In the interest of continuity - I am updating a trading journal on Big Mike's Trading Forum. This describes my new thing of finding my trading niche as described in a good book I read.
http://www.bigmiketrading.com/trading-journals/25166-starting-all-over-finding-my-trading-niche.html
In short I am sampling a number of trading methodologies to find if I am good at them, or at least enjoy them to pursue further.
At present I am scalping the Bobl / Bund and finding it quite ideal as a job. The market opens 5pm Gold Coast Time and this week has demonstrated good trading (if any) for the first few hours. Scalping seems a fun game also.
Friday, 11 January 2013
Tuesday, 18 December 2012
Eyes Are Open
It seems like a life changing breakthrough - but in reality it is just a blatantly obvious realisation that should have occurred three years ago. Technical Analysis is flawed. It will still have its uses but not for what you think it does. Having spent 2 weeks studying the market Order Flow it seems obvious - if this is how the market behaves at its most basic level, then why on earth should price just stop at the magical levels determined by my Trendlines, Gann lines, Fibonnaci retracements, bar counts, time projections, moon projections, planet conjunctions haha...
I will still leave room for some of these esoteric concepts to have some benefit down the track in case there is a metronome to all the chaos, however finding the metronome is not the path for me anymore to making consistent profits. Purely price analysis and swing trading has a vital flaw also - everyone knows where the swing traders stop entries are going to occur. My orders no doubt have sat a tick, or a point above yesterdays highs along with all the other Pork Chop Orders creating liquidity for some normal intraday trader to grab a few ticks here and there. Those few ticks could go in my favour, or against, but the fact is that once my stop order enters the market order flow, it enters a world where pretty much noone gives a sh*t which direction the markets going. And that is a problem - because for my daily swing to repeat in time and / or price, I need enough people to think that it will repeat, and I now realise, and quite frankly, they don't. The real money does not give two cents about where the market is going tomorrow, let alone in an hour. Well two cents they would if they have 10000 lots invested in it. So that is my realisation in a nutshell. So long Gann and all the esoteric predictive crap - yes you allowed me to call a yearly top to the day, but I lost a lot of money out of that and the subsequent attempts to call the yearly bottom. And I guess it was only one of about 20 top call attempts I made. Elliott Wave you do have use still, but in a much more subjective manner than I was willing to give you. Even Prechter himself said that calling the markets is of least importance (and least accurate) application of the theory. Mass psychology I believe does move in waves - but how effficient is the market nowadays at reflecting MASS psychology - like on a socionomic scale? Not very. Most of the orders I am seeing in the order books represent computer algorithms. They are programmed by people they say, so are subject to emotional market psychology... but I don't believe that. I have programmed a few IF THENs in my time and there wasn't a conditional statement on how the programmer felt.
So that is my rant - I will describe a number of the paths I researched heavily this past 3 years and their pitfalls in my fulltime search for the holy grail. Everyone tells you the Holy Grail system doesn't exist but that is a hard itch to not scratch. I read every single word and analysed every single chart that WD Gann produced which is probably one of the more obscure places to look. I still hope I can make use of this stuff one day but now its time to treat trading like a business, otherwise I will have to go back to the engineering world really soon. And to treat it like a business I have to compete with those that are making money at it on the time frame I want to get paid within. And those guys are Proprietary Traders. In the mean time make sure you stay away from sites like WITS, Educators like SITM (unless you are a long term investor), and anyone else that promises you a way to make a living trading. I haven't seen any of these guys prove they are doing it themselves despite requesting this information.
So what will it take to become a Day Trader? I believe that you have to have the trading skills, the same way that a tennis player has certain skills, and a software engineer has certain skills, and a consistent proprietary trader would have THE skills.
The skills I believe one needs to master are:
Tape Reading / Order Flow Reading
Price Action Pattern Recognition
Quick Trade Execution (Quick fingers)
Subconcious Risk Reward Filtering of trades (not in the traditional ONLY 3:1R style)
Patience
Beliefs about the market required:
Size moves the market
Size can occur anywhere (though for focusing purposes price levels can be predetermined for where the pork chops are going to get excited about price)
Other traders have to place market orders after I am filled to push the market in my direction (or liquidity completely dry up)
News / Events can effect market liquidity in random ways that can be taken advantage of (but best left alone whilst mastering trading skills)
Consistency in how I respond to market information input is more important than profits... as long as there are at least evidence of profits from being consistent
Combine these and I reckon I can make a living from trading.
I plan on day trading real money in January (my 3 years of real (blinded) trading ended in November after a fantastic slightly down month full of sleepless nights watching US markets. Not really worth it.
This is my current reading list I am working through:
No BS Day Trading - Everything he's got
One Good Trade - Bellafore
Jigsaw Trading Manuals - jigsawtrading.com (they have the software I need)
******* This should be enough to get started, then:
Studies in Tape Reading - Wyckoff
Day Traders Bible - Wyckoff
Tape Reading & Market Tactics - Humphrey Neill
Techniques Of Tape Reading - Graifer & Schumacher
Some Market Profiling Stuff
This blog will double as my trading log as I like writing, and typing is more efficient than hand writing, and maybe I will get some feedback.
And just quickly on Market Psychology. I am casually working through Mark Douglas Persistence Workshop - it is fantastic. But after reading countless market psychology books, taking up meditation, shaving my head.. Peter from Jigsaw Trading sums up trading psychology nicely in these words:
www.jigsawtrading.com on trading psychology:
I will still leave room for some of these esoteric concepts to have some benefit down the track in case there is a metronome to all the chaos, however finding the metronome is not the path for me anymore to making consistent profits. Purely price analysis and swing trading has a vital flaw also - everyone knows where the swing traders stop entries are going to occur. My orders no doubt have sat a tick, or a point above yesterdays highs along with all the other Pork Chop Orders creating liquidity for some normal intraday trader to grab a few ticks here and there. Those few ticks could go in my favour, or against, but the fact is that once my stop order enters the market order flow, it enters a world where pretty much noone gives a sh*t which direction the markets going. And that is a problem - because for my daily swing to repeat in time and / or price, I need enough people to think that it will repeat, and I now realise, and quite frankly, they don't. The real money does not give two cents about where the market is going tomorrow, let alone in an hour. Well two cents they would if they have 10000 lots invested in it. So that is my realisation in a nutshell. So long Gann and all the esoteric predictive crap - yes you allowed me to call a yearly top to the day, but I lost a lot of money out of that and the subsequent attempts to call the yearly bottom. And I guess it was only one of about 20 top call attempts I made. Elliott Wave you do have use still, but in a much more subjective manner than I was willing to give you. Even Prechter himself said that calling the markets is of least importance (and least accurate) application of the theory. Mass psychology I believe does move in waves - but how effficient is the market nowadays at reflecting MASS psychology - like on a socionomic scale? Not very. Most of the orders I am seeing in the order books represent computer algorithms. They are programmed by people they say, so are subject to emotional market psychology... but I don't believe that. I have programmed a few IF THENs in my time and there wasn't a conditional statement on how the programmer felt.
So that is my rant - I will describe a number of the paths I researched heavily this past 3 years and their pitfalls in my fulltime search for the holy grail. Everyone tells you the Holy Grail system doesn't exist but that is a hard itch to not scratch. I read every single word and analysed every single chart that WD Gann produced which is probably one of the more obscure places to look. I still hope I can make use of this stuff one day but now its time to treat trading like a business, otherwise I will have to go back to the engineering world really soon. And to treat it like a business I have to compete with those that are making money at it on the time frame I want to get paid within. And those guys are Proprietary Traders. In the mean time make sure you stay away from sites like WITS, Educators like SITM (unless you are a long term investor), and anyone else that promises you a way to make a living trading. I haven't seen any of these guys prove they are doing it themselves despite requesting this information.
So what will it take to become a Day Trader? I believe that you have to have the trading skills, the same way that a tennis player has certain skills, and a software engineer has certain skills, and a consistent proprietary trader would have THE skills.
The skills I believe one needs to master are:
Tape Reading / Order Flow Reading
Price Action Pattern Recognition
Quick Trade Execution (Quick fingers)
Subconcious Risk Reward Filtering of trades (not in the traditional ONLY 3:1R style)
Patience
Beliefs about the market required:
Size moves the market
Size can occur anywhere (though for focusing purposes price levels can be predetermined for where the pork chops are going to get excited about price)
Other traders have to place market orders after I am filled to push the market in my direction (or liquidity completely dry up)
News / Events can effect market liquidity in random ways that can be taken advantage of (but best left alone whilst mastering trading skills)
Consistency in how I respond to market information input is more important than profits... as long as there are at least evidence of profits from being consistent
Combine these and I reckon I can make a living from trading.
I plan on day trading real money in January (my 3 years of real (blinded) trading ended in November after a fantastic slightly down month full of sleepless nights watching US markets. Not really worth it.
This is my current reading list I am working through:
No BS Day Trading - Everything he's got
One Good Trade - Bellafore
Jigsaw Trading Manuals - jigsawtrading.com (they have the software I need)
******* This should be enough to get started, then:
Studies in Tape Reading - Wyckoff
Day Traders Bible - Wyckoff
Tape Reading & Market Tactics - Humphrey Neill
Techniques Of Tape Reading - Graifer & Schumacher
Some Market Profiling Stuff
This blog will double as my trading log as I like writing, and typing is more efficient than hand writing, and maybe I will get some feedback.
And just quickly on Market Psychology. I am casually working through Mark Douglas Persistence Workshop - it is fantastic. But after reading countless market psychology books, taking up meditation, shaving my head.. Peter from Jigsaw Trading sums up trading psychology nicely in these words:
www.jigsawtrading.com on trading psychology:
The fact is, I'm not a big believer in 'trading psychology' as it is described on a lot of web sites. A lot of people suck at trading but it has nothing to do with psychology.
Let's take Tiger Woods (if you are a pretty blonde you may already have done). It would be fair to say that he's been through a rough patch performance-wise and as of writing this (end of 2011), it would be fair to say he's back on top (of his game at least). Now, if anyone needed help from a sports psychologist to get his mind back in the game, it's Tiger. How about you? Well, you aren't exactly Tiger Woods are you? I know I'm not. I am terrible at golf to be honest. The most dangerous position to be in on the driving range is the stall to the right of mine. I don't know anyone else who can consistently slice the ball with every club (except irons 7-9) the way I can. Now, is it a psychological problem? Not at all, I'm just a really poor golfer, in fact, I am terrible at any game that involves a ball. The only way a psychologist/psychiatrist could help me would be if they paid for my golf lessons.
Let's strip away the excuses. If you are losing money trading, then the reason for this is unlikely to be psychological. The reason you are losing money trading is because YOU DON'T KNOW HOW TO TRADE. That's right. You have no clue when to enter and exit the market. You simply don't have any working method by which to evaluate when the market will move in one direction or the other. There is nothing wrong with this. There are a few genius level traders that figure it out themselves and then there's the rest of us that need some form of training to knock the information into us.
I hope you enjoyed this intro. I will be getting my sh*t together for a start at live trading in January including practicing / learning my trading skills. Hey.. prop shops have you up and running in 6 weeks so why can't I do it?
I will probably post a thing or two on things that click for me but until then, have a good holiday season.
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