Trading Experience

[TheNegotiator 13]

Lots of people talk about "screen time" and its importance in the success of a trader. In essence, it's experience. Number if trades and number of hours. Although I would point out as I always do, that not all trades and not all hours in front of a screen are equal and in fact in many cases can act in quite the opposite way to what was desired.

 

Yesterday was one of those days where experience might just have helped a trader out. The ES had been in a very balanced range for the prior 7 days and even with a bit of an extension upwards on Tuesday, there was a reasonable amount of information to suggest that it was still balanced. So suggesting that a short somewhere at the top of the range was a bad idea surely made no sense right? No. Because there are times when the ES just plods on in one direction only. It "one-timeframes". The experienced trader will fairly quickly spot that given the context of the auction, location and feeling for the way the market is trading, that the conditions are right for such a move and the chances of the market doing it are pretty high. Indeed, after the 1401.75 low was put in just after 10am, the largest rotation down was 1.75pts in a move of 13.75pts up and after the high of 1415.50 was put in, it still only managed to move 3.50pts lower to 12.00. It's worth noting that purely because the ES broke out of the range, it doesn't mean it would automatically grind in one direction without any reasonable pullbacks.

 

Clearly it's potentially of great benefit to identify this particular type of market action early on. The rewards were pretty high and it could prevent you from fading the market thinking that you're getting a great price to sell at.

 

What do you do to gain experience then? You must first have some sort of structure for framing the market and its behaviour. Understanding market movements relative to this structure will help you see things more clearly and develop experience at a greater rate. You must also document not only how you trade according to your plan, but what you see in the market's behaviour. Then if you can devise ways to clearly monitor and test these observations, you are well on your way to gaining experience (in terms of market awareness).

 

Here is the chart from yesterday:-

 

[lastninja2 10]

QUOTE: "You must first have some sort of structure for framing the market and its behaviour. Understanding market movements relative to this structure will help you see things more clearly and develop experience at a greater rate.

 

I agree completely.

For the newcomer I would suggest a reasonable starting point, in terms of "framing the market", would be Jim Dalton's Market Profile books.

I hasten to add that I do not take Market Profiling to be "the best" or "the right" way to frame the market. Perhaps we can think of it as a pair of glasses through which we can view the markets - more suitable and confidence-inspiring to some, less so for others.

 

QUOTE: You must also document not only how you trade according to your plan, but what you see in the market's behaviour. Then if you can devise ways to clearly monitor and test these observations, you are well on your way to gaining experience."

 

I think this is also crucial. Here's what I have done, and continue to do:

1) Firstly, I created my own trading guidelines (not RULES - I am not an algorithm) in the form of a 9 or 10 page pamphlet. The guidelines existed in my mind before I put them on paper, but the process of typing them out clarifies those ideas and makes me more inclined to stick to them - even in the heat of the moment when the market is tempting me to place a trade.

 

2) At the end of each day I take a 5 minute chart and mark out where I placed my trades + add commentary. In many cases it will be immediately obvious where I have violated my own trading guidelines. In many cases I will take losing trades, but be satisfied that my reasoning was at least consistent with those guidelines.

By analyzing and reflecting upon your performance, the experience gained from each session is doubled.

 

Are the specifics of the trading guidelines important? Initially, I say "No". What is more important is that you stick with them - whatever they may be - for a good while. Reflect on your performance (during step #2) after you have put those guidelines to the test for a decent period of time, and only then can you identify what exactly needs tweaking, and feed those experiences back in to a new guideline pamphlet.

 

I understand the internal battle only too well: You are not a mechanical trader and therefore no two trades will necessarily be alike - but introduce too much discretion... trade in a manner which deviates too far from your guidelines... and I think you will struggle to develop as a trader because it is so difficult to identify where you are going wrong.

 

For EXAMPLE;

If you take Jim Dalton's Market Profile approach, your trading guidelines might require that when single buying prints appear on the profile, you only take trades from the long side, until those single prints are "filled in".

 

On a somewhat different note, I'd like to share a personal experience of mine from the last 24 hours, because it has haunted me so badly.

 

My trading performance this week, up to Friday, had been 'okay'. Friday turned out to be an extremely boring/frustrating session, and it looked as though I would be finishing the day around about flat. With not long to go before EU cash close, some unexpected news was announced, and my market started to rise.

As seems to be always the case, I bought an extremely favourable price - because my reactions are good and I am always alert. But my handling of that trade, and the trades I would be taking in the next couple of minutes, was incredibly poor.

 

I became too easily spooked by the orderflow, and proceeded to snatch profits, enter more long positions, scratching them as I went... chasing the market all the way up the page. Inevitably, I eventually bought the top of the move and got punished on the pull-back.

 

It should have been an outstanding end to the day, changing the landscape of my week from 'okay' to 'good'. My initial entry price was heroic. Most of the traders I know did very well out of the move - I really felt like the loneliest person on the planet at that moment, haha!

 

I had dreams about that trade last night in which I entered early longs and then sat back as my P/L went through the roof. When I woke up, I set about marking my trading chart - what I had done well, what I had done badly, and devoted attention especially to the big move at the end of the day. As a result of that haunting experience + my reflection on what had happened, I will institute some fairly basic but strict guidelines for similar situations in the future. That is the feedback from step #2 back to #1 I mentioned above.

 

Ahhh... typing all that nonsense out has been quite cathartic.

[Obsidian 10]

...What do you do to gain experience then?....

 

mistakes!

 

reading and learning the theories/strategies may be the easiest part of trading. how and when you apply the things you learned requires experience.

[TheNegotiator 13]

mistakes!

 

reading and learning the theories/strategies may be the easiest part of trading. how and when you apply the things you learned requires experience.

 

Ah, but are the mistakes you make as a trader always that obvious?

[TheNegotiator 13]

Thanks for sharing ln! I think you've got a good base to move forward and are benefiting from your experiences in the best way. The Friday afternoon thing you mentioned happens sometimes. What it comes down to is being adaptable and able to quickly shift gears when a market changes. It's also maybe a little about being confident in your plan and accepting the risk. If you aren't prepared to lose a few ticks to see if you're right, then you shouldn't be taking a trade really.

[Obsidian 10]

Ah, but are the mistakes you make as a trader always that obvious?

 

sometimes yes.

I think our mistakes (not all the time but usually) have patterns.

for example some traders go against the trend..."this pair rallied 100 pips today, cant go any higher"...a few hours later "how come it can climb another 100pips"....you can see they do the same mistakes over and over.there are tons of different examples you can see on the forums...

 

we analyze instruments to understand their behavior, find price patterns. I think we should do it to analyze our own trading style to see if our mistakes hold a pattern or not...or sometimes we lose because we try to trade an instrument that we are not familiar with...

[TheNegotiator 13]

sometimes yes.

I think our mistakes (not all the time but usually) have patterns.

for example some traders go against the trend..."this pair rallied 100 pips today, cant go any higher"...a few hours later "how come it can climb another 100pips"....you can see they do the same mistakes over and over.there are tons of different examples you can see on the forums...

 

we analyze instruments to understand their behavior, find price patterns. I think we should do it to analyze our own trading style to see if our mistakes hold a pattern or not...or sometimes we lose because we try to trade an instrument that we are not familiar with...

 

The mistake isn't fading the market in itself. It's the belief that it can't go any higher, the failure to work out whether or not the market is really trending or not, the failure to assess the continuing nature of any trend, the failure to identify strong levels of resistance, the failure to interpret trading activity at said levels and finally, the failure to accept risk.

[michael45 10]

The mistake isn't fading the market in itself. It's the belief that it can't go any higher, the failure to work out whether or not the market is really trending or not, the failure to assess the continuing nature of any trend, the failure to identify strong levels of resistance, the failure to interpret trading activity at said levels and finally, the failure to accept risk.

 

Mistake are normal thing of humans. But human with mistake will not make good trader. But sometime mistakes make genius. It is destiny with wisdom. Wisdom want to explore about mistakes. So some time mistakes will make you genius, But not at all time. Many time make you failure.

[Obsidian 10]

Mistake are normal thing of humans. But human with mistake will not make good trader. But sometime mistakes make genius. It is destiny with wisdom. Wisdom want to explore about mistakes. So some time mistakes will make you genius, But not at all time. Many time make you failure.

 

actually you may be a good trader if you knew when and how to fix your mistakes