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This is the secret agenda that keeps rearing its head and which has to be controlled:
So let me confess here.... the pull of trading for me was the rush, the full-blown adrenaline rush, a psycho in my head - trading was almost an addiction and it has the power to destroy me.
Trading has been an escape, a cunning deceitful and arresting addiction, a lure to stray from the accepted, a desire to become an outlier. When actually all the focus must be on is trading profits. I am almost hesitant to confess here given the intensity of the thoughts that get stirred up during the practice but this journal is a springboard. I am trying to be honest, and no other place allows you to be as honest.
The behaviors that I have to control! Here is a list:
- Holding on to losers
- Getting out of winners for the rush of the quick small profit
- Not doing the right thing - entering quickly OR hesitating - Short: "Not following the plan"
- Allowing the ego to crush correct behavior and not taking the next right trade if this one fails. "Failure makes me mad!" syndrome.
The markets have no insanity, fear, greed and rage. All these are facets of us that move up like pawns unless we are in control.
The market is the 800 pound gorilla and deep inside we know we have to obey it, else...
But why do it this way when so many resources exist on this very forum to know where to put the faith - believe in yourself and your system and not lapse control and suddenly go on tilt?
Mindfulness is simply a tool - but the premise is that trading is a serious business. Trading is boring and cut and dried. Trading happens to make money when you accept yourself for what you are, do not fall prey to the arcade illusion, heal the temporary wounds that losses inflict and continue fighting the battle with iron discipline.
I actually laugh out loud when I think how I landed here - the lure of the easy money.
This has been the hardest easy money I ever made in my whole life.
I am cruising down the freeway making huge profits when suddenly I hit a speed bump.
A event triggers off a chain of reactions - lot of old stuff comes back from the closet where I thought I had shut it out long ago and for good!
When will I have Cut losses short tattooed on my palm? When will I guarantee that I will not go on tilt?
It is when I realize that I am sometimes still looking for easy ways!
But there are NO easy ways!
If it is one thing that trading makes you realize that it become less difficult as we go along but it never allows you to lower your guard or lie down and be lazy and yet make money!
One of the realizations in life is that there really is no "end" (nor a beginning) - everything is just going further.
The ego gets out of control more times that we like to admit.
We are lured into thinking that our way of looking at the market is the only right way.
The trap is so subtle that there is no time to escape - often the trap occurs as a long drawn down battle (pun intended)!
We hold on to a losing position saying that the market is showing signs of turning back!
We are afraid of our own nakedness - we have ego risk!
If we have an opinion isn't it just an opinion? Why do we want to become that opinion!
In our own private chamber of the mind we need to admit the 'point of being wrong' when we are swimming in the market - because when the tide goes out it becomes obvious who is swimming naked!
Resistance by definition is self-sabotage. But there's a parallel peril that must also be guarded against: sabotage by others. The reason is that they are struggling, consciously or unconsciously, against their own Resistance. The awakening trader's success becomes a reproach to them. If he can beat these demons, why can't they?
The awakening trader must be ruthless, not only with himself but with others. Once you make your break, you can't turn around.
Procrastination is the most common manifestation of Resistance because it's the easiest to rationalize. We don't tell ourselves, "I'm never going to write my trading plan." Instead we say, "I am going to write my trading plan; I'm just going to start tomorrow." The most pernicious aspect of procrastination is that it can become a habit. We don't just put off our lives today; we put them off till our deathbed.
Never forget: This very moment, we can change our lives. There never was a moment, and never will be, when we are without the power to alter our destiny. This second, we can turn the tables on Resistance.
This second, we can sit down and do our work.
Self-doubt can be an ally. This is because it serves as an indicator of aspiration. It reflects love, love of something we dream of doing, and desire, desire to do it. If you find yourself asking yourself (and your friends), "Am I really a trader? Am I really a good fit?" chances are you are.
Resistance knows that the more psychic energy we expend dredging and re-dredging the tired, boring injustices of our personal lives, the less juice we have to do our work.
What are the aspects of the Professional?
• Patient - in all aspects of life.
• Seeks order - He is on a mission. He will not tolerate disorder. He eliminates chaos from his world in order to banish it from his mind. He wants the carpet vacuumed and the threshold swept, so the Muse may enter and not soil her gown.
• Demystifies - He understands that all creative endeavor (trading IS a creative endeavour!) is holy, but he doesn't dwell on it. He knows if he thinks about that too much, it will paralyze him. So he concentrates on technique. The professional masters how, and leaves what and why to the gods. The sign of the amateur is overglorification and preoccupation with the mystery. The professional shuts up. He doesn't talk about it. He does his work.
• Plays it as it lays - The professional conducts his business in the real world. Adversity, injustice, bad hops and rotten calls, even good breaks and lucky bounces all comprise the ground over which the campaign must be waged. The field is level, the professional understands, only in heaven.
• Prepared - The professional prepares mentally to absorb blows and to deliver them. His aim is to take what the day gives him. He is prepared to be prudent and prepared to be reckless, to take a beating when he has to, and to go for the throat when he can. He understands that the field alters every day. His goal is not victory (success will come by itself when it wants to) but to handle himself, his insides, as sturdily and steadily as he can.
The professional dedicates himself to mastering technique not because he believes technique is a substitute for inspiration but because he wants to be in possession of the full arsenal of skills when inspiration does come. The professional is sly. He knows that by toiling beside the front door of technique, he leaves room for profits to enter by the back.
At Bar marked 2 I read this as a point where buyers were certainly turned back, and any upmove to the right of the chart would possibly be met with stifff resistance.
This long entry was made as a range break to the upside. I was aware of it being countertrend to the overall market structure which showed a steep bearish trend and a measured move down was on the cards more than an upmove, but I sensed a quick scalp and tried to squeeze out a countertrend long scalper's profit. There were two things wrong with this trade - I was entering at the extreme of a trading range where fades are the best moves moves but I insisted on taking a range break long. The second issue was that the long was not validated i.e. there was actually no range break and I was an early long due to which I had to bear the MAE as price went down back into the middle of the range but was turned away by the trendline where the actual entry should have been taken.
Not marked, should be marked where price breaks to the upside from the trading range. This is where a valid entry shoudl have been taken and this was a perfect range break, only that it was countertrend and hence was only a scalp.
This exit was correct of a nimble scalp but also was a scared exit, but the scariness here was for real and not a psychological issue.
I hesitated to short here even though a clear bear trendline was offering a low risk high reward short trade - the hesitation cost me a lot of ticks as the market fell sharply and I was filled nearer the bottom of the bar. Waiting for further confirmation when there is confirmation leads to slippage which then may lead further issues like watching the price go against me which would not have otherwise happened had I entered from the place of the first confirmation (trendline touch and anticipation of reversal i.e. point 5 bar top)
This was defintely a scared exit, but it was a profitable trade and would have been a perfectly good target had I entered at the top of the earlier bar as discussed above. Waiting for actual signs of reversal confirmation and exiting on a huge bar's extreme usually lead to same amount of profits, except in hard trends where the market does not look back. However 6 was a bad exit anyways.
This was the worst possible early entry I could take - the market was still hugely bearish and no confirmation of a long was on the cards. This caused the maximum MFE and the stop was not triggered but was far away and if hit would have thrown a combine off track for that day.
This was where the actual entry could have been taken as the market started reversing. I was acutely aware of being painfully early and the cost of being the early bird was high.
This was where I was back in profit and should have ideally covered but I had a stubborn order two ticks above this swing point and even though I could see the market was reversing back to bear mode I did not cover. A mix of cockiness and 'knowing' that the market will go up. Both are bad when trading.
This was the absolute low point of my day's trading. The cockiness made me take on one more long here even - I broke my rule of being a one lot trader and was edging into a trap - the classic newbie mistakes of 'averaging down' and was also 'chasing the market so as not to miss the big upmove'.
This was a good exit for one lot. I should have held the other lot but exited after sitting through two lots and more MAE than I could bear.
Thus even though I had zero losing trades, the MAE was the worrisome aspect and it was totally my fault because the market behaved with precision and there were lot of easy reads but the problem components of execution were highlighted on which I keep trying to gain an upper hand since this is a critical problem area to overcome.
The problem of execution had the following components for me:
Unanticipated moves. When caught off guard, which itself is a result of poor planning. Execution errors are more pronounced when entering countertrend, and also when entering with-trend at a climatic reversal point such as a failed final flag. Added slippage, due to hesitation (see bar marked 5) Anticipated moves, but early entry. (see bars marked 2, 6, 7 and 10) These are simply Impatient entries most of which can be averted by entering on a stop order one or two ticks distance from the signal bar or range break. Execution paralysis. These are totally trader related. Scared quick exits without confirmation of reversal. No entry due to fear of trend having gone too far. Experience and practice reduce these errors. Late exits even after confirmation i.e. not exiting even after the market has shown its hand. Missed entries. If these happen simply due to not anticipating and not being available when the market gets ready to move due to schedule, that is perfectly alright. A trader needs to eat, sleep and do other things. Trade-offs should not cause a resentation feeling, repenting or pining about missed entries and then cause further bad execution like chasing the market / more early entries without confirmation etc.
Of these (3) leads to greater MAE and / or causes money stops to be hit.
(1) means that a trader is trying to catch every wiggle of the market which is not bad by itself, but patience to wait for good setups always pays off - mainly due to the fact that (2) may cause being in a position which may then lead trying to close lesser positions which may cause NOT entering correctly when the really best opportunities present themselves.
(4) shows an incomplete understanding of the nature of trends, and the market in general and occasional lapses of discipline / attention
(1) and (4) show more practice and screentime is needed.
1. To analyze yesterday’s trades.
2. To review any open positions and do a what-if analysis of targets and stops by assessing market conditions.
3. To make an initial selection of possible entries to trade based on the above two factors.
The goal of my trading is to PROTECT CAPITAL aka NOT TO LOSE MONEY. Gaining money is a secondary objective.
Take a trade ONLY if the reward is 1.5 times the risk.
Every trade I take MUST have a stop loss order entered into the system.
I will not use tight trailing stops, stops can be moved to protect profits only based on rules 1 and 2.
I will stop trading for the day if I lose 2% of my total pile.
I will stop trading for the week if I lose 5% of my total pile.
The size of my position must never exceed the parameters defined above.
Finally, I will never let a winning trade turn into a losing trade i.e. I will move my stops to either breakeven or to a place which crossed refutes part of my idea. This is not a good market structure rule but something that seems to work for my psychology.
After a winning trade I will not let ego takeover and still continue to abide by the above rules.
After a losing trade, I will verify that I followed my rules and remind myself that following the plan is more important that the outcome of a single trade. There can be GOOD losing trades!
In trading, as in life, I will strive to be impartial to the passing ebb and flow of emotions and STICK TO THE PLAN.
Strengths:
Knowing when you've lost touch with yourself.
Ability to follow your inner voice at times.
Weaknesses:
Freezing! Since I tend to freeze when faced with losses, the automatic stop loss takes me out. Also, I have to get a position correct or exit any wrong / erroneous entries!
- Betting on reversals is a losing proposition. Trends continue so far because too many people bet on reversals!
- Could I have taken the other side - it would have been so profitable......
The last statement was always dangerous thinking for me.
It presumes a delusion I had long held before I became a profitable trader... the delusion that I CAN PREDICT WHAT THE MARKET IS GOING TO DO NEXT.
Let me say it again.... I do not know what the market is going to do next. Even though I risk real money on a great setup I do not know the outcome of my next trade.
I will only compliment myself because I followed my trading plan well and executed well by following good trading discipline.
I will never compliment myself based on the outcome of any trade. (e.g. hurrah my last trade was a winner etc must not be found in these pages... send me a remote butt kick if I ever do that).
The fact that prices move just enough to oblige a trader to profit from a lapse of trading dscipline is part and parcel of the market's way of setting him/her up for a gigantic failure.
