (automatic OCO in NinjaTrader - stop size varies based on technical risk assessment)

Start with a money stop if technical stop is far away or SKIP THE TRADE if not within risk parameters.


Trade Management


Walk away - for trades on daily timeframes this technique works best.

Manage for intraday by polling on a HALF-HOURLY basis (no less).

How to manage? Never let a winner turn into a loser if it has been a winner from the start. This is factored into my plan (two lots, stops moved to breakeven).

This is the only way to cultivate discipline and prevent overtrading.

Where to move stops to AFTER TRADE GOING INTO GREEN?

Below / above swing highs (that means giving up a lot many a times but it is technically correct)

Trade exit


REMEMBER YOU CANNOT AND WILL NOT BE RIGHT ALL THE TIME.

Rule for exits: when a trendline breaks exit half the position immediately and exit the other half when the trend extreme is tested. What if the trend continues after that and I am left without a position? Do nothing and wait for next setup. :-)

Protect profits. Trailing stops as exit, but the trailing must be technical (swing highs / lows taken out).
Never take a knee jerk exit: sometimes your intuition can tell you but do not insult it by RUSHING to take exits. Focus on getting in based on your rules and getting out based on rules.

What are these rules?
  • Objective reached and limit order taken out. This point should be such that average profits are much greater than average losses!
  • Protective stop triggered (trade is a loss, but you got out using your rules). Ditto if this is the breakeven stop.
  • Trade not “behaving right” – this can be called my time stop, but mostly it has nothing to do with time and is more of a ‘technical conditions no longer exist at this point’ – exit at market.
  • "Know thy enemy and know thyself"

Journal review

List down the new things learnt.


Are you a better trader?

Can you wait for the MARKET to show the way?



Some points to serve as a reference lest I say it is not in my plan:

These are more to do with psychology:


Signals and not emotions to dictate entry and exits.

Are you trading on HOPE or FEAR? Then you have a day which you are not in synch. Stop trading and go out and breathe free of fear and hope. Live to trade another day.

Daily loss limit hit? See above statement again. The daily loss limit should NEVER be hit any day.

Slightly ambiguous but this one has to be here: Learn to trust Intuition however (which is technical, and which is a fruit of practice and the thousands of hours of screentime - nuture it and respect it).

Do you know and understand trends? breakouts? can you indentify failures? can you identify when failures can fail?

Can you determine technical points to place your stops?


May my trading be illuminated and guided by the above principles and may i follow my plan. I will not need it if I follow my plan but anyways - Wish me luck!

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 iqgod 
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I seriously am overtrading today and hence am calling it a day right away. I have not lost much capital here (1.5% of total) but hefty commissions.



The above chart surprised even me with its trade density. What was I thinking?



These symptoms are a precursor to going on tilt so stopping myself for the day.

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Start of a multi-week long trade in USDJPY:


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 iqgod 
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Opening Bell!

I was set – calm, mindful, and ready to wait the day out.

Tick mark. Tick mark. Tick mark.

Excellent.



What was I thinking then?

I have been tracking the index chart of the NIFTY50 (NSE).

I have been extremely bearish on that chart ever since 10th October 2012 printed that gigantic flash crash bar clearly visible on the chart below from even 8 feet away (High: 5815 Low: 4946 which are around 900 points apart) and open and close pretty close together when compared to that but overall bearish.

CHART





Addendum: The market has respected the major (ish) trendline for the past five sessions AND has printed a pinbar yesterday which was a Breakout Pullback long for a brief long swing trade (less than 2 – 3 days). I am expecting a fresh wave of selling to enter the market soon as the market has reached the congestion region marked – mainly because the flash crash bar irreparably broke the bull trendline which has set the stage for a steady market descent which would test 5400 before the current secular bull market resumes.



Note: I will turn EXTREMELY bullish if the market prints a closing above 5815 which is the highest high of the market. (Old Partridge: I am not selling my stocks, we are in a bull market!)

Above prices are index prices, add an average of 10 to 15 points to get approximate futures values.



Getting into the flow, market opens (albeit, me with this above bullish bias which seems stretching it a bit since congestion is just overhead, so expecting a trading range day to unfold)

The market opens gap up.




Bar 0 – Gap up opening much above the pinbar high which confirms bullish strength, but I sit on my hands and do nothing. (good). The bar turns into a big bear bar with a moderate tail which means some bears are trapped. At this point I am oscillating between a 1 minute chart and this 5 minute chart but remember my plan and fixate on the 5 minute, ignoring the 1 minute. Can’t resist the occasional peep however, but am not doing anything based on it.

Bar 1 looked extremely bullish mid-ba r and must have stopped the weak bears out since it started printing a tail which finally remained on its close.

Bar 2 was a doji but I started anticipating a downward move and to get clarity kept looking at the 1 minute chart again.

Bar 3 – at this time I was back on the 1 minute chart and saw this as bar 21 (M1) (see 1 minute chart below).



Bar 4 - by bar 24 (M1) I was sure that I had found an important swing trade of the day since this bar was a pinbar (though it did not reverse anything as it overlapped the prior three bars, but it was at a good location as it formed a credible double top which made the risk minimal) – stop above double bar high and potential reward could be the width of a channel or spike that tested yesterday’s close (tick mark – this was a good trade),. Also the bull trendline drawn from lows of bar 3 to bar 18 or similar (not shown) was broken to the downside. I was an excellent trade, EXCEPT that I did not take it : - ) So much for coming to the market with pre-biased bullish views. This also uncovered an important point to trade the chart based on the timeframe I am in.

Bars 5, 6, 7 – established my intellectual proveress firmly but unfortunately I do not get paid for postulating theorems if I don’t walk the talk. Point to remember.

Bar 8 – This short was a stupid mistake. I admit to myself that I was still calm and sitting on my hands when it struck me that OCO orders from NinjaTrader are giving an issue on the broker side and while fumbling with ChartTrader this short was inadvertently entered. Then I made the pitiable mistake of “let’s see if this trade was god’s hand and let’s see where it goes, mebbe I get lucky” but luckily this mode didn’t last long.

Bar 9 – registered in my brain as a High1

Bar 11 – registered in my brain as a High2 where I covered my trigger happy short trade and initiated a fresh long “anticipating” a break above the High2. Big stupid mistake.

Bar 12 – gave some credibility to my mistake and made me happy that its top exceeded the Bar 11 high and thus took me in into thinking I was in a valid and good trade where price would be soon propelled into hyperspace.

What my brain failed to register (and I wonder why) all this time was that we were in barb wire and the trend that entered this tight trading range was bearish with four big bearish bars and the move expected would be downwards (probably a measured move target). Actually this is a lie – my brain did register the above thoughts very clearly but I could also see my P & L dipping slowly and my brain put me into a dreamy hazy state till I could see a green P & L. This according to me was the bigger mistake of the two – on a arbitrary scale it was somewhat okay to have taken a trade off that H2 (steep bear trendline (drawn from bar 4 high to bar 7 high) break (bar 9 shoot up), spike down and a higher low test of the extreme at bar 10 triggering the trade at bar 11 – so far so good), a valid setup for a but then not at the nest of places since the 20 EMA had not even been touched yet – it would have been a good setup if it has been also a EMA gap bar etc. (old jungle saying:have atleast two reasons for a trade).

Coming back to the cardinal sin, I HELD the long trade without a stoploss “knowing” it will come back. A big psychological gap that needs to be mended before the ship is sunk by it.

Bar 14 – looked like a pinbar but was in a awful place – mainly in a bear trend without a real trendline break having occurred. Sin continues bar by bar as the market moved from trading range (bar 8 to bar 17) to trading range (bar 20 to bar 28, roughly or that can be a trading range from bar 20 to bar 22 and then a retest of the upper trading range and then downtrend continues on bar 30).

Bar 15 to 17 was a wedge a little rough around the edges, but could have offered an excellent setup if my head had been in the right place (it wasn’t due to that stupid long which I held onto stubbornly like a, pardon me, investor)

Bar 23 was a spike up after three narrow range bars (three outside bars) but was followed by a good looking pinbar so sitting on hands (along with a stupid long for company)

Bar 24, 25, 26 gave the impression that an extended bear channel was forming and bar 26 went below the low of pinbar 24 so this was a good short again except that grumpy stubborn traders who are long do not like to thing of risky stuff like more valid short setups. Stupid, grumpy, and not getting paid for any of it.

Bar 30 was the capitulation that was expected mostly because of the pinbar 24 leading to a short and more because the trendline from bar 4 high to bar 18 high was broken and a retest of the trend low was expected.

Bar 35 was the excellent swing long setup I was waiting for all day (the bar 21 (M1) short was also a lucky find which worked out, but it was neither anticipated nor deftly taken, mainly because I had been bullish back then and I was ready to go long if its high was exceeded at 5652) So now the grumpy trader turned excited trader was long two cars. Entered at bar 36 - Reasoning: bar 34 pinbar high was exceeded and it was a H2 as earlier bar 34 had formed an H1) and thus was a good swing opportunity. Bad note: I did not place a stop loss – I think this was because the earlier long trade had travelled so much against me that at this point it was “too late” to consider bailing out. Bad bad bad. No tick marks for the past two hours.

Bar 37 – I exited one long because it was running into overhead resistance (trading ranges described above) and didn’t want to lose the profit or rather two scratched trades (sigh-of-relief-at-preserveing-capital-in-a-roundabout-daft-manner) at this point.

Bar 38 – the bullish strength of this bar should have made me hold on to my single lone long but I exited solely because I was a few hundred bucks in profit. Bad bad bad. I realize how bad while I am typing it. I anticipated a move up higher after a trading range BUT YET I sold off the remaining long. No walk the talk again. Pain avoidance. To top it I sold a car and bought it back again out of sheer nervousness since it was not clear what the market might do – mistake – not letting the market tip its hand and acting before my turn.

Bar 46 was an excellent short scalp setup since it was a double top and I could have gone short below at bar 49 i.e. below the pinbar low which confirmed the short scalp trade and also due to the second fact that the bull trendline was broken. I still sat on my hands and harbored bullish thoughts. It is strange how a stubborn little idea can color sour four full hours of otherwise great trading possibilities.

Bar 52 was a M2B – an excellent long scalp setup but my brain was jelly at this point and I was avoiding trades like hell.

Bars 56, 57, actually this entire trading range was a amazing bull trap and bear scare. At that point it looked as if the market was ready to breakout into a sustained bull trend after having taken out the double top.

Bar 58 ended the trading range and the quick succession of bars of alternating color should have alerted me to a possible end of the move since it was now established that a trading range day was on the menu. (I remember having this thought at that time – using the heuristic that after two moves if you are at the same point where you started it is a trading range day – late realization but would have handsomely paid off IF I had taken the short (see the godawesome bear bar 59)).

Bar 60 offered a quick long scalp before the second bear leg started at bar 62.

At this point I was ready to lose my calm – firstly all I had been doing the whole day was PREDICT trades with reasonable accuracy and cherry picking the worst trades for execution. I was ready to move down the ladder to become a TV talking head.

The second thing I had been doing all day was tke nothing but countertrend trades because of a long bias I had (the market didn’t have such a bias, alas if I had listened)

These are the two takeaways for me today.

BEING BLIND TO THE OBVIOUS TREND

NOT TAKING EVERY VALID TRADE

I went long at bar 63 (break of steep bear trendline drawn from bar 59 high and bar 60 high, demonstration of bullish strength at bar 60, 61, 62 which later sold off to become a big bear bar, and finally test of trend extreme by printing the lower low bar 63) but sold at bar 64 because bar 64 was turning into a pinbar.

I went long at bar 65 and then had to leave to pick up my child from school so placed a stop slightly below its high, target above the highest high because I was still excpecting a large bullish move at the end of the day (!!!) and left). While on the move I eyed my mobile device from the corner of my eye and watched the trend agonizingly climb to bar 68 high, again shoot up pn bar 70, while feeling good that my stop was not hit and mentally making a note to journal this moment proudly “how walkling away prevented me from cutting a huge winner short because in my mind the trade would reach its target since it didn’t hit the stop – however the market just drifted off and I am long one contract at the end of the day.

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 iqgod 
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CHART: NIFTY 11-12 (5 min)



Bar 0 – was a unequivocal pinbar (in fact there was a Bar 0 (M1) on the one minute chart which was a pinbar (see chart below) and it was also a pinbar on the five minute chart (above).

CHART: NIFTY 11-12 (1 min) till 1000 am



I exited right at the market open as it was forming, firstly because had been anticipating a huge bull move since yesterday and the market gave it to me and I felt happy at receiving more than my bountiful share.

At the back of my mind I had a fleeting thought that the pinbar might be a bear trap and I wanted to place a stop buy order to go long above it if the bull move was not over (Yogi Berra: “It ain’t over till it’s over”)

However at this point I had to take my younger kid out and I also try to avoid trading the next day after I have had good gains on the earlier day. (I know it might be thought of as a bad business policy to limit my profits when I am on a winning streak, but I have found that the next day I am usually full of cockiness to a point that I think I “know” where the market is going). So I decided to stop trading for the day. (Post mortem note: Alas, Only if I had stuck firmly to this decision)

The effect was that I did not take a with-trend trade that was low risk high reward (the risk was the height of the pinbar which was tiny compared to the gap opening and atleast a measured move equal to the height of the gap from yesterday’s close would have been a reasonable target ).

I returned at 0935 AM which was at Bar 4 on M5 and it was a heady feeling to be right about the move and felt depressive at not having taken the easy trade. (Note: Many times I observe that I do not take easy trades – it may be that I think of the market as a intellectual exercise and skip the easy addition sums and concentrate on solving differential equations. Mental note to myself: When the market is handing you money atleast keep both fists open.)

I sat on my hands till 1030 or so thinking that I could have gotten the last part of the bull move and was internalizing to myself that this was a dead cat bounce which would soon be over. At about 1045 I was feeling even more sorry for missing the earlier trade and thought I could fire a few shorts with the “market’s money”.

Look how sorry my thinking became from the crystal clear patient approach yesterday. With such thinking things can go from bad to worse on a matter of minutes. Add to that I harbored another ridiculous thought that I could be stopped out for a piddling two digit loss and then see the market dive down for thousands of bucks. That would never do, I thought.

At this point I entered the market on Bar 15 for NO APPARENT REASON other than I FELT THAT THE MARKET WAS OVERDUE FOR THE DIVE.

Same entry was midbar on Bar 87 on M1 which I remember thinking of as a ridiculous entry even as I clicked the mouse button.

CHART: NIFTY 11-12 (1 min)1000 am to 1215 pm




It was right off the 1 minute 20 EMA and was a double doji break to the upside – and it was a truly magnificent trade had I followed my true self. Instead there was a resentful trader inside me who was pssed off for not taking . See how a trade not taken colored my emotions for the current trade which is an independent entity and has no bearing with the earlier trade.

At this point I should pause to present the ridiculous amounts of mistakes I made INSPITE of being intuitively aware of the right ways to execute and even when solid technical reasons presented themselves to not take the short trade and actually also presented themselves to take the LONG trade.

Analysis: Reasons for taking this ridiculous trade:

I was now with a bias that the market would reverse.

Because of this bias I stopped listening to the market’s loud voice and instead listened to the two voices in my head.

The first voice was a gentle soothing voice of my intuition which blended with the market’s voice – this was what I should have listened to.

The second voice was of my ego – that sorely aching overinflated loser that bastardised today’s trading for good. I listened to the oaf and gave him the upper hand. Nay, I handed him my soul on a platter as you shall soon see.

(Checkpoint: When you have two conflicting voices at once become mindful (meta-attention, which iis attention to attention) so that you become aware that you are ignoring technical signals and are listening to other non-technical things – it may be ego, fatigue, fear, greed etc.)



Mistakes:

- I ignored technical signs – I simply took the trade

- I became overwhelmed by my emotions because of which I traded emotionally and not objectively, because if which

- I set no stop loss

- I was not being accountable for any decisions I made – I trampled the decision to not trade at all today. Then I trampled the sacred decision to only act after a valid signal triggered a low risk trade, and along with such poor discipline there went my trading into black waters of emotional turbulence.

- I set no target and expected price to immediately descend into the depths of hell (fully aware that I have never seen such a momentum move in my years of market observation - and I have witnessed in the 2008 crash vertical slides (and having made all newbie mistakes including placing a buy on Satyam stock as it fell from the mid hundreds to 30 in a few minutes – I tried to buy a few shares at 79 but luckily my broker blocked the orders and did not transmit them to the exchange. I also had the bright idea of buying Satyam again when it formed a base at 13 but did not execute because I was trigger shy at that point – it was a low risk reasonable reward trade, but I allowed emotions to rule me then too. But I have made enough digression as could be accommodated in a paragraph so let’s move back to my self-commentary).

At Bar 95 (M1, see one minute chart above) I sold two more lots as I observed a “possible double top” forming (it sounds ridiculous as I type it).

At bar 98 (M1) it was much above the earlier swing high and I was getting nervous about my half-baked lots which I entered with only half a plan.

I covered one lot at a small loss when the market returned at bar 103 (M1) (bar 102 broke the micro bear trendline to the upside).

I covered a second lot at bar 110 because of the same reason as above (break of micro bear trendline and retest of the trend extreme).

At this point the chart kept morphing – I would see a ascending triangle forming which would coil by printing lower and lower prices 110 to 119), there would be false upside breakouts out of the triangle (upside breaks at bars 115, 116, 119) and then suddenly the market would invalidate it by printing prices below that triangle (bars 122, 124).

The difficult-to-predict but easy-to-trade upside breakout came at bar 137 (M1) which would have yielded a scalper’s profit but by this time I was too messed up internally.



Actually at this point I should have stopped trading.

But didn’t.

Bars 141 to 153 formed a three push pattern (wedge) and then the expected down move to the bottom of the spike that preceded it followed (bar 162).

At bar 165 my thinking had reversed to expect more upside and hence I bought at the not-so-good-looking pinbar (again WITHOUT waiting for the pinbar high to be taken out – this was really really bad trading on tilt). No stop below the pinbar again.

My mind went into “the market is now offering a bargain” at bar 169 and I made a foolish buy again. Out of control.

Covered for piddling profits at bar 176 and bar 178.

Bar 183 (M1) was a magnificent pinbar but this was the wrong timeframe to be trading reversal signals. Instead of going long one tick above its high (as recommended by Al Brooks regarding the one minute timeframe, where, he reiterates, that one should only trade with trend and the trend was definitely up at this point, so I was revenge trading again.)

Thus I was short three contracts (I covered one at bar 190 (M1) (tick mark – good judgment) and the second above the pinbar high (tick mark – good risk management – half marks only, since I held on to a one contract short)

CHART NIFTY 11-12 1115 am to 1315 pm



Bar 192 was a higher low retest of the intermediate downtrend and hence a sustained bull trend was expected which happened immediately from bar 193 (M1) to bar 196 (M1). All this while I was still short one contract and to top my list of mistakes I also sold at each shaved bull bar top. Ridiculous is all I can say. As @PandaWarrior would have put it I was high on hopium).

I bought back two contracts for deserved losses at bars 204 and 208.



At this point I was so keenly involved in the market that I could predict most turns correctly (bar 209 was a pinbar and I would have sold below its low in my normal mindset). Bar 225 formed a double bottom with bar 216 and I would have gone long for a quick scalp.




Bar 248 was a retest of the double bottom. A long scalp was a high probability trade.

Bar 259 was expected to give a short because it overshot the trend channel line drawn from the highs of bars 209 and 238.

Bar 261 was a good signal bar below which to short (bars 259 to 261 formed a pinbar and bar 262 was the short entry bar).

Note to myself: As I watched the rapidly swirling signals which I predicted correctly I also realized dimly that I was on the wrong timeframe because on a one minute chart the market was too fast for me to react in a timely manner to contain my risk.

The bull trendline was broken by bar 248 cluster of bars and hence a downmove was expected at the next bear signal bar. This was the second reason for shorting below bar 261 (two reasons to enter a trade).

The bulls capitulated at bar 268 (M1). A triangle or springboard formed from which a move towards any side would have resulted in a low risk high probability trade for a scalper.

The triangle was broken to the upside bar 282 (M1) - I fumbled with my execution and went short instead of long. This was the ridiculous-trade-of-the-year but what was more ridiculous was that I kept waiting for a failure of the upside breakout. A sad story, dear reader.



The tragedy part was that I sold more on bar 292 and then I waited. And waited. And waited.

CHART from 1325 pm to market close



The market trended all the way against me. I got a margin call at bar 354 which was the right place to get a margin call. I didn’t get a call – rather the broker liquidated one lot. It was almost as if I had anticipated it, expected it, and held my other cheek for a second slap which never came.

Why did I short at bar 292 you may well ask. The reason being I ANTICIPATED a head and shoulders pattern – and shorted at the high of the LEFT SHOULDER.

I also had to go to pick up my child from school and hence I acted out of my turn and hastily shorted before I left.

Now I must be the best technical analyst in the world because my intuition was correct and a tiny H & S did form (left shoulder - bar 292 to 295; head – bar 296 to bar 303; right shoulder – bar 304 to bar 310). The neckline broke at bar 310 and I was right. I was happily observing this on my mobile device. The pattern completed by reaching its target at bar 312 which the distance equal to the height of the H & S except…. I had not set the order to cover the position. Probably because I was still expecting movie sequel “The Fall of Mr.Market - Into the Abyss”.

Thus I am short two contracts at the end of the day.

And I am painfully short of words.

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 Big Mike 
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I noticed you are using the vvScreenshot tool, but you aren't using the auto-upload + bbcode IMG feature. This would save you a huge amount of time... I suggest you make sure you have the latest version and enable those features.

It makes it 1-click to paste screenshots into posts.

Mike

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 iqgod 
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Detailed notes on the 1 minute chart:



Please ask if anything does not make sense.

Instrument: NATURALGAS (Future, MCX India)

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 Surly 
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Hi - just wanted to post that I feel your pain. I had two terrible days in a row Monday and Tuesday - both due to a few losses clouding my judgment and then a series of essentially "out-of-control" trades that snowballed and led to heavy losses far beyond what I want to honor as my daily loss limit.

Reading your posts it strikes me that you are an emotional person (I am the same). I think this can be a great advantage if mastered because I believe it gives one greater access to intuition. However, unchecked, emotionality will cause us to do exactly the opposite of what is called for at times when our emotions have gathered too much energy.

I wish you luck in your trading - I hope you can find the balance between intuition and emotion.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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 iqgod 
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Hi @Surly,

Thanks for the encouragement.

I have been tracking your TST Combine journal and wish you all the best.

I think both of us are very near to the goal of consistency. Stage IV traders?

Maybe a trader intervention done by ourselves as both mentor and mentee may help.



Regards,
IQGod

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 iqgod 
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How to make trading go from the most exciting profession in the world to something similar to your day job (yawn) ?

Simple.

1. Look at the risk part first and only then focus on the reward.

2. Practice, practice, practice - how many trades did you practice today - practice for love, practice as if today is your last day on the planet - since the back of your mind knows that it is in sim it will not treat the trades seriously - that is a free chance to hone your technical skills which will be needed sharp when you go under the fire on live.

3. TAKE the trade when the time comes. DON'T miss out.


To take the trade when the mind is under fear of losing remember this statement (taken from the rendering of the Bhagvad Gita, the greatest trading book ever written)

EGO: BIG SALE!! EVERYTHING MUST GO!!


And the last part is where I failed today. My ego had become sore red after two days of consecutive losses (which were due to EGO too - stubborn holding onto losing trades). I'll keep that in mind the next time.


I had given up doing my homework yesterday evening and was dejected due to the losses yesterday. Perfect judgement. Zero execution.

However on the daily I observed hurriedly that the important level of the pinbar extreme of 5 Oct 2012 i.e. 5818.35 had been exceeded and a strong uptrend day was on cards.

DAILY CHART: NIFTY (index)




NIFTY: M2 the first hour

At point 1 the huge bull bar was in place. However I wasn't convinced that these were strong buyers - reason being that the market was almost vertical at this stage on euphoric bullishness and thus this behavior is unsustainable. Hence I waited.

I was itching to buy for any damn reason. But this came forward to me as an unplanned knee jerk reaction on my part (seemingly same as yesterday and the day-before's overtrading overdose) - hence I hastily stopped myself and stood on the sidelines.

However I completely stopped placing any orders at all - the deer response. Deep freeze. This time however the deep freeze was resulting in being out of the good trades I could see unfolding before by very own eyes.





The pinbar was utterly fantastic but at this point I had not been watching the chart and was running errands. errands seemed a riskless haven and were actually pleasurable. Back of the mind knew that I was not running errands but running away.





More learning. I learn't a lot about myself in these three days.

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 Surly 
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Hi @Surly,

Thanks for the encouragement.

I have been tracking your TST Combine journal and wish you all the best.

I think both of us are very near to the goal of consistency. Stage IV traders?

Maybe a trader intervention done by ourselves as both mentor and mentee may help.

Thank you iq - yes, looks like we have somewhat similar trading styles and also somewhat similar patterns of mistakes.

I am still bringing way too much drama to my trading - it still has too much of an emotional charge. I am striving to grow most consistent in my trade identification and then also take fewer trades. In my combine I am now going to approach reaching the profit goal by trading with increased size so that I can reduce the frequency and number of my trades. We'll see how this goes...

good luck in your trading.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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 Surly 
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I was itching to buy for any damn reason. But this came forward to me as an unplanned knee jerk reaction on my part (seemingly same as yesterday and the day-before's overtrading overdose) - hence I hastily stopped myself and stood on the sidelines.

However I completely stopped placing any orders at all - the deer response. Deep freeze. This time however the deep freeze was resulting in being out of the good trades I could see unfolding before by very own eyes.


The pinbar was utterly fantastic but at this point I had not been watching the chart and was running errands. errands seemed a riskless haven and were actually pleasurable. Back of the mind knew that I was not running errands but running away.


More learning. I learn't a lot about myself in these three days.

I can totally relate to these sentiments - if we could only be so understanding and objective about ourselves in the moment! I often see myself making decisions in the moment in ways that I know are counterproductive - but I don't always have the objectivity to stop myself.

onward and upward!

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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 iqgod 
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  #27 (permalink)
 iqgod 
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I was bearish till last Wednesday.

I had not noticed that the market had exceeded the 5 Oct pinbar high on Thursday and that should have made me bullish.

But I kept thinking 'This MIGHT be a bull trap. I must not buy now.'

The market posted all time highs that day and still I persisted with my bearish views.

Actually my VIEWS were bullish finally but the child in me was obstinate at not having rode the trend and hence I held on to my losing positions (learning this because I am journalling this....). (more on these trades, later)


So on Friday I was the same obstinate child while the market climbed to its former bullish glory and a bull market has probably ripened to take off (albeit without me).

Yesterday I shorted and was pleasantly rewarded for 'being right'. (more on this trade too, later)

Today I shorted again and was stopped out two times for a loss (trading range) and finally sold correctly into the bear breakout but missed majority of the bear trend and got a small pie for moving my stop too close which was then taken out by a small pullback. (Fear, note how this was greed two trades earlier!)




The mind played today on two things ... 'not knowing' what was going to happen next (fear) and greed (knowing technically what was going to happen next but fear mixed in - not giving it back).

Followed my plan so should be somewhat ok to digest these learnings.

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 iqgod 
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 iqgod 
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 iqgod 
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Entered the second time after getting chopped once.



HTF charts for reference, observe the bullish signs everywhere






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 iqgod 
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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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 iqgod 
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 iqgod 
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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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 iqgod 
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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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 iqgod 
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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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 iqgod 
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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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 iqgod 
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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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 iqgod 
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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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 iqgod 
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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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 iqgod 
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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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