The Trading Journal: Appendix A

[DbPhoenix 42]

Ok guys I'm not sure if anyone is actually reading this thing but I thought I'd try to help people discover what to trade. I'm going to disclose a few things about how I found my trading niche and offer some ideas to help people find out their niche. This may be a long post so if you want some help picking a niche, grab a coffee or beer before starting to read. List what you find so you can help keep track.

 

When I first started trading I was foolish enough to jump in without doing my homework. I jumped into trading a time frame that wasn’t suited to me and trading an instrument (options) that didn’t utilize my personal talents and advantages. So over time I managed to find the right instrument and time frame to trade but how did I go about it?

 

I actually found the time frame and instrument a bit blindly to be honest. I actually stumbled across them and then did the following stuff afterwards to clarify that it was the right thing for me. Hopefully if you’re reading this you can do it before backtesting or simulation trading a method so you don’t waste your time.

 

After reading a great book by Brett Steenbarger entitled “The Psychology of Trading” I realised the importance of finding a trading method that suited my personality. It is very important that you are trading a time frame that suits your personality, this doesn’t mean one that suits your other out of market commitments, that is very different.

 

Just because you work a day job doesn’t mean you should be trading according to daily time frames because the only time you can get to the screen is for fifteen minutes to see the close. First find what time frame suits you and then figure out a way to do it around your work or outside commitments. Being that we are in the thick of global economies you can trade any market around the world from you own home pretty much. So how did I the right time frame and market instrument and how can you find it?

 

Look at Past Activities and Sports

 

I started by looking at past activities and sports I enjoyed. By doing so I managed to find an interesting pattern. I always seemed to play sports that were reasonably fast paced. They included football (Australian Rules as I am from Australia, Ice Hockey, Basketball and Tennis). The one I liked the most out of those was Ice Hockey because there wasn’t really a dull moment for any player whilst on the Ice.

 

Another pattern was particular video games I used to enjoy. They were always ones that were action packed but still required strategy. Shooting games that needed you to be quick but at the same time take everything in that was on screen and work out how you’re going to get to the next area. I didn’t mind the thinking type games such as Command & Conquer and Sim City but I always found they took too long to get things done.

 

Another fast activity I enjoy is riding my motorbike. I like riding around the mountains going as fast as I can but still leaving something in reserve should I need to avoid a road hazard or get out of a bad situation. Here was another clue, I didn’t like putting myself totally on the line, something to keep in mind for risk management.

 

So looking at my history of things I enjoyed, I realized they were all pretty fast moving activities. Previously I had been trading longer term instruments where trades would last for weeks. Obviously not fitting my past activities I enjoyed.

 

So first thing you need to do is look at the activities you have enjoyed in the past and the nature of them. You may enjoy Baseball, Golf or playing Poker which are activities that give you more time to think about your next move.

 

So I had found that I needed something which had a bit more action and was quick. I then needed to find out my personality traits and talents. To do this I looked at how I interacted with people on a social level and what my subjects I gravitated towards in School. You can do the same for College or University or even look at your job.

 

Finding Personality Traits and Talents

 

First starting with school. I was always someone who picked things up very quickly, I’m a fast learner. Another clue to what I should be doing. I never enjoyed nor was I good at History, Math and Science. I enjoyed English, Graphics, Theatre/Drama and Sport. Right there if you read between the lines it tells you that I don’t like the subjects with heavy calculations and rules. I liked subjects with creativity but didn’t like the rules accompanied with Math and Sciences. History required intense study of the past and remembering of facts and information. So I realised I had a liking for and a talent of the creative subjects but without using hard statistics.

 

If you think about your School or College/University days and your current workplace, you can find out what areas you were good at and just as importantly what areas you enjoyed. You need to find areas that you enjoy and that you are good at. Both are important.

 

I then thought about my social life and what I tended to do in conversations and groups. I noticed that I was a quick thinker when it came to talking with people. When I am in a conversation I think about what the person I am talking to will say in response to what I am going to say, before I say it. So like a Chess player who thinks moves in advance, I think conversations in advance. I then try to lead the conversation to the direction I would like it. That was another clue, I seemed to put possibilities together before they happened.

 

I also noticed that I would constantly look for signs in people to tell me that they are enjoying the conversation or looking for something different to talk about. This is when I realized that I liked looking for things people were saying without saying it verbally. Another clue for trading that I tended to look for things that were being told but without being obvious. The last thing I realized was that I was creative in my humor. I would not tell a joke straight, I would make a comment that would get people to think about the joke. Instead of telling a punch line I would give people a reference to come up with the punch line themselves. This was another clue into my personality trait of thinking ahead and my creativity.

 

At School I always was a bit different to everyone else. I wouldn’t do things to fit in, in fact I deliberately would go out of my way to do the opposite of what most people did. Yet some how I managed to still be well liked by the majority of people in school. This was another clue that I didn’t like to follow crowds, I also didn’t like to follow the rules of the School. If there was a rule I thought logically didn’t make sense, I wouldn’t follow it. Things such as wearing a tie with the uniform or being cleanly shaven.

 

Just take some time to think about your own social experiences. You need to be honest with yourself. If you were someone who was comfortable fitting in with everyone else, write that down. It will help determine whether you should be following the trend or going against the grain. There is no point going against the grain if every time you do, you feel unsafe and sick in the stomach because it doesn’t fit with your personality. You also want to think about how you interact with people and whether you are quick in your responses or whether you like to take your time to think about what you say. That can tell you if you suit a fast paced market or a slower moving one.

 

How You Drive Your Car

 

The last thing I thought about was how I ride my motor bike and drive my car. I look for people in their cars turning their heads to see if they are going to change lanes. I look at the front tires of a car to see if they are going to come into my lane. I watch the car and how they move within a lane to see if they are a reasonable driver or a terrible one that is moving from one side of their lane to another. I drive a touch faster than everyone else on the road because I rather keep my eyes on the people in front of me instead of having to watch people next to me and coming up from behind me. These are clues to what I tend to gravitate towards. I am observant of things that aren’t so obvious and I am very individual.

 

There are many things you can find out about yourself in regards to how you drive your car and if you follow the rules strictly or believe it is safer for you to do something else.

 

Think about anything else you can to tell you what your personality is like. I wear clothes in the same style I have worn for ten years. I don’t care if the fashions change, I know my style and I stick with it. I am “street smart” more than academic smart. I like to learn on my own more than being taught by someone else because I think I can learn it myself.

 

List Your Findings

 

Whatever you think of, slice it up and look at the hidden meaning behind it. Then once you have a list of things you do, you then need to see how that relates to trading. I wrote my list that looks something like the following.

 

Don’t like to follow rules unless I agree with them

Good at seeing between the lines

Like being creative

Like things fast paced with action

Don’t like to overexpose myself and feel unsafe

Don’t like following the crowds

 

Look For Markets That Suit Your Findings

 

So how did I know to trade futures in an intraday time frame? Well I learnt from a past mentor that certain markets should be traded at certain timeframes. Here is the following:

 

Equities should be traded using daily charts

Options should be traded using weekly charts

Futures should be traded intra day

Forex should be traded intra day

 

Now this is not set in stone and only my opinion. I am sure there are people out there trading these instruments in different timeframes to what I have mentioned. The reason these are like I have listed them above is because of the volume traded. Equities are traded a lot but there isn’t the liquidity to get in and out of positions as easily as forex and futures. Don’t forget I am from Australia and our market is not as Liquid as the US or London markets.

 

Considering I wanted to trade quickly, not be exposed to things out of my control and have a bit more discretion in my trading, I realised the Futures were my most suited trading vehicle. I trade them looking at a 5 minute basis and e-minis in particular have high liquidity. I trade against the grain but follow the overall flow of the market. I use the NYSE Tick to tell me that the equities are doing something different to the index futures, looking between the lines. My other indicators are guides and not strict rules where I must do X if Y occurs. I have the freedom to interpret markets.

 

If you get your list of what you are after, you can find a rough time frame to trade such as intra day charts, daily charts, monthly charts, or maybe no charts at all. You may find you are good at reading business statements and use fundamentals.

 

You can then work out your style of trading whether you like to trade with the grain or against the grain. There is no inbetween. Your either trading as the market is moving or your trading as the market is stalling looking for the opposite direction. You can find out if you need strict rules to tell you what you should be doing or whether you trust your own judgment to make the strict rules simply guides.

 

This should hopefully get you headed in the right direction and give you some guidance. Once this stuff is figured out, look for a mentor who trades in a similar way to what you’re looking for or ask around forums for what people recommend according to what you’re looking for. At least you will start in the right direction and can focus on the plan instead of asking whether you are in the right niche. (jasont)

[shreem 10]

Hello Dear DbPhoenix, thanks for your great explantion about you came to trade what you trade and how you trade it.

 

I am sure that if everybody take the time to read what you wrote, they would find great gems for developping the right mindset in order to approach their trading according to their own temperament and impulses and because others are doing it.

 

Your post help me a lot and and your writing suggest to me that you are a very sincere and honnest folk who has a true desire to help other.

 

So, great hat to for that post and I am humble to being able to read it.

 

Great trading day and week to you

 

Sincerely

 

Shreem

[DbPhoenix 42]

Hello Dear DbPhoenix, thanks for your great explantion about you came to trade what you trade and how you trade it.

 

I am sure that if everybody take the time to read what you wrote, they would find great gems for developping the right mindset in order to approach their trading according to their own temperament and impulses and because others are doing it.

 

Your post help me a lot and and your writing suggest to me that you are a very sincere and honnest folk who has a true desire to help other.

 

So, great hat to for that post and I am humble to being able to read it.

 

Great trading day and week to you

 

Sincerely

 

Shreem

 

I should point out that this was written not by me but by "jasont" (note the name at the end of the passage). I've quoted it here so that those who are interested may be aware of at least one other trader's process.