Breakthroughs That Led to Trading Improvement and Success.

[equtrader 10]

Thanks Ingot54. Very good posts.

[TRADEZILLA 10]

I agree completely.. I've been there too and know what you mean by being "inconsistent" in our methodology. I've also done better with the longer time frames but still attempt to scalp with some success. Just curious, since you use such a large time frame in the 4-8hr in the forex, how do you manage your drawdown? I've had some success trading indexes and of course watch the energy and metals market but am interested in entering the Forex market since I work a day job as well.. I'm also curious about the methodology you've settled into..

[Ingot54 13]

This thread became interesting because of the great responses fired in by members. The thread is still active and poignant because it goes to the heart of the frustration felt by traders looking for that one single thing that could truly be called a "BREAKTHROUGH."

 

I was surprised though when a private email arrived with a request for assistance, from an equities trader. It has been many years since I traded equities, and even at that time my experience with them was fleeting, as I moved quickly to CFD's and then to Spot (Retail) Forex.

 

So my experience day-trading is practically unhelpful in this instance. However, I had done enough with CFD's to understand the attraction of taking 3,000 shares and trading for a few cents movement, so decided I might be able to do something here.

 

I repeat all the correspondence between us "as is" (original wording) except where I need to preserve the identity of this trader. And I have paraphrased occasionally to reduce the bulkiness of my writing style, but have retained the original meaning and intent.

 

Finally, in keeping with my desire to maintain my own integrity, and to remain teachable myself, I have not removed any advice that I gave at the time, but which I have since found may not have been the best thing to say to any trader. I hope those instances are few - but we are all human.

 

I invite any/all members to comment, but please wait until all parts of this correspondence is blogged.

 

I have changed the trader's name to "John" for privacy. John is not a beginner, by the way - he is a responsible and generally successful trader, who, as will become clearer as we go, knows full well how to trade. He was in a state of limbo with his trading, due to factors that I hope we have been able to identify and fix.

[Ingot54 13]

Initial contact with John

Here is the original message I received from John, together with my first response:

 

Hi my name is John and I live near (in) USA. Your recent post was just about the best thing I have read in a long time.

 

http://www.traderslaboratory.com/for...cess-9057.html

 

I am 52 years old and have been day trading for almost 1 1/2 years. I am laid off work for nearly 2 years and am devoting my time to learn to become a successful trader. I am at my desk 2 hours before market opens and usually am here before bedtime.

 

I trade equities and am very risk adverse. I have yet to learn how to take profits when they are there and usually exit too soon. I study Daily support levels and look for higher highs and higher lows and lower lows and lower highs. My point is that I look for support and resistance levels that are at strong levels (daily spots) and look to enter on shorter time frame charts.

 

I am lost. I don't feel as if I have a tradeable methodology or a system that I can call my own. I just cant get my head around this. I struggle with direction of a stock when it approaches my level and I usually hesitate. I pick really good levels but am so indecisive when price gets there.

 

Your post was just great and I am not asking for you to make me a great trader but rather does this sound similar to what you went through?

 

I don't know how to come up with my methodology and rules for me to follow. I like breakout trades ... of daily highs and lows,and support longs and resistance shorts of daily highs. Many times they work and many times they don't ... am I asking for perfection?

 

I think so and I know that's impossible. Maybe I really do have a methodology and don't even know it?

 

I am really stuck.

 

Any words of wisdom would be greatly appreciated from someone that has been there. I take criticism well and would learn from an outside view if you have a few moments time to write back.

 

Thanks for taking the time to read this.

John

 

************************* ******************

Hi John

 

7am here in Queensland Australia, and I just received your message. Thank you for the kind words. I would like to help where I can - even if it is just ONE thing that takes you a little further along the road to trading success.

 

There is so much to learn and yet so little once you understand what to do. I tend to use a lot of words, but will try to keep that under control without losing any of the impact if I can.

 

I do not know really what your history has been as a trader, or the mistakes you have made in the past, so at this point all I can do is run through some items hat I regard as serious considerations for traders.

 

* Do your utmost to preserve your capital

 

There are many reasons for this - the very least of them is the actual financial loss.

Having the capital is, of course essential - you can not trade without it.

 

But consider what happens when you have a loss ... the very first thing you experience is anger, or at the least, frustration. This should not be. You should not be emotionally moved by either a win or a loss to the extent that it causes you to visibly react - either physically, verbally or even with a sigh with a loss, or a chuckle if you win.

 

Of course we are human, and not Mr. Spock, so it is only natural that we do have some satisfaction or disappointment at the results. After all we trade to win, and with winning comes the realization of our financial goals.

 

But the real reason I mention "preserve your capital" as the very first item, is PSYCHOLOGICAL, or in simple terms, CONFIDENCE. It is very easy to take the next trade if you have been winning your last 5 trades in a row. Your confidence soars.

 

But consider the opposite - how damaging is it when the last 5 trades have ALL lost. You must at the least, suffer some serious loss of confidence in your ability to select good trading situations.

 

This is the very worst aspect of losing capital - you lose the ability to pull the trigger at the correct moment, and even watch helplessly while trades go by that you should have taken, and thus miss the potential profit of them.

 

It is all very well to observe that this happens - I have felt it, and so have you, clearly.

But what can be done about it? How can we stop the bleeding of finances, and even more

importantly, how can we turn around the situation so that the account begins to grow instead?

 

* Break your greater financial target down into smaller ones

 

How many points, or dollars do you need every month just to stay afloat?

How much would you need then, to be actually climbing ahead?

 

Ok ... having worked this out, conservatively I hope - we don't want to be unrealistic here, because down the road we can always step up to improved targets.

 

Once we have the monthly figure, the next step is to break that down to weekly values, and of course daily values. Now I never set arbitrary targets, though there is nothing wrong with that - it is still a plan. But targets can be like markets - full of "noise". One day you exceed the target, the next you miss it by a few points, but the idea is to establish a guideline that will bring you to your weekly or monthly goal.

 

Do not be too ambitious from the beginning though - if you have not been winning, then there is no use setting high or optimum goals just yet. Be realistic, and set achievable goals.

 

The hidden goal or process here is really NOT financial, but psychological. You are not only building your confidence ... and finances ... you are building a pattern ... a successful habit. And this is the true meaning of the word "discipline" ... maintaining control of yourself and your trading with consistency.

 

Once you start hitting those small targets, your confidence will soar, and you can then begin to focus on broader issues that really do deserve more of your attention.

 

* Look after your physical and mental health, and strengthen your relationships with others

 

I can not stress how important this is. How many traders ultimately discover success in their field, only to succumb to some illness with its base in their sedentary lifestyle? How many traders lose the support of their spouse, their children and even their dog, because they failed to keep in touch emotionally and physically with them?

 

The spouse feels neglected and soon love and romance takes second place to the computer. After all, we kid ourselves, we are doing this for them. Now that is simply not true. We are of course doing trading to improve our financial security, but it should not be at the expense of our families. They want US ... not our money. If they wanted money, they would have married into money.

 

Meanwhile, the kids are also getting older, growing up, and what time have you really spent with any of them? Soon they will have left home, and you may wonder why they don't come around to see you. Or you get a knock on the door, and with surprise you see the sheriff with your 14 year old in trouble.

 

Trading can not deliver good relationships - one day you might be successful ... but you might also be alone, with even greater financial consequences.

 

Make sure you have "trade-free" times that are sacred - even if you miss 100 points - your family is worth more than 100 points. It is only paper money ... and there will one day be a lot more of it for you. Let your family know you care, by being emotionally present and engaged in their lives too.

 

Get yourself an exercise regime - walking is good, but whatever you do, get out of that chair and away from that computer several times a day. Take a break - go out for coffee with your spouse, or at least focus on something else for regular intervals. This is not optional - it is mandatory to preserve mental alertness and to prevent physical stagnation and decline over time.

 

If you can pay your dues to your family ... and yes even the dog ... they will be happy to let you spend your time pursuing your trading goals. Set priorities and then respect them.

 

* More to come ...

 

John ... I know I have not touched on the topics you requested help with ... I am getting to them ... but this has taken me an hour now, and I realize what an important topic it is. I need more time to think about the best way to help you.

 

I am going to reply to you on the forum, under the heading: "Advice to John".

 

I have only made 3 posts on Traders Laboratory, and my posts are still being moderated.

So the topic may not appear for awhile.

 

But I will fully respond to answer what you are asking, and I am hopeful that we will be able to turn your trading around. Be patient mate - we will get there.

Just relax, and stop what you are doing until you KNOW what you are doing.

 

Kind regards

Ivan

[starbucks 10]

Initial contact with John

Here is the original message I received from John, together with my first response:

 

Hi my name is John and I live near (in) USA. Your recent post was just about the best thing I have read in a long time.

 

http://www.traderslaboratory.com/for...cess-9057.html

 

I am 52 years old and have been day trading for almost 1 1/2 years. I am laid off work for nearly 2 years and am devoting my time to learn to become a successful trader. I am at my desk 2 hours before market opens and usually am here before bedtime....................

 

 

Kind regards

Ivan

 

Hi Ivan,

 

I totally agree with what you said. I'm in the same position with John ( mid life crisis )

 

In fact, what you mention is better than a lot of "GURU" .

 

 

~~~ Happy Trading ~~~

[Ingot54 13]

I agree completely.. I've been there too and know what you mean by being "inconsistent" in our methodology. I've also done better with the longer time frames but still attempt to scalp with some success. Just curious, since you use such a large time frame in the 4-8hr in the forex, how do you manage your drawdown? I've had some success trading indexes and of course watch the energy and metals market but am interested in entering the Forex market since I work a day job as well.. I'm also curious about the methodology you've settled into..

 

Hi Tradezilla - thanks for your contribution.

 

Let me state from the outset that I am not the kind of trader you would wish to follow. I wouldn't class myself as a loser any more, but neither am I wildly successful ... no Ferrari's in this garage for awhile ... :rofl:

 

But if I aim for small trades, I can pretty much win 100% ... and that is not a boast - just a boring fact. The side that is not attractive is that I am only trading for small stakes, and I rarely make more than 40 pips. I need a manager I think ...

 

I have been involved briefly in the scalping zone, and I simply don't do well in the short time frames. When I get up into the Daily and 4H time frames, I can make a few pips with no trouble. For example, on Monday night I had two trades and made pips - no loss. Tuesday night - one trade, short USDCHF ... +40 pips.

 

I can do this stuff any day ... every day of the week, provided I remain focused, but I work night shifts, and I attempt to force trades through at times, or I attempt to trade when fatigued. This week I am taking a few days off, and apart from the three winning trades (and another I don't count where I gained $AUD0.57), there have been no others available under my setups. And I am determined to not trade until I have a reason that can not be ignored. Then I take the shot.

 

I look at the Monthly and Weekly trends, to get a feel for where the market "wants" to go.

Then I look at the Daily, and then the 4H to see if my setup is developing or ready to trigger. I also look (briefly) at the 1H TF. All of this stuff only takes me about 40 seconds.

 

I usually look for the RSI / Stochastic and MACD to either cross or be trending-to-cross in the TF I am targeting. The lower TF helps me to nail a better entry, but I don't care much if it is not perfect. Too much time can be spent on that, and often the price is already slipping away. If everything is ok I simply jump in - it works often enough for me to be comfortable with that style of entry - and it is no worse than a highly calculated and technical entry.

 

I am either right or wrong. If I am wrong, I am out in about 20 - 30 pips.

 

I think it is a fallacy that trading the higher TF requires 100 - 200 pip Stop Loss positions.

 

While I have set those in the past, I find it is better to simply choose the smaller ones, and wait until my original concept of direction becomes "right" again, or I pass on the trade.

I have 5 pairs I like to watch - EURUSD - GBPUSD - USDCHF - AUDUSD - GNPCHF.

 

I don't entertain the JPY pairs - they are killers for my style of trading, and too volatile for my nerves a this point of my development. And I simply do not need them - I can make pips without the added risk, and I can get to know the 5 pairs more intimately.

 

I should add that I use a pair of MA's to confirm other stuff I need to see. One is an SMA and the other is an EMA. There are others ...

 

But I am wondering why you have become interested in FX - do you perceive that there is a better opportunity there for you?

 

I stick with it because I have been doing it for years now, but I often wonder if I would have been better trading futures over the time I have been educating myself. I tend to think that traders should try a couple of markets, then choose one or two, and stick with them - specialise. I think it takes a good trader to manage more than one or two instruments.

[Ingot54 13]

Initial Response from John

Hello Ivan,

 

I just got home from the store and sat down here to see you have replied to my e-mail. I read what you said 2 times already and will read it again as clearly you not only put a great deal of thought in what you are saying but also the way and timing is spot on for me.

 

I have been very ... well ... overly focused on my trading and many things in my life have taken a back seat including family and my health. They are very supportive but also must not be forgotten ... and well ... I too am missing out. I have always been very active and in good shape / health but sitting here day after day ... well ... I can tell I need to get up and away EVERY day as you say.

 

I will take what you say very seriously.

 

I need better balance and just didn't realize this. Well ... maybe in the back of my mind I knew but sometimes we need it to be pointed out ... so thank you. I think my mind needs to be a little less cluttered and I need to relax so I can maybe begin to see things clear once again.

 

Your letter has been a very welcomed inspiration for me and I look forward to any further ideas and comments you have and completely understand that it can take up a lot of your time.

 

I am most greatful ...Thank you.

 

One last thing, if its ok I will send you another e-mail in a day or so and try to give you a better idea of my trading history and what I believe are my strengths and weaknesses and I will try and do so in a manner that will make some sense and I will need to give this some thought.

 

Thank you

John

[Ingot54 13]

My response and his reply ... I will post the tomorrow!

 

Encouragement and other stuff

Hi John

 

Just reading your note now - it's 9 pm here - nearly 9 hours since you sent the message.

 

Since we moved to Hervey Bay, we have had Internet problems, and yesterday our email

failed to receive emails from the ISP. This has been fixed (from their end) just now, and I

had a stack of emails flood my in-box!!

 

Another thing I thought might motivate you to keep away from checking your favorite stocks ... this is the "silly season" where markets are concerned, and volatility and light volume means the prices can do what they like and no one is the wiser for the explanation. So best to take a break while the "heavies" are taking theirs!

 

I have been unable to contact the moderator of Traders laboratory re getting out of the

moderating queue, and will have a third attempt tonight. I have contributed 4 posts, and all of them have been delayed.

 

In 3 of the posts, the conversation moved on past my contribution, and when the posts did

appear it was as if I didn't post at all - the moment and the content was lost. So if I can not get permission to leave moderated status, I will simply assist you via email instead. No problems there ... it will just take more time, because I like to have what I have previously written to be visible, so as to maintain some continuity of thought, and to avoid repetition.

 

Just do your best John - I am not going to hold you to account over what you can do.

 

I can only say that the making of a decent break from the daily pressure certainly does

refresh the brain enough to see things very differently and far more objectively.

 

Cheers mate

Ivan

 

************************* ******************

John's Reply ...

 

Hello Ivan,,

 

Just wanted to drop a line and say hello.

 

I spent Friday and today with my daughter and haven't turned on my charts at all. I did do a little trading related reading over the weekend and looked for your TL posts and read those.

 

Did the moderators contact you yet? Just wondering.

 

I know you mentioned that you won't hold me to account over what I do, now I just need to be a bit easier on myself. I think I have put a lot of pressure on myself and this break hopefully can ease some of that.

 

We are having very cold weather and are supposed to get some snow this week. I have a

couple inside projects planned that I hope can keep my mind off trading and also will make me feel good to get them accomplished.

 

Again I want to thank you so much for your time and hope you are well.

 

Thanks

John

[Ingot54 13]

My Reply

 

Hi John

 

Thanks for catching up

 

Good to hear that you are balancing things a little better - you're doing fine - and yes, no need to be hard on yourself.

 

Sometimes we are harder on ourselves than we would be on an employer.

Yet we should regard ourselves as employees, with us as the boss, and be a bit kinder.

 

As any good employee would, we then perform much better, knowing that our best effort is good enough.

Nothing more is needed.

 

To show I am human too (true!) I made a trade of the AUDUSD last night that was 100% set to go, with every possible thing lined up.

Yet this morning I logged in to discover that the trade had reversed on me, and I was stopped out.

 

I didn't moan or groan about it - I accepted it, because this is what happens in trading.

I looked over the setup, and no - I didn't make any foolish mistakes, or any technical errors.

It was simply one of those things that happen.

 

Currency trading is driven mainly by economic news, and there was nothing that could/would influence my trade.

Yet it reversed ... go figure!

 

Now I am tempted to "revenge" trade - to re-enter the trade as it finally is going in the direction I chose.

But the problem now is that my indicators do not line up.

 

If I enter now, against the indicators, what will I say to myself if it turns again, and runs again against me?

 

No - I have to take a deep breath, and simply say: "Next please" and look for the setup amongst the other pairs I trade.

That is the nature of trading, and the only way to approach it - free of emotions, and free of desires to treat failed trades as

evidence of personal failure.

 

In trading I do not have to be right every time. I just have to take every setup, knowing I will not get a 100% win result.

Last night's effort was just one of the losses that happen.

 

If I did something foolish, I would accept the responsibility, learn the lesson, and look for the next trade.

And even if I can not find the reason, the action is the same ... move on to the next.

 

As long as I remain consistent and ply my method exactly as per rules, then the outcome is assured.

 

Keep in touch mate - I am certain we will be able to move you to the next level.

 

Meanwhile, you could write down a copy of your selection rules, and method, and perhaps details of how you manage your trades.

And email it off to me to look over, if you feel it would help.

 

Also, do you trade by Fundamentals, Technicals, a mixture of both, or by something like CANSLIM? (Google it if unsure)

 

And do you look at whether the general market (S&P500) is rising/falling?

Do you do sector analysis to isolate the best and most consistent sector? And then, do you select the best few stocks within that sector, to

locate the outstanding moves?

 

If you haven't got these things on paper, then perhaps that would be something to do while feeling the need to look at the markets.

One good way to isolate errors is to have the plan written down, and then look back and see if you deviated anywhere from that plan.

 

Also, there are several stocks that are perfectly suited to Day Trading, such as Google, Microsoft, and so on ... and some volatile ones

I don't have the names of now.

 

Years ago, before Rupert Murdoch moved from Australia, the stock of his company (called NEWSCORP then) used to fluctuate in a broad

band up and down over the course of 2or 3 weeks, by $5 or $6 ... probably more.

 

At the time I was a novice, and often wondered how to exploit this.

 

Of course I know today how to do that, but by the time I had it worked out, the stock was delisted. It was a dream stock to Day Trade - perfect liquidity,

and 'almost' predictable.

 

Whatever the NYSE listing name of Murdoch's company is today, I'll wager that the same pattern still exists, and is ripe to

be exploited by someone who is interested in specializing in one stock. It is a stock you could get to know the characteristics of quite easily, and it

could easily become your bread-and-butter.

 

Such stocks have occasions when you stand aside and do not trade them, but then they set themselves up for a killing, and that is the time you trade them.

 

Very simple ... but not easy.

 

I have never been a day trader, but I have dabbled in CFD's, and understand a few of the issues.

 

Hope this has been of some help John

 

Kind regards

Ivan

[Ingot54 13]

Getting a Trading Plan onto paper

 

Hello Ivan

 

It was really great to read your last e-mail to me that I read it a few times as I sit here. Especially interesting was your trade of the other day. You have your set-up that you look for,everything in your trading plan must have lined up and you didn't hesitate and took the trade, and you placed your trade with a stop in place.

 

You accepted the loss but did not compound the loss with the "revenge" trade.

 

The first thing that comes to mind as I read this is ... that was a successful trade. Actually that is the second thing that comes into my mind as the first thing is I rarely ever can say that I have a successful trade. I remember you saying in the post you made in TL that one of the things that turned your trading around was that you take EVERY trade set-up and that's where winners come from.

 

I do not do this and have much hesitation before an entry and of course this pause gives me an excuse to not take the trade as its moving now away. I do have things that I look for and study charts for certain levels to trade off of but as I write this ... well ... I do not have a trading plan written down.

 

Ivan Please, Please bare with me as we try to make some sense out of my confusion.

 

Tomorrow I will write down what I believe is my trading plan / style and try and condense what it is I look for and how I go about doing this when placing a trade. I may in fact have a trading plan and not even know it or I may not and think that I do.

 

I know that I hesitate and lack confidence and yes I have fear. I have come a long way and know that I have learned a great deal. I believe you sensed a lot of what I am saying here in my first letter to you and that's one reason you had me take a step back.

 

Thank you for all the timely responses and I am sure you understand that I am eager to hear back from you ... BUT ... I completely understand that you also have a family and responsibilities.

 

I will write down as clearly as I can how and what I look for and how I have been managing my trades and look forward to your opinion and ideas.

 

Again Many Thanks

John

 

************************* ***********

THE PLAN

 

Hello Ivan,

 

As I mentioned I really don't have set rules to have a defined trading plan and this may need my attention.

 

I do daytrade stocks and have a favorite stock in John Deere ... (DE) ... I have learned to study and pick levels from longer term time frames ... (the daily) ... I believe that the higher time frames dominate the lower time frames but have noticed that momentum will start in the shorter time frames ... 2 min ... 5 min.

 

On the daily I will draw lines from the previous days high and lows. ( I may have 6 or 7 lines drawn at any given time). I believe that these levels are most significant as this is where price has stopped and reversed so it must be of high interest / volume ... (extremes).

 

I look for breakout trades and reversals of these levels. Of course getting the direction and timing is an area where I lack. I will look for the levels on the daily chart and while watching the short term chart during the day I will decide whether to enter at those levels.

 

I especially like when I see yesterdays high or low being tested today and look for a breakout or reversal. I also have noticed that when a stock consolidates below a daily level of resistance or above a daily support level and is kind of smooth and tight ( instead of wild choppiness ) it sort of bases ... that may be a better entry level than waiting for the crowded trade at the breakout level.

 

I just noticed this recently. I always look to see when earnings are coming out on any stock I trade. I look on Bloomberg.com and look on their economic calender to get the days announcements ... Job claims ... FOMC minutes ... Housing ... Oil reports ... ISM manufacturing ... Philly fed ... and will not trade during those times.

 

 

I am a technical trader and do not look at fundamentals.

 

I have a 5 minute chart of the SPY's on at all times and a daily chart of the SPY's with the highs and lows to keep an eye on. I try and watch the broad markets direction and look to go long or short in my stock with this in mind.

 

For me this doesn't always work as I need to really define direction.

 

Another trade I look for is a stock to come up to resistance (a level on the daily) and look for divergence. Is it making higher lows as its approaching? ... if it breaks out and I miss it I look for the retracement to that previous resistance level which now may become support.

 

Its called a 1-2-3 trade I think. (of course I didn't invent it ).

1 is where it breaks resistance

2 is where it stops above resistance and retraces back down to

3 where it holds new support and goes higher. (it also works on a short trade at support )

 

I hesitate on these trades also as when it gets to entry time ... I am just not sure. I know that perfection is impossible but I just wonder if I have everything lined up to give me the highest probability.

 

Also I usually find this set-up (1-2-3 pattern) on the shorter time frames and not the daily.

 

Another set-up I look for is a retest of daily support or resistance from at least a week or more ago. Many times I have a level on my daily chart that is kind of in no mans land and a stock will seek out this level. Sometimes it will come to the exact penny and other times will come close.

 

I am a genius after the fact but when it gets there I hesitate. I feel that I am guessing and that's gambling I think?

 

I like trades that I mentioned because I believe they work and the exit area is very close by. A break of support or resistance and a retrace and its a few pennies past for an exit. On the 1-2-3,,,if price doesn't hold for a few pennies ... stop out.

 

So far I am only using 100 share sizes and usually will risk 10 cents looking for a 20 cent profit. I think I mentioned that I cut my profits way too soon. How many times have I made a trade and seen it go 15 or 18 cents in my favor and pull back to 5 or 6 cents profit ... I exit.

 

Then I watch the thing go off in my favor ... many times past my profit target. Its an awful feeling. This will sound crazy but many times I almost expect a loss.

 

I have moving averages on my charts and also pivot points. I NEVER trade the pivots but I have noticed that many day traders will and those are areas that when hit can become important. So they are there for further information.

 

Many also use the moving averages to trade but I do not ... they are on there because if a stock gets there and stops I can see why.

 

I am sorry this is so long and I am sure there is more but I hope you can get an understanding of what I am doing and even what I am not doing. Your opinion is very well respected by me as everything you have talked with me has been most positive.

 

Also I have 2 computers on at a time. One has 3 nice big monitors on it and the other computer has only one screen. Some days I will Skype with a couple friends and some days I am alone.

 

I have noticed that if I am here all day and only make a trade or 2 ... I am good with that. I don't have to make 50 trades a day. I want to trade my set-ups and if that means 5 trades today and one tomorrow ... its ok.

 

I have noticed that there are days when the market trends nicely and its time to be a little more aggressive and then there are times the market is tired and you must be more patient. I would say that I am trying to become a price action trader looking at volume and price,,,Level2,,,, and would like to hear more about trading the right side of the chart that you mentioned in TL some other time.

 

I am so sorry its such a long letter. Please take your time and know I am so greatful.

 

Thank you

John

[Ingot54 13]

Non-Trading stuff in the interum

 

Hello Ivan,

 

I just read about the Flooding in Australia and have been looking for your area 'Hervey bay' in Queensland.

 

I know you said you were near the beach and can't find exactly what and where everything happened but fear its near you.

 

My prayers go out to you and family or friends that have been affected. I haven't had the news on much and today was looking online and heard about the devastation.

 

I just cannot imagine that happening and even seeing some pictures it unreal.

 

 

I hope and pray you are safe and well

 

Kindest regards

John

 

************************* ******************

Hi John

 

All well here - and thanks for your caring email mate.

 

There is a lot of heartbreak to the south of us - Brisbane has not had a flood like this since 1974.

We were fortunate - only scattered showers where we live, and no inconvenience apart from no bread and milk

because the major highways have been cut by flood waters.

 

Even Burger King (Hungry Jack's in Australia) and MacDonald's ran out of supplies yesterday.

Any bread and milk is being rationed.

 

We have stocks of tinned goods in our pantry (larder) so all good for us.

Most people are coping ok with the reduced groceries situation - supermarket shelves are empty.

I remarked to my wife that this is expected in places like maybe Russia during hard times, but not in Australia.

 

We have three Cyclones developing in the Pacific Ocean to the East of us.

The largest is striking New Caledonia (where my wife comes from) as we speak, and is a category 4 today

and that is one smaller than maximum intensity. I hope they will get through it over there with little damage.

 

But I also hope the thing blows itself out before reaching here, which is in its path.

 

Will catch up as soon as I can - (maybe tomorrow) when I am hoping to answer your earlier email.

 

Kind regards and thanks

 

Ivan

 

************************* ***********

 

Hello Ivan,,

 

Great to hear you and family are doing ok with everything happening so near. I saw Youtube videos of some areas and just cannot imagine. People on boats looking at their homes only to see just the roof.

 

I guess it happened pretty fast. You seem well stocked there to get through and I did see some stores shelves on video that were completely empty. It looks like mud and sludge and will be a massive clean up project.

 

I am sure they will try and clear the roads so vehicles can get through for food and emergency supplies. Thank you for taking the time to let me know you are doing ok as you have much to take care of. When time permits and you can respond to my e-mail that would be great ... no worries.

 

Oh one more thing,,,yesterday was my first week of not trading and as I plan on one more week off I believe its doing me good ... thanks

 

Stay safe and talk soon

 

John

[Ingot54 13]

Why write down your RULES? ... and market manipulation!

Hi John

 

All good this end - hope you are going along ok too.

 

You said (below) that you "don't have any set rules", yet you were able to tell me pretty much what it is that you do.

 

This is the beginning of your rules ... you already have a strategy.

 

Now - what is essential, is to GET IT ON PAPER. This is very important, and can not be stressed enough.

If you are to develop consistency in what you do, you have to check all the boxes.

But you won't be able to do that if there are no boxes to check.

 

This is what happens ...

 

* You have a mental picture of how you approach the markets ... or your trades

* You look at all the information, and you are unconsciously already forming a bias

* Many of the (imaginary) boxes will be checked as you go, but the subconscious will continue to over-look

some boxes, because of the bias you have unknowingly formed

* Some markets will be your favorites, and you may skip some of the boxes because you "already know 'x' and 'y' about it"

* If you over-look just ONE critical detail then it does not matter what else you do - everything will count for naught

* If the boxes are not checked, then it allows you to be free of the discipline of following good practice

 

eg Money Management, Position Sizing, Trading in a consistent TF, Trading only WITH the trend and not

trading counter-trend, not trading before/after news releases, and so on - you may be able to add other

short cuts you are tempted to take that you are aware of, that amount to inconsistency

 

Only when you are able to write down on paper what you do, so that any other person can follow it, can you

be said to have a plan.

 

Further, having that plan in front of you creates a written record of WHAT YOU DID - not just what you must do - and

as such, already provides the 'bones" for an autopsy of both winning and failed trades

 

MANIPULATION ... PROOF

 

Now - here's something I noticed a few years ago when I was trading stocks myself.

 

For a few days before major news was due for release, the price of the stock would tick up.

This can only point to insider activity. We live in an imperfect world, and the temptation to make a few bucks

illegally is no longer respected - indeed the world will think you are nuts if you do NOT take advantage of

insider information.

 

But far from being hurt by this, you can learn to ride along with it.

The insider activity is seen in the charts - it will pick up more each day as triggers are set off in

scanning software that detects the movement, and even more traders will get in. And even more

insiders decide to use the information - or it is passed 'word-of-mouth' to friends who promise to

'keep it to yourself'.

 

Now, the question is - do you take profits BEFORE the news release, or afterwards?

Most stocks sell off fast after news, because the news disappoints the market - it was not as good as expected.

Or the insiders all dump and take profits - many of them one-timers in the markets, and consider $300 to be

good pin money!

 

Sometimes the markets will jump because the stock had been down-ramped prior to release, and the insiders

are ready with contingent orders, to snap up the cheap stocks getting sold down.

 

Here is where you can use contingent orders - buy stop or sell stop orders at certain levels.

And you can set limit orders to take profits.

 

Always be prepared to leave money on the table for someone else. Do not be the last 'greater fool' - if you know that theory.

And if a stock rockets, don't wait for it to move even higher - take your money out and be contented with the gift.

How many times have other profit takers beaten you to it, because they were happy with the profit?

It is not necessary to wring every last dollar from a trade. It is not necessary to get out near the top, or buy in near the bottom.

All you want is a slice of what is on offer - leave the action to those who drive the market.

 

As far as taking profits 'way too soon' - that is relatively easy to fix.

 

Keep in mind the reason you entered the trade.

Is the price still moving with the HIGHER trend? And the TF above that one?

Is the reason you entered still valid?

 

There are times when you HAVE to take smaller profits of course - and this may happen many times in a row - markets

do change over time. But there are also times when outliers occur - events that will give you 10 times the target reward.

You do not have to get out at an arbitrary profit, unless the conditions are just the normal daily swings.

There are times when a big move is under way, and you may even need to take a small drawdown to stay with the

higher TF signals. Your plan has to be flexible in your profit-taking criteria.

 

That's about it for one day, John.

 

I will address trading the right hand edge of the screen next time.

 

Kind regards

 

Ivan

 

PS - You will soon pass your 2 week mark - congrats for the effort you are putting in.

It doesn't really matter if you did have one or two peeks at the screen - it is entirely up to you.

But what you do need time away from, is the analysis of your stocks and charts.

This is where your mind needs to create space - let the fuzzy stuff fade away

[steve46 12]

The breakthrough for me was when I went to work for a very kind old gentleman at Gelderman in Chicago.

This old guy took me aside and told me simply....look son, there are a couple of ways you can do this...you can simply do what the next guy is doing, or you can strike out on your own and try to find something that no one has done before....its your choice. You can see what all the others are doing, its either technical or fundamental analysis...and here we are...If you want to make something of yourself, take a look at this idea...he proceeded to tell me about the concept of "time based pivots" and how to find areas of supply & demand in the market.

It took me a while to understand that once you combine the two concepts you have a very powerful idea that works without fail in every liquid market in the world....and I did not look back from that point in time...

 

Eventually I added the idea of "value" taken from Market Profile and Auction Market Theory, but I have never had to change or modify any of the original concept.

 

Hope this helps

Steve

[Ingot54 13]

Understanding the value of the Rules

Hello Ivan

 

It looks as if the worst is over for you weather wise unless I missed something. I am glad to hear you are well and many years from now you will have some more interesting stories to tell your grandchildren.

 

Things are well here as last week was productive and much time spent with my daughter. We have very cold weather here which is typical and have had a lot of snow. This is my second week away from trading and I did turn on my screens yesterday for a bit and looked things over a little. No trades and not even a desire as I am very comfortable with my decision to allow myself this time away.

 

Thank you for the very detailed e-mail with explanations. As a novice trader with my mentor/coach he did have his students make a trading plan but I didn't realize how valuable that would be. He traded only pivot points and that's what he taught.

 

I since found that trading pivots and his style of trading didn't suit me and my trading plan was useless. I understand that there are many different ways people can trade and have different tools and that's great but its also important to find what suits your personality.

 

You touched on some really excellent points and I am eager to condense my strategy and put it down on paper and ultimately it will become my very own trading plan. I think I may have to smooth some of the edges along the way but now I will have a foundation.

 

I understand the importance of the check boxes now and you are correct in what happens without that and how the mind (my mind) works and you almost fool yourself.

 

Being disciplined and following rules has never been a problem for me (well mostly) but in this instance I feel I have been all over the place with no set rules to be disciplined with. I will spend my time going over my trading plan and my rules. I wanted to start sooner and was so glad that you suggested I do that.

 

I remember in the TL post you made that you said that you stopped being a jack of all trades and focused on one strategy and learned everything about that. I think you said something to that effect.

 

It made sense.

 

I will put my trading plan on paper and when I have it to where anyone can follow it as you mention, I would like to send it to you and get your thoughts. I am going to take my time and really go over everything.

 

Again many thanks to you Ivan. Everything you have suggested to me has been most positive and even though I haven't traded I am feeling less lost and that's a BIG thing.

 

I will send my Trading plan off soon and I am eager to also hear about the right side.

 

Thanks again

John

[Ingot54 13]

John's Written Plan

 

Greetings Ivan

 

Hope all is well and conditions are improving for you and your family. I have been away from the markets for 2 weeks and only one day did I actually turn on my screen, just to take a peek.

 

I have spent the last couple days going over my trading plan and found that a person can really find out things about themselves and their personality when doing this. It has smoothed out some of the rough edges and helped me better focus how I view things.

 

I look at a chart and I see trend ... I don't see counter trend I see trend and my thoughts are to go with trend. I have traded counter-trend and its just not comfortable. I don't see counter-trend when I view a chart.

 

Two of the guys that I Skype with see counter-trend and I must be true to myself. Just wanted to pass that along to you as I think that was of importance. (Hope that made sense). I would be greatful if when you have some time you could read my trading plan. I think I did a good job and am open to any and all suggestions. I feel as if I am moving forward and view anything you say as steps in that direction and not negative.

 

Below is my trading plan

 

Kindest regards

John

 

************************* *************

 

John's Trading plan

 

The trading plan outlined here is specific for me and my personality. The plan will detail my trading strategy and the rules that I will follow. I will focus on one strategy and become the best at that strategy.

 

Certain conditions must be met for me to put my hard earned money at risk and with good money management and risk control I can have confidence when placing a trade.

 

My Strategy:

I am a breakout trader.

I will only take trades that breakout from a pre-defined daily level on my chart.

I will go long or short in my stock on breakouts.

I will use a daily chart to determine the trend of a stock and the level it is headed for a breakout trade.

I will look for a consolidation below (or above for a short) my stock for an entry to my price.

Sometimes if there is no consolidation I will look for price to breakout at my price.

I know that the higher time frames dominate the lower time frames and I will make my decision for my entry on the 5 minute chart.

 

As with the daily I will look for the consolidation of price action on the 5 minute chart and a break of that to my target.

If my stock is at my target level and hasn't consolidated I will look for entry at the target, unless the stock is over extended.

I will also use the 2 minute chart.

I believe that momentum begins on the shorter time frame charts.

I will use the 2 min chart to help find an exact entry and look to see if volume increases, as that will help to determine interest/strength in my entry level.

 

I will also have a chart of the SPY's on a screen to see the overall direction of the broad market.

I will also have daily levels on my SPY chart to notice support and resistance levels.

 

My levels on the daily chart all come from the Highs and Lows of past days.

Nothing in-between.

The high and lows of days are the extremes and seem to have the most importance.

 

I will only trade WITH trend, long or short.

To determine trend I will look for divergences.

I will look for a stock to have come to an area of support, hold and reverse up (on longs).

I will look for increased volume.

I will look for the stock to make higher lows and higher highs as well as the broad market.

I will not trade a stock that has large swings where I cannot determine its trend/direction.

 

I will look for news releases or announcements on my stocks that may come out in advance and have an impact on my stock.

I will also look for daily news announcements on the markets and will not trade at or just after the announcements.

I will allow the market to settle and absorb the information.

I will also have a list of all the stocks I trade with their earnings report dates listed.

 

I will look for a minimum of a 2:1 risk reward in my trades.

Sometimes a stock will breakout of an intraday high (or low for a short) and my stop will be a few cents below the breakout point.

 

I will look at the Higher trend on a higher time frame chart on pullbacks and may even sit with a small drawdown if the negative action on the shorter timeframe doesnt affect the higher timeframe.

 

My main goals are :

To never freeze on my stops and accept the losses.

I do not always have to take my maximum loss if I have evidence that my stock is going against me but if my max loss is hit I have accepted the loss before I take the trade.

 

Prior to taking a trade I will have a profit target level on my entry chart established.

In my opinion this is where being a descretionary trader will come into play.

Sometimes price will fall short of my target price and reverse.

I will look at higher time frames and broad market.

Sometimes price will hit my target and consolidate where it could reverse or continue higher (for a long).

As my share sizes increase (in the future once I am consistant) I can take partial gains and leave most to work.

At times I will exit most as I see conditions change with the broad market.

And there will be times that my stock runs past my target and can give me 10:1 or even 20:1 risk reward. This wont happen often but it can and will.

 

One thing for certain. If I don't take every trade that my plan says to take I will not be in a position to have winning trades.

My goal and mantra is to TAKE EVERY set-up that my plan calls for.

Only by doing this can I build the discipline necessary to become a confident trader.

I believe that confidence is born from discipline.

I now have a trading plan that I can follow.

I now have rules in place.

Listed below are my rules that will be in front of me at my trading desk.

 

The night before or the morning before the market opens I will consult my daily charts for the levels that I will trade and establish entry and risk/reward potiential.

 

1. Is there above average volume?

 

2. Is the trend with me?

 

3. Is the stock showing greater relative strength than the overall market?

 

4. Is the intraday pattern nice and tight without big volatile spikes up and down?

 

5. Is the breakout coming off an intraday consolidation instead of a chase of a vertical move which should be avoided?

 

Summary:

I have outlined the trading plan and a checklist of 5 important market factors that must be met for me to take a trade.

As I am still trading 100 share sizes and its difficult to scale in or out of a trade I am looking to increase share size to 200 and then can implement better money management rules.

[marktrader 10]

I am now for the first time in years trading on a consistently positive basis.

 

I am a computer programmer by profession and what in the end what has worked for

me is placing all the rules in a TS Script. I have 90% of all rules automated. I have my cell phone paged when an alert requires my attention.

 

I use a daily chart to determine market bias.

 

Larger time frames for me are easier too.

 

Biggest issue is resloving the delima of knowing that trading is about predicting the future and I always think I can and I am always wrong. That is why I can't really trade myself.

 

I have to use a rote "DISCIPLINED" following of rules. Then it is the system or rules that are making the decisions. For me this is the difference between success and failure. The difference between systematic trading and gambling.

 

God bless and good luck...

[Ingot54 13]

Trading the Hard Right Edge

 

Good morning Ivan

 

Well its morning here and I am not sure the exact time difference between us. Its 8am as I write this.

 

I hope all is well and you are getting back to some sort of normalness out your way. We have bitter cold and even snow that turns to ice very quickly. Makes driving more difficult.

 

I looked at the thread you started on TL on "Breakthrough moments" and see that some very good posts have been contributed. I would like to add a post but when I think of breakthrough moments I think that consistency follows and even trading success (profitability) and at that point I can offer some valuable insight.

 

I am having many little "awakenings" in my learning as I am sure everyone has and still does no matter how long they have traded for. I don't want to change direction of the thread to someone looking or working towards their moment without talking with you first, so I have not added a post.

 

The 2 weeks off has done me well and I am going to sit at my computer today and look at the market. I don't plan on trading, but with my trading plan I will start to get a better feel for what I am looking to do. I have gone over the plan and I think it suits me but will take focus to use it every time, and then I hope it becomes second nature.

 

I am wondering what your thoughts are about my plan and would like to hear about the right edge when time permits.

 

Its almost time for the open so I will end and say thanks again and hope to hear from you soon.

 

Kindest Regards

John

 

************************* **********************

THE HARD RIGHT EDGE

 

Hi John

 

Well I have pretty much left you alone, except for an occasional email over the past couple of weeks.

 

It is 3 weeks today since your initial email to me, and I am sure you are already a much more thoughtful person regarding your trading, and what you are trying to achieve through your trading. Congratulations on making an effort to change.

 

It does not matter what you write on that thread - Breakthroughs That Led to Trading Improvement and Success. - Traders Laboratory Forums

 

I am sure it will be on topic if it represents what you feel has been a breakthrough moment in the past. We all have them, and usually plenty of them. I am still learning new things, and just this week I made some decisions about my charts, that has simplified them and made the tech stuff clearer.

 

I removed one of the indicators I previously thought was indispensable, but in looking back at trades, it was hardly ever needed, and pretty much followed one of the others anyway.

 

Now - regarding the Hard Right Edge concept ....

 

There is nothing break-through about it in the sense that it is innovative.

It is not - it has always been the case that price unfolds on that part of the screen, and we do NOT know what is going to happen next.

 

All we can do is know what worked in the past when a certain chain of events occurred, and then REACT to what price is doing. That reaction will be based on the higher probability advantage our strategy tells us is setting up.

 

Think back on your trading education. If you read text books, they have probably "conditioned" you to "see" setups that have worked out nicely. You might see MACD crossing, a pin-bar candle (narrow hammer, or shooting star) rising volume and maybe RSI above/below 50 and trending up/down nicely.

 

The text then goes on to show you that the trade made 4 points/60 pips or whatever, to prove their point.

 

The writer is well respected in trading circles, and has a beautiful website, and "the $197 Course." Naturally you nod your head in agreement, and eagerly lap up the next chapter, where you learn even more setups that have worked out IN THE PAST. There are several other setups in the book, and you remember that these are similar setups (to what) you read elsewhere, so it must be right.

 

Then (after this) remember any (training) videos you saw. Many of them also point to a setup and show how and where you "would have entered" and where the take profit point "was". Many videos (presenters) on the Internet (Youtube) are now a bit smarter than that - they know traders don't want to look at what "would" have been the setup, they want to see how the "$197 method" would have traded TODAY as the action unfolded.

 

So they either shoot their video and move it forward frame-by-frame, showing what price does that conforms exactly with the strategy; or they say: "Let's pause the video here, and come back in a couple of hours to see how that worked out."

 

Now some of these guys are genuine, and some are out-and-out tricksters.

 

Like you and me, they have to live, buy groceries and pay the utilities.

 

And they want the nice house and car, and they want these things FAST! But there is NO fast road to wealth if you live honestly and deal truthfully in this world, without hard work and commitment.

 

And I can tell you, John, you are already AT "fast" ... you ARE there ... there is probably NOTHING left for you to know, except TRADE THE WAY YOU KNOW YOU SHOULD.

 

So how do they short-cut you and make it look like the trades are genuine?

 

Many ways.

 

They can make several videos, and just publish the ones that worked out. Or they can just film away until a setup occurs, and then edit the film to only show the select trade.

 

They can make and pause many videos, and only show the paused ones that DID work out. Occasionally they throw in a failed trade, to show that they are "genuine" and that everything has an occasional failure.

 

Bottom line - it is all leading you to grab their system/indicators/course/signal service and so on.

 

But I can tell you John, you already have what it takes to succeed. You have had enough experience now to be able to make a winning trade or two, and you have the honesty to look back over your plan, and see where you either messed up through not following strictly (which can be corrected); or you did follow exactly the plan, but it simply did not work out "this time", which we expect.

 

You know that from time-to-time you will get the outlier ... the "home run" trade of more points than you imagined. And you will get the target amount sometimes, and sometimes take a hit. That's not unusual.

 

What you are, as a trader, is a manager.

 

You are managing an account for JOHN.

Are you a good employee?

Are you sticking to the company policy of culling the losers?

Are you setting contracts that are in accordance with John's specifications?

Are you taking the insurance (stops) that the company policy dictates?

 

And so on ... according to the strategy, trading plan, business plan etc.

 

Or are you a rogue trader, who varies the position size when "it looks like a good setup." or who lets a trade run further into loss "because it looked like a reversal was likely"?

 

Does the cost of brokerage out-weigh the cost of the loss? Would it be more prudent to scrap the trade, pay the brokerage, and wait for another setup? As you know, good trades work from the outset ... there usually is little doubt.

 

Now you may think this has nothing to do with the Hard Right Edge (HRE) ... but it does.

 

I am a story teller of sorts, and it takes me awhile to get to the point sometimes.

 

But I mentioned the idea of being a manager of "John's a/c" because as a manager you are entitled to REACT ONLY TO WHAT THE MARKET IS DOING NOW!

 

What the market is doing NOW is only shown on the HRE.

 

Of course we need to do our analysis, understand that we are trading with a trend, and understand the higher time frames too ... all of that is STILL valid. But once we are IN a trade, that must move to background, and becomes the governor of your decisions.

 

The ACTUAL decision can only occur as a result of the next price bar

 

As a trader, you give up your freedom of choice (and I may write about some of this stuff on the Traders Laboratory threads sometime). You only have permission, as the manager of someone else's a/c, to operate according to the stated rules.

 

Otherwise, you deserve to be sacked. You have been entrusted to make money for JOHN, and as such you are being paid to do exactly that function. You do not have any right to explore, experiment, take risks or to do anything outside of the stated intention of the strategy.

 

Ok mate - I have set a bit of background there for you ... and in the next email I will get down to how the HRE works, and how we as traders must use that activity to manage our trades.

 

Kind regards

Ivan

 

Food for thought: This is an update on Paul Rotter, who was/is the world's most successful trader.

You may Google for the original story - this seems to be an update of an other story on him

 

http://www.trading-naked.com/library/paul-rotter-trader-monthly.pdf

 

Interview with "The Flipper" Paul Rotter | TraderDaily

[Ingot54 13]

Wrapping up the "Hard Right Edge" Concept

 

Hi John

 

Continuing the HRE idea ...

 

It really does not have much more to go, to be complete as a concept, and as a trading principle.

You can think it through for yourself pretty much now.

 

You do your analysis according to your written plan.

You have your position size and stop orders already worked out.

You know the next two upper time frame trends, so that you are not going counter trend.

 

And ... like a hunter, you wait for the precise signal that will tell you to spring the trap!

 

I can best describe this by illustrating a demo trade that I found on my platform (Forex).

 

There a few basic indicators that I use - these are specific to Forex, and probably would work as well on Equities, but I do not make an recommendation about them - it's just my setup.

 

I use a mixture of (specific MA's) on the main candlestick chart.

I use a (specific) Stochastic, which tells me when the market agrees about change of momentum.

I use a customized MACD which gives me momentum and confirms change of direction.

I use a (specific) MA to give me rising/falling market direction.

I use a Daily Pivot Point without (removed).

 

John, I have attached 4 charts to illustrate the HRE concept. This is where a true setup reveals itself, and where trade management must happen. Of course we watch what happens on the screen, but MANY times we miss the best part of the move, simply because we waited too long for the pattern to "properly" set itself up.

 

By the time we enter, the bird has flown, and we only manage to take the remnants, if any. Frequently though, we may encounter a whipsaw. These CAN be avoided by moving to a HIGHER time frame to find your setups, and then dropping to the lower TF to grab the entry. The concept is so simple and workable, that for many people it doesn't seem complicated enough to be able to work. Disbelief comes in, and we say ... "yeah, but ...!"

 

A lot of traders will not use "simple" when "complicated" is available

 

It may take a bit of getting used to, and practice.

It may be that you are already doing exactly this.

 

But if you are having trouble with failed trades/stop-outs and late entries, then the solution is to jump to the higher TF to spot the entries. You WILL miss a few trades, but be assured they may only be small moves anyway. But you will still pick up the bigger moves that began in the lower TF by seeing the conditions coming together on the HIGHER TF as well.

 

You may get:

FEWER trades but

BIGGER moves ... and FEWER whipsaws and

MORE spare time ... LESS stress and

MORE enjoyment from your trading.

 

And of course being a relaxed trader will help you to avoid the fog that comes in with intense analysis and irritating trouble-shooting (and excess screen time - added ).

 

That is about it John.

 

It is so long since I actively traded equities, that I forget how they flow now. But it is clear that prices of all instruments ebb and flow in waves. I am not a fan of Elliott Waves, but I mention "waves" to show that if you are trading with the strongest TF - which will be the HIGHER TF, then even a bad trade can get itself out of trouble, when the pressure of the main trend resumes.

 

If you get into a bad trade, always look to see if the higher TF trend is still intact. If it is, then you stand a chance of riding out a small draw down. If not, then cut the trade quickly.

 

You will feel the financial loss of course, but as well, you will feel instant relief and freedom as the trade is gone.

You are then free to take a break, save the energy and burnout, and set about looking for another trade.

 

I know you already know much of this John, but I hope what I am saying also serves to reinforce what you are doing correctly, as well as what you may give some thought to implementing.

 

Kind regards

Ivan

[Ingot54 13]

Good stuff to know ...

 

Hello Ivan,,,

 

Thanks so much for the well thought out and thought provoking e-mail. Its giving me much to think about and more important it is putting things in perspective as to "My Business" and how to run it.

 

One of the most attractive aspects to trading is to have ones own business but as the employer and "sole" employee there can be no free passes or destruction will follow. One must be even more diligent in the duties, because while others in the business world would hold us accountable, we may have a tendency to bend many rules and not fire ourselves but ultimately blow our account.

 

Very important, and I didn't think of things in that way. I read the articles on the "Flipper" and wonder if we as little guys have a chance these days?

 

I have a question maybe you can answer ... Are there guys like us that can actually make a living doing this? Do you know anybody that makes a living trading stocks? Forex?

 

I don't and have to say it worries me that this can even be done on a regular basis ... I think it can be learned and that with good discipline and knowledge of the markets even a small trader can be successful but I wonder ... I know the markets wont go away but wow ... just another worry I guess.

 

You have given much to think about and have taken me in a very positive direction with good solid ideas and I see the other e-mail you sent me and will take some time and study that also. Thank you again as you are really helping me

 

Kindest regards

John

 

************************* **********************

Hello Ivan

 

Just wanted to let you know that all 4 images showed up and are very readable. You have given me much to go over and study and I love that.

 

You have truly made me think and even relax as I can stop searching. I think I needed someone to talk with and go over what I am doing and hear my thoughts and strategies and let me know that I am on the right track.

 

I know there is no Holy Grail but I think you have let me know that my concepts are solid and are helping me smooth the rough edges and think like a trader. Trading is so isolating even with Skype buddies that I admit to much second guessing.

 

I will always learn and be open to ideas but I think its finally sinking in about keeping it simple (not easy) and having a much needed plan. There are not enough Thank you's for your time with me.

 

I will go over this material and in a few days I will contribute to your great thread. My name is (JohnX) on TL. ,,,,Again many Thanks

 

Best Regards

John

 

************************* *************************

HI John

 

I am pleased if you have gotten even one little thing from our conversations.

 

"Being a trader" sounded attractive to me before I really got into it. It was then addictive, because I had been a gambler on race horses before then - many years earlier. I had given it up, because that too, is pretty difficult, and is a corrupt industry anywhere in the world - in my view. The public are needed to keep the money flowing into the pockets of the owners and trainers, and of course, the book makers.

 

There is a thin line between trading and gambling. I wrote about this on Salma's thread on Trader's Laboratory -

 

http://www.traderslaboratory.com/for...ling-9100.html

 

and got a bit cranky with "Mighty Mouse" over his attitude - but after all, forums are only places where a point of view can be expressed. I should not have become so annoyed with him about it - but I guess my ideas are a bit too rigid sometimes. I later commended another of his posts in the Psychology section, I think it was, but he didn't pick up on it. Oh well.

 

I do know of a trader who is making very good money - Davin Clark -

 

- Trade4edge - | Davin Clarkes Trading tips, tools, information, resources

 

Davin used to run traders information nights for free in my neighbourhood on the Sunshine Coast years ago. By the time I got to hear about them, he was winding them down, and I think the one I attended was actually the last one.

 

I was a bit disappointed by that, because I was just getting into the serious learning part about trading. Before that I was just picking a stock that had good fundamentals and holding it for a few weeks. I was pretty green then.

 

Davin was/is a surfer. He loves the ocean waves, and every day would do his trading, then go out surfing. He would be finished by 11.30am. The last I heard of him personally, he was paying over $300,000 just in brokerage for the first 5 months of 2006! There is a mention in this article about how he went from making $100,000 a year, to more than $800,000. ($15,000 a week).

 

JustData.com.au » Journals » Stock Investor » Market Coach » Is It Really Possible?

 

Today he still trades and runs workshops (in the USA). But people now pay large amounts to attend them.

 

From his early psychology changes through working with Chris Shea, he certainly came a long way.

 

Chris Shea is a market coach I went to twice, and he used to run workshops for traders over one weekend each year, for traders wanting to go to the next level.

 

There was a special "invitation only" event, reserved for those who made a minimum $750,000 a year.

 

This is Chris Shea's site. Have a look at the links:

 

The Market Coach

 

So it can be done. But what has to happen, is you have to change what you are doing now.

 

If it doesn't work, then stop it. Search for what does work, and be prepared to pay for it.

That is probably my best advice. I do know that finding a good mentor/coach will play the pivotal part in turning you from an ordinary trader, to a seriously successful trader. I do not think there is any short cut to that, unfortunately.

 

I too need this kind of a lift. I have broken out of the rut to a degree, but I still haven't moved to 'wildly successful'.

I am looking at the articles by Rande Howell on Traders Laboratory, and I know this I probably where I will receive a boost.

 

I found this site last night when searching for answers for myself (yes - I am still seriously needing support too).

 

Stock Trading Losers Anonymous | Elder

 

There is food for thought there, and the conclusion is good.

But the answer is still elusive.

 

Telling people the Holy Grail is inside their own head may be nice, but it is not helpful. We all know we make silly decisions that affect our profitability, and a Coach can get those out of our systems. But what we really need, is to understand what it takes to move from where we are, into that super-league ... even a little bit.

 

I do understand one concept, and I will share it with you in the next email.

 

I tend to ramble on, and these letters get a bit lengthy.

 

Kind regards

Ivan

[Ingot54 13]

How you REALLY feel about Money!!!

 

Hi again John

 

I have probably replied to this (largely) in the last email.

 

But this is to explain to you how we view money, and how the difference can be in our heads.

 

Imagine you are getting off the train after a day at the office, and you have a briefcase in your hands.

You walk to the car park, the same as you have for the past 2 years. You place the briefcase on the

ground beside you as you fumble with the car door lock, and then throw the briefcase on the

seat beside you, and drive the short distance home.

 

Now ... with that in mind, I want to switch to another scenario.

 

This is just a mental exercise, and is a series of questions ...

 

1) You are walking out of the bank, and you have $20 in your wallet - same as usual ... so how secure

do you feel? Nothing unusual there ... we do this every day with larger or smaller amounts of money we carry on us.

 

2) Now you leave the bank with $2000 because you have to make a cash payment. How does that feel?

Do you forget about the $2000 and just walk on back to your vehicle? Or do you tend to remain very

conscious of where your wallet is, and maybe walk a little more directly to the car?

 

3) Ok - you have just received $70,000 in cash from a little old lady, who has been hoarding money for years.

She is a friend, and has asked you to take the money and deposit it in her bank account, as she is too frail to

make the journey. How do you now feel about carrying that money on you? (Remember, this is a mental

exercise - we aren't able to use electronic transfers.) Do you go alone, or do you feel much more

comfortable if you were able to have your brother and perhaps another grown male accompany you to the bank?

 

4) Ok now - let's go back to the first scenario ... where you are getting off the train.

Before this, you had concluded the business deal of your life. You had inherited a Kentucky mansion, but had

no need of it or desire to live there. You decide to sell it. The only person who expressed interest in it, offered

you $2 million in cash. You accepted, and signed the mansion over to him.

But you were not expecting "cash" to be literally bank notes ... you were expecting a cheque.

 

The man hands over a briefcase filled with banknotes of all denominations, but this has been certified by a bank

certificate, to be 'clean' money, and all present and correct. Now it is 4.30pm, and you have to catch the train home,

and the banks are closed for the day. What do you do?

 

There are no options ... you have to take the train and take the money home in the briefcase.

 

Now - how do you hold the briefcase on the train? How do you walk with it ... what are you thinking about?

Are you looking around to see who is near you or paying attention to you? How do you walk to the car in the train car park?

Do you place the briefcase on the ground as you fumble with the door lock?

 

The idea here, John, is that we can easily replace $20, or even $2000, so we don't get particularly anxious about it.

But $70,000 would make us very careful, and $2 million? Well I wouldn't leave the office without bodyguards!

 

The analogy is important to us as traders. And the level of our comfort changes with the risk.

Yet the market does not know or care how much we have risked, or what is at risk for an individual.

 

Why should the market care if you are trading 30,000 Microsoft, or 100?

 

It is the same for me as a Forex trader.

 

I trade the mini contracts, so one contract is $1 per pip.

One pip is .0001 of $1, so it is highly leveraged by a factor of 10,000.

 

I usually trade between $2 and $5 per pip (2 or 5 mini contracts).

 

I can easily make 30 pips ... and if I am patient. I can make 100.

 

So what is stopping me from trading at $50 or even $250 per pip?

 

The answer is ... nothing ... except what is between my ears. In fact there are traders who would be taking the

exact same trade, and doing those numbers. Why not me? We are so conditioned to think in terms of dollars, that we

can not see the points or pips objectively. Our risk profile needs to be raised, but it has to be done carefully and securely.

 

We do not want to turn into gamblers ... we need to be professional as a priority, and then work on our staking comfort zone.

 

John, I am still struggling with this myself - I do not wish to blow another account, so I play around in the muddy,

shallow waters of trading. I need to get out into the deeper, clearer water. Fear keeps me from doing

what is necessary to take advantage of my strategy. I know it is making good pips, but fear stops me from exploiting it.

 

Does that make sense?

 

This is something I have to work on, and I probably also need a mentor/coach to get over.

If there is a 'secret' to success, I think it can be found in this email to you, John.

And having identified that (for myself) the task is laid out in front of me.

 

If you ever make headway in this area, or have some good links to this kind of training, I would be pleased to hear about it.

 

Finally, I think the content/substance of these emails back-and-forth would be very helpful to others.

Originally I had intended to create a thread on Traders Laboratory, but had problems with time delay, in the queue

as my posts were moderated. I decided not to wait, and just chatted with you via email.

 

Would you have any objection if I paraphrased and edited these emails and posted the ideas on a thread on TL?

 

I would not identify you. Instead, I would simply call you "John" without any other details about you, to avoid any

embarrassment or bias towards you by other traders on the forum in the future. We all have our self-image to protect, and I respect that.

There is quite a lot of stuff that should not be included - only the idea or substance.

 

Kind regards

Ivan

[Ingot54 13]

Closing it all out ... for now

 

Just another note, John

 

Over the course of these few weeks, I have adopted the role of "teacher" or "mentor" to a degree.

 

But I am not really like that. I have certainly spoken the truth to you as I know it, and to add some

importance, I have used an air of authority, to help you remain objective, and understand the

importance of taking a break, and really looking at what you are doing.

 

I probably do have a lot of experience that is good to pass on, but so do you.

 

I am certain that had I asked the same questions of you, about what works, and how to get

my trading back on track, or how to overcome burnout, you would have been able to respond

similarly to me.

 

I feel I am just another trader, doing my best to get to the next level.

 

Just wanted to clear that up - I am no guru, by any stretch, and I do have my ghosts that haunt me too.

 

I would like to keep in touch with you, and exchange ideas if and when breakthroughs occur, or if/when

light are turned on. It happens all the time in trading, and these moments should not be lost.

 

Some trader said he has "never worked so hard for easy money!" and that is so true.

 

The time I have spent educating myself in trading skill over the years has been probably almost equal to the time I

have spent at my job.

 

Anyway John - all that to say I am still looking, and probably will until I find what I need to

bring myself to the next level.

 

Cheers

Ivan

 

************************* **********************

Hello Ivan,,

 

I was thinking about the help you have given me and it has been in the role of mentor/teacher and you have done an excellent job.

 

I really needed to stop wandering and put together the important things I have painstakingly learned. I didn't need a pat on the back for my hard work but I think more so confirmation that what I am looking at is correct and is on track.

 

I needed to define what I am looking for and what I will trade. I only made one trade this week as I am slowly getting back into things and it went in my favor. I made 15 cents on 100 shares so I made $15 on the trade. Everything fell into place according to my plan and I took the position. It was a breakout trade and as such "crowded" to where price was volatile.

 

I had a stop ready but failed to have a profit target in place so I exited. I sat back and really thought about my thoughts that were in my head as I was in the trade with money on the line. After seeing profit something happens and I go into protection mode and took profit. (if you can call it profit,,,,it went on to go a total of 70 cents in my favor never getting close to my stop)

 

Of course I go over the what if ,,,,what if I had 500 shares?,,,what if I had 1000 shares?,,,,I stopped myself there and thought about what I did well. I followed my plan almost to the letter except for a profit target.

 

My check list was all checked and everything,(except profit target) was planned,,,,even stop was ready. I will take the good out of the trade and finally ,,,finally,,,,finally,,,, I took a trade for the right reasons, and according to Tom's plan. 3 weeks ago I didn't have a plan.

 

Now I do.

 

As I said I am slowly getting back and with renewed confidence I hope to send you an e-mail soon and say that I in fact entered a trade and allowed it to work and made 70% or 80% of the total move. My check list is slowly starting blend together, and that has been my focus this week.

 

I see the other e-mail you sent and will respond to it a little later as its morning here and I wanted to answer this one as its more of a personal letter and that I understand what you are saying and of course I intend to keep in touch and see if we can get to the next level with ideas or some small experience that can help us take one more step in the right direction.

 

As you mention you are a story teller and that really helps a person to use their mind and think about what is happening.

 

Your first e-mail showed concern and a willingness to reach out to help and that's hard to find. I will pass that along to someone else one day also. Your last e-mail is really interesting and I will read it a few times and respond soon but wanted to mention that of course you can use these e-mails in a thread.

 

I trust your judgement and the use of the name 'John' works well. I am very interested to read it and how you intend to put it together. Thanks again and talk soon

 

Best regards

John

[SIUYA 11]

this is a crucial element that is often overlooked when you develop a "fear" of trading.

and is particularly so when trading with a small undercapitalsed account.

How you view money......

 

It does not matter who you are - if you are trading with a $5000 account, $500 means a lot both in percentage terms and most likely in terms of how you view $500 as you presumably only have $5000.....and that $500 easily gets translated into what else is $500 worth - a great bottle of wine, a weekend away, the kids school excursion....

 

At the same time, you need to value the value of a dollar as they say.

In other words even if you have money you should not be cavalier about losing what to you might be trivial, as a loss is a loss is a loss.

 

Probably why its advised to only trade with money you can afford to loose, and also dont think in terms of dollars, think in terms or pips/ticks/risk reward etc; etc.

 

Additionally, the day trader has the issue of seeing the dollars tick up and down instantly in many systems, and what hurts more - giving away the dollars we think we made, or giving away some pips? and the pips they are trying to make mean every single one counts for some traders......If you are going for 1000 pips and giving back 100 is not such a big deal, but going for 4 pips, giving back 1 pip can hurt.

 

This point is multiplied many times over when people step up from SIM to real trading - the additional element of money (however we view it) changes the mindset.