Christmas Trading

Bad Assed Trader:  I hear that many traders pack up their trading tools well before Christmas and return the week following the first week of the new year.  It's a good idea to take a break and I'm sure they know what they're doing.

But I'm not there yet myself.

I like to keep in the flow of things and so have been at my trading desk every day over Christmas except Christmas Eve, Christmas Day and Boxing Day, such is my dedication...  I haven't actually done much trading but have kept up with my daily analysis.  The last trades I placed before Christmas were on December 22nd and Santa was on my side: two out of three of them hit target yesterday:

GBP CAD Short Trade from December 22 - 28 2011 shown on 60min chart

The first little chicken to come home to roost was trading the British Pound (GBP) to go down against the Canadian Dollar (CAD).  I entered the trade where the yellow arrow marks and came out where the pink arrow points.

If you remember my rules from a few blogs ago you'll know that I look for various pieces of evidence that price is turning to take my trades.  On this occasion you'll see that before price first started dropping there were three peaks where price tried to get above a level at about 1.6170 and failed.  This was one of my indicators along with a soft level of resistance on the daily chart and two high test bars on the daily chart, the second of which was a reversal bar and formed a "train track" formation with the previous bar as shown below (the train tracks are the green and red pair that are almost exactly the same size and position and after which price drops):

GBPCAD High tests and train tracks

To me this combination of soft resistance, high tests and train tracks formed a powerful indication that price was about to head down which was in line with the overall trend for that currency pair.  I placed my stop loss above the highest peak (the central green bar) and entered when the dip in price on the four hourly chart was broken to form a lower low following a lower high.

I placed my target just above where price had previously dipped to on the daily chart: it had dipped at around 1.5750 so my target was 1.5778 which was 276 pips, equating to 1.6% net profit.
As it was, the pound was clearly taking a pummeling over Christmas - bad for the pound but great for me as I happened to be in two short trades on the pound at the time.

I've often see price tanking fast on the charts and usually when it does I'm just watching from the sidelines but when the pound really dropped off the cliff yesterday (December 28 2011) I was, for once, actually benefiting.  The pound dropped against the US dollar by 250 pips yesterday and I caught 189 of them which was great for me.  Here's a pic of how this drop looked on the daily chart:

GBP USD showing big down move 28 Dec 2011

Yesterday's bar is the second to last on the chart and you can see it took out all the gains of the previous two days and was an even greater move down than the large move up on Dec 20 which was pretty exceptional.

Now I had placed my trade on 22 December as an order so that if my criteria were met I would be taken into the trade and I was on 23 December.

Here's a picture of the four hourly chart which shows my entry on this short (selling) GBP USD trade:

GBP USD Short Trade Dec 23 - 28 2011

I entered at the yellow arrow as price broke through a level of support to form a new lower low.  Whilst price had been bobbling along somewhat before I traded down it had some lovely examples of reversal indicators in that bobbling process.   Firstly the great big red high test bar and then a few bars later a large high testish green doji bar (looks like a cross) which was immediately followed by a red doji bar.

As you can see, I did have to sit through a retracement back to my starting point and some, but my stop loss was above the top of that high red test bar as I'm a cautious trader really so I was still in when price plummeted.

As it was I could have put my stop loss lower, above the green high testish doji bar but one of my mantras is that Cable (GBP USD) suffers from "chop at the top" and also has a choppy bottom so I like to be extra cautious with my stop losses as I hate to get chopped out only to see price shoot to my target. This also met my rules which I now stick to like glue.

EUR USD Short Trade Dec 22-28 2011

My third trade placed on December 22 was on the good ole Euro and again I've put the four hourly chart up here to show my entry (yellow arrow) and profit target (pink).

On the daily chart price had retested a level that had been support but was now resistance with a big high test reversal bar.  I entered, in my usual manner, as price broke the low after making a lower high (again with a nice big high test reversal bar).  I think the Euro then got struck down by Christmas spirit as it fuffled around indecisively for days which nearly drove me to kill the trade but I stuck to my rules (thankfully).

It was weird how price edged up ever decreasing bars until it touched the 50 Moving Average (red line) and then just tanked, but great to watch when you're trading it short, especially after I had to find so much patience during the retracement which happened almost immediately after my trade had kicked in so I'd been in negative position for days on this trade.

It's still a slightly irritating trade in that although price has clearly hit my target (1.2857) which I placed 22 pips above S2 (a strong support line) on the daily chart the spread on my broker's platform has kept me in and now it's starting to retrace.  I took half of my position off once I saw this had happened to capture 85% of my target with half of my position and moved my stop loss down to the high of today to lock in 73 pips profit on the other half in case it retraces right back up.

It's always highly annoying when you're kept in by spread, on this occasion price went 2 pips below my target and the spread on this pair is 2 pips on my broker's platform so according to my charting software it actually precisely hit my target before heading back up.  But clearly my broker has a different story.  Still, it may head back down again and through my target and if not I've got 73 pips protected.

So it's been a good Christmas trading and I haven't even got onto all the wonderful trading books I got from my family for Christmas: more on those in my next blog....

Why 1% must be enough on a Counter Trend Trade

Bad Assed Trader:  Back on December 3 2011 I shared with you a trade I was stalking on NZD CHF.  At the time it looked like price was pretty much in a range and nearing the top of the range so I was looking for it to bounce off the resistance line (ceiling) at the top of the range when I would sell (once the four hourly chart showed a lower high and price dropped to form a lower low).

I promised to let you know how it all panned out so this is the story of my trade on the NZD CHF.

I have to start at the end of the story because my coach Emmanuel saved me from myself on this one like the knight in shining armour that he is.  I know I called him a midwife only recently when he helped me deliver my strategy but Emmanuel is made of magic gold dust and can turn from midwife to knight in the mere blink of an eye such are his powers.

So I lost no money.  But nor did I make any...and as Emmanuel pointed out - strictly speaking I shouldn't have taken the trade in the first place.

So here's the chart showing what happened (yellow arrow is when I sold and my stop loss was at 0.7260 - well above the high of the spikey red bar):

NZD CHF Counter Trend Trade from 08 12 11 on the Four Hourly Chart

This is the four hourly chart which is the one I use for entry into my trades.  The yellow arrow marks the entry point - although as you can see the second peak is not actually lower than the first which is why the trade didn't actually meet my rules.

Clearly at the time I was anticipating the second peak to be lower and because it was a spikey outsize bar (larger than the previous bar which had also engulfed the bar before - good reversal signs) I must have justified it to myself as equating to a lower high.

Also, and perhaps more importantly, price had actually broken up through the resistance level on the daily chart (not shown here but see Dec 3 blog) and closed above it so my ranging strategy was now a counter trend strategy if I'm completely honest.  And with counter trend trades my rule is to only expect 1% profit and to set my target there.

So I entered at the break of the neckline as shown by the yellow arrow and set my target at a rather ambitious 222 pips (0.6938) rather than at 1% profit which would have been 100 pips or 0.7060.

As you can see, price plummeted the next day but not quite to a 1% profit target level.  It then bounced back up off the 20MA on the daily chart (not shown here) and showed indecision for a few days before testing the 50MA on the daily chart, partying wildly there for a while and then springing back into action.

As you can see, I have marked on where 1% profit could have been taken if I'd had my wits about me and had actually noticed that I was in a counter trend trade (which I didn't until after the trade was closed).

I had a session trading with Emmanuel on Monday (December 19) who, in his lovely gentle way, pointed out that the slightly higher high on the four hourly chart meant I had broken my rules and so I should move my stop loss to break even so as not to lose money on a trade that I shouldn't be in.  He's a wise man and as you can see on the chart after that price went in only one direction really - up.

This trade provided me with a couple of really useful lessons:

1.  When I'm stalking a trade where I expect price to stop somewhere in particular (eg at a support/resistance level on the daily chart) and it doesn't but is sufficiently close for me to justify taking the trade then I must review the label I am giving to the trade.  When I trade a range I set 3 or 4% targets most of the time but a counter trend trade only justifies a 1% target.  I didn't show good mental agility with this trade.

2.  I need to stick to my rules and not see what I want to see rather than what is actually there (a higher high on the 240)

3.  If I find myself in a trade which broke my rules I should follow Emmanuel's advice and move the stop loss to break even.

So even a crap trade provides useful lessons!

What an Excellent Trader Does

Bad Assed Trader:  I'm blogging from my trading desk in France today.  This sounds more glamorous than it is.  My desk is in fact a table identical to one I saw in a local french bakery the other day, with a marble top and wrought iron legs.  Mine has a laptop on it rather than flour, dough or patisserie but it's the same table and probably belongs in a bakery.  But for now it's a trading desk.

I like the fact that technical forex trading is a craft requiring few tools.  On my desk I have only a small notebook in which I set out the trades I plan to take and a small pile of forms which I call my Daily Analysis (it's a simple form I complete every evening and review every morning on which I record what is happening to each of the 30 odd currency pairs I'm willing to trade, whether they are going up or down and more importantly what needs to happen for my trading set up to occur).

I also have a couple of pens and two highlighters to pick out the currency pairs I'm presently stalking and my current guide book: "The Daily Trading Coach" by Brett N Steenbarger.

Sadly there's no patisserie on the table but this past week I have indulged in numerous eating marathons and frankly couldn't face a choux or eclair however inviting.  These marathons, when done by the french, seem to result in trim figures - the evidence of triumph of continual troughing over fast food.  But when done by us, the Brits, usually end in tears when we get home and face the scales and another set of clothes too tight for comfort.

But enough of my feeble attempts at the french lifestyle.  Today I am reminding myself, before I enter another trading week on Monday, that to be an excellent trader I must do as an excellent trader does.  This seems obvious I know but I'm still at the stage where I have to remind myself.

Having developed my strategy (shared in detail last week here on this blog), I am now getting into the rhythm of analysis, planning the trades and executing them according to plan.

Trading has become less effort and whenever I am tempted to cut short a trade because it is well into profit and I know it's due to retrace a bit (which can be the uncomfortable part as you watch your profits melting away) I am able to remind myself: what does an excellent trader do at this point?  An excellent trader lets the profits run - they expect the retrace and as they've only entered a trade about which they are confident then it does not feel uncomfortable because they anticipated it happening. And so I sit on my hands.

Similarly, when I have been stalking a trade for days and start to see price action indicating that the necessary change of direction is in the air I remind myself that an excellent trader waits for evidence and confirmation before placing a trade.  No more jumping in.  This is not what excellent traders do.  Gradually, by continuously reminding myself of what an excellent trader does I am losing the urge to make these amateur errors.

And just when I think I'm getting the hang of spotting, executing and managing trades I reach a point in The Daily Trading Coach where Brett talks about the challenges of making trading your income and unearths a whole new set of tasks and thought processes that I must master.

Apparently I must diversify to ensure my trading technique does not become redundant due to market changes, or as he puts it: "Diversification in your trading enables you to stay afloat when any one of your strategies stops working for a while and becomes obsolete."  But I'm not sure how this relates to my trading strategy which is all about spotting a turn from up to down or down to up and trading it.

When I read on I discover that I must track my returns in different conditions.  So for example when I'm trading the return back to trend following retracement, or when I'm trading counter trend (the retracement itself) or when I'm trading in a ranging market where price ping pongs between two levels - I should know which of these situations gives me the best results.

I should also know which currency pairs bring me the best results.  And if I sometimes use my trading strategy principles on a smaller time frame then I should know which time frame gives me the optimum return.  I should know whether I get better results from trading the bounce against horizontal levels or moving averages.

Basically I need to scrutinise every aspect of my trading to see and know which parts are most effective.

It seems my trading analysis will need to be taken to a new level.  Up until now I have only assessed my past trades for what I did right or wrong in spotting, placing and managing the trade as this has been my main concern.  I can feel another set of goals coming on and the ghost of Faceless Bureaucrat haunts me still.

But if Brett says this is what excellent traders do then this is what I must do.  I feel as though I am almost back at school, trying to earn the gold star from the teacher judging my work.  And yet I am judging my work so I am the one awarding the gold star as well as the one being excited about getting one. Which is a spot odd.

I guess it's all about clarity as to what excellent means and then taking focused action to deliver that.

Time to award myself a gold star for recognising the next step I reckon...

Even Traders Need Motivation Tools

Clarity brings results

Bad Assed Trader:  Having only recently taken delivery of my very own strategy I've been rather obsessive about it this past week.  It has haunted my dreams and occupied my waking thoughts.

Another session with Emmanuel last week helped me to clarify in precise detail what it is I am actually trading. Emmanuel's patience knows no bounds (just as well...) and if I was looking at my strategy with blurred vision he has now provided prescription glasses to enable me to see with absolute clarity.

That clarity has brought results.  November was my best month ever with a 6% return.  If I am able to demonstrate consistency with my strategy during December then in the New Year I will start to build up my trading account with chunks of my redundancy payoff and hopefully by the summer my trading income will equal what the NHS paid me.  This is the plan and has always been my goal...well, since last Autumn.

In my last blog I promised to reveal my trading strategy.  So for anyone who is interested here are my Rules, in their entirety.

Cautionary note before I start: For readers who are not traders - please don't try this at home without proper training first.  I've been doing this now for coming up to a year and a half and even with the Rules there is judgement and discretion involved.  A strategy that works for me will not necessarily work for others - to be successful as traders we have to build our own strategy, one that works for us and in which we have confidence.  So here we go....

My Trading Rules

I trade Cyclicity combined with Support and Resistance and Price Action

Entry

1.    Identify the trend on monthly, weekly and daily charts – daily is the chart I’m trading. Up, down or ranging, all are ok but identifiable pattern exists

2.    Identify Support and Resistance levels – horizontal or 50 Moving Average – which must work for the trade (ie bouncing, only use breaking if combined with bouncing).  Trade must be bouncing off strong Support or Resistance (S/R) & the stop loss goes behind whatever it is

3.    Identify target – reward to risk must be at least 1:1.  Ensure no strong horizontal/respected moving average levels of S/R are in way of target.

4.    Wait for cyclicity to be in my favour – ie we're at the early part of new phase 1 or 2 in whatever time frame I’m trading.  Countertrend is ok if conditions are exceptional and it’s clear price has a long run before it’s likely to return to phase 1 – in this case be extra conservative with target & double check lines of S & R that may cut the trade short

5.    Spot the inklings of change: Use the hourly chart for signs of the cyclicity phase changing eg lower highs or higher lows (M or W shape)

6.    Wait for price action to confirm the shift of sentiment eg doji bar, high/low test bars, train tracks, W, M on 240 (four hour) timeframe

7.    With trend trades: Ensure MACD/stochastic indicators are not diverging from price action.  This is the only reason to stay away if other factors are present.  Indicator divergence after entering a trade is irrelevant – stick with it.

8.    Counter trend trades: Ensure indicators (MACD/Stochastic) are diverging from price action and exhaustion of phase 1 is clearly confirmed by the indicators as well as cyclicity and price action (on the 240 time frame)

9.    Enter the trade on the break of the neckline of M or W on the 240 chart after seeing the lower high or higher low.

10. Set stop loss with reference to the daily chart: place above the daily high/low of the bounce cause.  If there is a moving average/horizontal S/R or big number within about 10 pips from the bounce spot place stop loss behind it for added protection (price sometimes spikes up to retest these things).  The exception to that would be if I’m targeting over 200 pips and my reward to risk is over 2:1 (then can put the stop loss >10 pips over where it previously bounced)

Mixed Signals means indecision and a warning to stay out

Management of the Trade

Set target and place a limit order for it based on next zone of S/R based on price action using discretion with conservative bias

If trading counter trend target is unlikely to be more than 1% but is based on next level of soft S/R or a respected moving average.  If significantly more than 1% looks likely then take half off at 1% and move stop loss to break even and trail daily.  Once close to target trail more aggressively on 240 or 60 using discretion (maximise protection of stop loss as priority) eg behind price swings and moving averages 

If trading with the trend trail stop loss on daily basis using daily bars as a guide but protecting stop loss using S/R on 240 or even 60 min charts (as above) as get closer to target

If price is fuffling this is not a reason to delete a trade, consolidation is normal before a move.  Think of snake down/snake up.

Trade deletion or interference loses money so set realistic target and leave.

Only take trades where you have a high level of confidence and can therefore sit through the random erratic movements on the way to profit without fear/anxiety.

Set stop loss realistically - adding a few pips for safety (as price has often just pipped me out before going my way).  Add more pips for larger timeframe (eg 5-10 for daily chart) and how choppy the pair is. I always protect my stop loss by Support or Resistance preferably with a big number as well. Expect Chop At The Top – cable often has a choppy bottom too!

If market gaps on opening and enters trade at different level then only take trade off if risk exceeds 2%, otherwise leave as it is with stop loss in same place.  Market gapping means correct anticipation of direction of travel and possible strong move.

The best trading is finding great trades that meet all the criteria, being confident in taking them, being realistic in setting profit and stop loss and being calm and competent at execution. 

If in doubt, stay out.  As Rob says: better to be a pilot on the ground wishing you were in the air than a pilot in the air wishing you were on the ground.

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

So there it is, for the record.  My very own strategy in it's full glory.  


And just by way of demonstration, here's a possible trade I'm stalking. 

NZD CHF on December 2nd 2011

It's the New Zealand dollar against the Swiss franc. Price has been ranging for months and months, basically between the two horizontal grey lines (I've put two lines to represent the top of the range as there's a bit of a zone rather than a precise point: what was support back in January/February with price bouncing up off it has now turned to resistance with price being pushed back down from it).

Price is nearly at the top of the range so I'm waiting to see signs of reversal before I take it short (sell).  We already have a high test bar on Friday which is a good reversal sign but as per my rules I'm looking for more price action confirmation of buying exhaustion on the 240 and 60 minute time frames.

I'll let you know how it goes....

Delivery!

Bad Assed Trader:  This has been an exciting week for Bad Assed Trader...I have finally given birth to my strategy.  I couldn't have done it without the expert midwifery skills of my ever amazing coach Emmanuel so if he's reading this - thanks Emmanuel!

I think the birth really took place yesterday morning when I spent four hours with Emmanuel analysing all the currency pairs and my November trades and discussing what I would and wouldn't trade.  By the time I came away I had a certainty and clarity that had been gradually emerging but now was fully formed - as if it has a life of its own.

It helps that my trading account is now showing that I have turned the corner - up 5% so far this month with another 2-3% sitting in my profit/loss account waiting to be banked (or eaten up by the market).

And who's the father of this strategy?  I have to pay tribute to the massive contribution Rob, another of the excellent traders at Knowledge to Action where I've been training, has made to my trading approach.   So if there is a father of this strategy then it has to be Rob.  I've integrated so much of what he's taught me and many is the time when the penny has finally dropped after I've heard him speak on the various courses.

So after a gestation period of something akin to a year and a half (does that make me an elephant...?) I now know what I am trading.  This may sound like I'm incredibly slow, after all I've been trading all the while so what was I doing not knowing what I was trading?  God only knows but I was searching for my own trading approach, trying different strategies and endlessly analysing my trades to see which types brought the money rolling in.

This has not been an easy journey for me and in many ways it's only now beginning.  There will be many more ups and downs, more testing of my metal and constant analysis and reflection required, but I feel I've passed a significant milestone.

It's such a relief to have come to this point where I'm really clear about what I'm doing.  So...what am I doing?

My trading strategy is very simple and based on the fundamental principles of trading.  Any trader reading my strategy description would say there's nothing new or especially exciting there but hey, it works.

If you want to find out more then read my next blog where all will be revealed.

AUD CAD daily short trade 8-23 November 2011

But before I go, here's a chart of my one of my latest trades.  This was selling the Aussie dollar against the Canadian dollar entering on November 8 (top arrow) and exiting on November 23 (bottom arrow) which generated 2.2% profit.

I could have secured a better entry but I'm still working on improving all aspects of my trading and particularly my stop loss management.

Since my discussion with Emmanuel I've learnt that I probably should still be in this trade and trailing the stop loss behind the down bars but I set a target and it hit it so the money is banked.

More soon...

Tuning in the Radar

Bad Assed Trader:  In the recent assessment I've been through for my diploma in executive coaching I had to give a presentation about how I coach.

I talked a bit about using my radars.  One is an external radar, using eyes and ears to see and hear information being transmitted by my clients through their body language and verbally: what they say and how they say it.

The other radar is an internal radar which makes me feel what the client feels.  Often this is called empathy.

Learning to coach has required a great deal of reflection and self examination and I've had to conclude that I am someone who feels a lot and who feels strongly.  People tell me I bring a lot of energy into the coaching session, that I energise them.  I think this is that I am emotionally charged by coaching and this presents as energy and enthusiasm and I am the sort of girl where what you see is what you get, plain and simple.

Interestingly, when being coached by other coaches on the diploma course as part of their practice coaching I have almost always chosen my trading performance as my issue to be coached on and the coaches repeatedly say that I am similarly energised by the trading.  They often find it a bit much, to be honest, reporting that I send loads of information flying at them from all directions and they don't quite know where to start with it all.

So where does this radar thingy come in when it comes to trading?

Well, when I was being coached as part of someone else's diploma assessment last week this radar thing emerged as a very relevant issue in my trading and what I can do to improve it further.

We were discussing the issue I have been vexed by recently which is that the more I create rules to follow, checklists to tick and targets to meet (in my well worn Faceless Bureaucrat style) the worse my trading gets.

Yet when I relax, watch the charts and just go with the flow my trading takes off and it's just fab.

At my last session with Emmanuel, my trading coach, his answer to my vexation was simple: Go back to what worked.

I followed his advice but I also wanted to understand what was going on and why, so exploring this in a free coaching session seemed like a good idea.

This energy I bring counts for a lot when you're a Faceless Bureaucrat (as I once was in the now rapidly dimming past).  it was often only through sheer will that I achieved some of the things I did to enable service improvements to be made.

In those times my radar was receving (targets, strategies etc) but it was also transmitting strongly too - as persuasion, negotiation and often as this sheer will.

When coaching others I've had to fine tune my receiving radar and become more aware of what I'm seeing, hearing and sensing.  I've also had to tone down my transmitting radar so all it does is reflect back to the client what I've received from my external and internal receiving radars: a bit like a magnifying mirror.

In my recent coaching session what emerged for me was that the targets, checklists etc are all part of me transmitting and this transmission interferes with the market signals I'm seeking to pick up.  It seems I have difficulty receiving when I'm transmitting.  I never was much good at multi tasking.

I know that as a trader I have to perceive the market signals acutely.  I have to be able to technically read them - and I can with a skill that's still developing - but for my style of trading I also have to perceive them - almost feel them.

I know that when I'm at my best trading I look at a chart and can see what's going to happen next without having to go through all the evidence (although of course I do - it's mandatory for me, anything else is "jumping in" or jumping off a cliff as I'd rather see it).

When I say I can see what's going to happen next it's really more of a feel, I feel the weight when price is about to drop and often I can feel the stillness of price action as it pauses before falling off a cliff.

When I'm at my best I'm just working out the parameters for the trade when it starts to happen.  It happened yesterday morning when I placed a trade on Swissy (USD CHF).  It was counter trend but I had the evidence I needed to sell it and just as I was calculating my position size it started to move and I was in.

It wasn't my fastest trade but it hit my 1% target 4 hours later.  A similar thing happened with the Canadian dollar yesterday morning too - also counter trend.

On Thursday I took 3 trades: I sold the Euro against the dollar for 1% profit, sold the New Zealand dollar against the US dollar for 1.2% profit and tried to sell the Aussie dollar against the Japanese yen but got taken out by my broker's spread (price went up to 2 pips short of my stop loss) before price dropped to my target and beyond.  Despite the losing trade - which was my fault not my broker's: I set my stop loss too tight and I did really know it on one level when placing the trade I just thought I could get away with it - I'm content with my progress.

Tuning in to Trade

The reason I'm content is not complacency, I know I've got mountains of work ahead of me, further analysis of the charts, my past trends and myself at every level, but because I'm starting to recognise my best mindset for trading and when I'm not in it.  I'm starting to trust my perceptions more and with confidence.

Emmanuel had suggested I got back to what was working and I did, immediately. And guess what?  It worked.

Now I understand I need to tune up my receiving radar (the satellite dish in my head) and turn off my transmitting one whilst I'm trading.

What a fascinating journey this is.

Still trading...

Bad Assed Trader:  Bad Assed Trader would just like to say briefly that she is still alive and well and trading despite no posts for nearly two weeks.  The coaching diploma assessment is due next week and pressures of this work have prevented blogging opportunities.

But I'm still trading and have, despite a rather rocky start to November, been having quite a good time of it more recently.

Hope to start blogging again by the end of next week when the assessment will be all over.  Can't wait to finally be a full time trader.

Now, back to that presentation and essay...

Do we trade with Free Will?

Bad Assed Trader:  My latest fascination relating to trading is whether I am fully using my "free will" to trade.

One would like to think so.

But all is not what it seems in respect to human behaviour.

Wikipedia defines free will as:

"Free will is the ability of agents to make choices free from certain kinds of constraints."

I recently read that scientists had carried out research which allowed them to predict a decision people were going to make 6-7 seconds before the person had actually made the decision....or should I say was aware of the decision they had made.  The conclusion was that the subconscious (or unconscious mind as many prefer to define it) makes our decisions before we are aware of them and then informs the conscious part of our brain which thinks it has made the decision all by itself.

I then forgot where I had read the article so did a bit of googling and found this fascinating short Youtube video on Free Will  which demonstrates exactly what the article was saying.

In my research on the topic I also came across this really absorbing article  in the New York Times which has stimulated my thought no end.  As a psychology graduate and soon-to-be qualified coach I have a more than passing interest in this anyway, let alone how it relates to trading.

I have an emerging hypothesis which I'd like to start to relate here.

Evidence points to decisions being made first in the subconscious mind.  Logic would suggest that if decisions originate there then thoughts also originate there as you would expect thoughts to precede decisions.  Otherwise, what would be the point of thoughts if not to guide decisions?

Maslow's Hierarchy of Needs

Psychological study has long understood that people are primarily driven and motivated by deep seated needs (or urges).  These needs come before the thoughts and before the decisions - they are the first step in the process of any action we take.

At their most basic they are clearly physical - the need for air, water, food and warmth.  Maslow set out a hierarchy of needs in a pyramid (see left) and the basic needs are at the bottom.

So our need for air generates our action to breathe.  The thoughts and decisions concerning breathing are generally taken subconsciously.  Conscious thought does not come into it unless we wish to veto the decision to breathe and hold our breath.  We cannot consciously override this deep seated need though because in the end our subconscious takes over and forces us to breathe.

As we work up the pyramid we believe we have more choice over whether, how and when we meet these needs. We are also more influenced by our environment and upbringing in these choices - ways of acknowledging respect differs across cultures for example.

So we start with the need which drives or motivates us to find a way to meet it.  Latest research in neuroscience (watch that Youtube video and read that NYT article) is now showing us that our subconscious mind starts that process of meeting a need with something that could be described as a "perception of motion". This means the subconscious mind has an idea as to how to meet that need and perceives the answer.

Whilst needs are always real and valid (because they are simply needed - no choice or interpretation is involved), the ideas generated as to how to meet them are sometimes inefficient.  For example, someone who needs respect might hit another person thinking that will gain respect.  This might not be the most efficient and effective way to gain that person's respect.  These ideas from the subconscious are the result of learning, mainly as a child when we form our understanding of the world around us and how it works.

So the subconscious generates this idea and the conscious mind becomes aware just before execution, perceiving the decision as made and then witnesses the execution of the act as though it was controlling it.  According to the NYT article and information on Wiki, our conscious has the power of veto.  This means it can receive the proposal to act from the subconscious and then reflect on it, consider it more fully and then decide against it. This is considered to be where "free will" is applied, through conscious thought, where people believe they have resisted their urges or some predetermined destiny that's written into their DNA or fate or whatever.

But I'm not so sure.

I do believe we have free will but I don't believe it is generated by the conscious mind.  If decisions originate in the subconscious then all thoughts could be expected to originate there and so it is in the subconscious mind that free will resides.  Our conscious mind is simply overhearing, if you like, the thoughts and decisions the subconscious is considering and making.  Consciousness is just awareness: awareness of thinking, deciding, doing and perceiving.  I don't think I'm out of kilter here considering the definition I found on Wiki:

"Consciousness is a term that refers to the relationship between the mind and the world with which it interacts."

This reflects well my own line of thought which is that consciousness is just awareness of the world, including what we are perceiving, thinking and doing in our subconscious.  We (the bit of us that feels, wants, thinks, aspires, plans, decides, regrets, loves and hates) are our subconscious really.

The Oxford English dictionary defines conscious as "aware and responding to one's surroundings".

The conscious mind is the aware mind.

Experienced traders stress the need to be self aware, to recognise when feelings like greed and fear are starting to influence your trading and to refrain from trading until you are aware that you are back in control, ready to trade without emotion - trading what you see not what you think or feel or want.  Trading with free will.

So if we want to trade using free will and our free will resides in our subconscious/unconscious mind then it is our subconscious mind that must be trained to trade and to wish to use its free will (free from the influence of deep rooted emotions) when doing so.

I have some ideas that I am experimenting with on myself to train my subconscious to direct my trading more effectively and will let you know of positive outcomes as they unfold...

Unleashing the power within...

Fear of Missing Out

Bad Assed Trader:  As part of my continual search for the holy grail of trading improvement I am homing in on detailed aspects of my psyche by paying great attention to what I am feeling and thinking just before I take those of my trades that do not work out well.

The Euro Yen (EUR JPY) seems to be my nemesis at the moment, or should I say my tutor.  It recently gave me another learning opportunity.  I had thought I had identified my fears and recognised them but I was still operating with a blind spot in relation to the fear of missing out.

A couple of weeks ago I had been watching many of the currency pairs retracing back against their trends.   They were mainly in down trends due to dollar strength increasing, but they had all stretched themselves and were being pulled back to the 50 day moving average in the manner of an elastic band pinging back or, as my coach Emmanuel puts it, a lung breathing in and out.

So, as a trader, you watch the price going back up and you wait for a sign that it will turn and head back down.  My rule is that I need cyclicity to be on my side, with price bouncing off a strong level of support or resistance and price action indicating that price is turning by showing a high or low test bar, a doji, train tracks or equivalent - all shown by the nature and shape of the bars on the chart.

So Euro Yen was retracing and I was watching and waiting.  Patiently, or so I thought.  I subsequently realised that the more time passed and the more price retraced the more I felt a building up of pressure.  It was the same with many other currency pairs, they were retracing and then they were retracing more.

In fact, they started to look as though they might have actually turned and formed an uptrend as price was making a considerably higher high.

As I later realised, the pressure building up turned into a feeling that I had missed noticing the turn in the trend.  Then I started to feel - in a deep down sort of way rather than a blatantly apparent way - a similar feeling to that which you get as a child at school when someone's come into the classroom with sweets to share and everyone else has spotted the goodies and got up and helped themselves and because you were concentrating so hard on your work you didn't notice until it was too late and all the sweets had gone.  Awww.

With the benefit of hindsight I can see that this feeling influenced my actions.  I took a long trade with EUR JPY just one step too soon because the pressure had been mounting.  As a result price dropped to a dozen points below my stop loss taking me out and then chuntered its way up through my target.

Well I'm not gnashing my teeth over it as it provided me with a really helpful lesson.  As it was I was having a day's training in coaching that day as part of the diploma in executive coaching I'm doing.  So after losing my trade I had the benefit of some free coaching from another trainee coach and took this issue into the coaching arena.

It was fascinating to explore in detail the emotions that were involved in the run up to me taking that trade.  The other trainee coach and I put a magnifying glass onto my feelings about missing out and this has helped me to recognise those feelings of pressure which are so dangerous to traders.

No-one likes to feel they are missing out on something everyone else is benefiting from.  It feels painful and lonely.  We all have that small child inside still pressing us to join the crowd. You can see the advantages to children to follow the herd because they haven't developed sufficient judgement to know for themselves when something beneficial or harmful has appeared so they just tag along.  We are undoubtedly hard wired to do this for our whole lives.

As a trader I have to conquer that emotional pressure.  I have to anticipate that it will come, spot it coming and find a way to counteract it because successful traders absolutely do not follow the herd.  It's no good me denying I have that inclination to some degree: we all have it.  Good traders have found ways to prevent it from influencing their trading behaviour.

Youtube has an amusing video from Candid Camera showing how powerful herd behaviour can be on unsuspecting victims:
http://www.youtube.com/watch?v=fQI8pZJiMe0

Resisting the urge for sheep like behaviour

Bad Assed Trader gets off to a flying start...finally

Bad Assed Trader:  Readers who tuned in last weekend will have read the final farewell from Faceless Bureaucrat.  I'm on my own now, a Bad Assed Trader alone in a mad market, watching as the Euro soars over 100 pips against the Pound one day and tanks by the same the next, as it did on Thursday and Friday this week. Typical action in the frenzy that is the Forex...frenzy and huge potential.

I've been preparing myself for this adventure (Faceless Bureaucrat would have called it a "challenge" but I cast away such jargon and just head for the fun) and recently this has taken the form of training my subconscious to play a more active role in supporting my trading.  Now I can't prove that it is this tactic which has turned my performance around this week or the fact that FB has gone once and for all (P45 arrived in the post this morning - YES!) or maybe I was already turning the corner (hey, it was a very long corner, let's be honest) but something has happened, something amazing.

I refuse to see it as a blip.  I know it's only a week but I can feel that a shift has taken place in my mindset.  It's a combination of things.  I'm paying much more attention to lines of support and resistance and to cyclicity and giving more weight to them.  I'm more discerning in waiting for evidence of support/resistance PLUS cyclicity PLUS price action to be in my favour.  If one of these is missing then I skip the trade and don't care if I miss out.  Bad Assed Trader has become more patient, waiting for the signs to scream before she risks money and she's fussy, she has high standards and knows if she drops them she may as well stick ten pound notes in the fireplace and take a match to them.

And, following the lessons I learnt on the last trade I blogged about on Tuesday (October 4) I have actually managed to pretty much stick to my action plan - I only take a trade if I'm really confident in it and then I just don't mess with it.  I let it run its course.  I had one exception to this where I realised after entering the trade that I wasn't fully confident and so when price very clearly started going against me I took it off for half a percent loss. This turned out to be the right thing but again reinforced to me how important it is that I only go for those trades where I have the confidence to see it through.

So what's this flying start then?  Well, let's look at it this way.  Perhaps Bad Assed Trader was an apprentice until Faceless Bureaucrat was willing to cede control.  Perhaps BAT needed to learn all the lessons whilst it was safe to do so.  Of course she'll carry on learning until she drops but best to learn the most difficult and dangerous lessons when it's safe.

Perhaps BAT feels that only now does she really need to make serious money, now that she's on her own.

Whatever.

The point is I've made over 5% in my first week of post Faceless Bureaucrat trading. I took 11 trades and won 7 of them, often making 2 or more percent on a winning trade.  Now even Bad Assed Trader doesn't like to brag but after well over a year of trading I reckon I'm entitled to say that's my best ever week.  And I'm determined that it marks a turning point. There will inevitably be peaks and troughs but I'm sticking to this new mindset.  Let's see how it goes.

In the meantime I firmly believe we have witnessed the faceless bureaucratic caterpillar metamorphosing into a forex trading butterfly, and what a metamorphosis it's been. Thrills and adventure all the way.

And I promise to be honest if it all goes tits up next week.

From Faceless Caterpillar to Bad Assed Butterfly

Confessions of a Typical Trader

Bad Assed Trader:  I've been reflecting long and hard on a particularly instructive trade I took last week.  It's been another learning opportunity, let's put it that way.

No, it was not a disaster.  I didn't lose any money, in fact a gained a bit.  But not the full 1% I aimed for and could have achieved had I not indulged in the typical trading errors to which I am clearly still vulnerable (but working on it - or rather to be positive: am over it).  The reasons were 100% mine and the errors so typically and classically mine (and so typical of many traders I believe) that I feel I should hold this trade up as a standard "why I should not interfere" trade.

I had only recently gone over a clutch of my trades to compare what would have happened had I not interfered with them whilst they were on and compared the outcome with my actual results (with my interference).  It gave me the evidence to prove that my coach Emmanuel is right when he repeatedly says I should find a great trade, set realistic profit and stop loss targets and then let it run its course.  Do not start changing the target mid trade, for example.

USD JPY 4 hour chart on 30 September 2011

So here's how not to do it.

The Yen (USD JPY) has been buggering about for some time and I'd practically scratched it off my list for daily analysis until, on Friday, I noticed an interesting repetition in price action.  I've picked this out on the chart on the right by drawing the emerging trend line as price started to make higher lows and higher highs. MACD (the indicator showing at the bottom of the chart as an ascending row of peaks) also indicated that price was turning upwards.
I can't pretend this was a conventional trade in any sense.

USD JPY on hourly chart just before 8am 30/09/11

But I'm a girl of principle.  By which I mean I work from principles.  My understanding of trading is that we look for patterns which show a repetition of some behaviour and use that as a basis for assessing the balance of probability for where price might go next.

USD JPY: What happened next...on the hourly chart

When I saw this it looked exactly as the chart above shows.  I checked on the hourly chart (left) and entered the trade on the break of the 7am bar (the last one) at 76.68.  I set my target at 76.93 (initially), below yesterday's high and the whole number (77.00) where price will often fall back.  I was right, price got there (see chart below where I have marked on my entry with a fully shaded blue arrow, my (altered) target with a purple arrow pointing down and my stop loss with a red arrow.

It looks straightforward doesn't it?  Did I take the easy road?  Did I buffalo.  So here is my honest appraisal of my performance on this trade:

1.  Fundamentally I lacked confidence in the trade.  Although I had some good justification for it, it was an unconventional trade (going long in a downtrend where indecision about price and a narrow range of price were predominating).  The hourly also showed a lower high and low which I discounted as mini cycles.  I believe this lack of confidence underpinned all my subsequent errors.  It shows me how important it is that I have full confidence in and justification for my trades.

2.  Despite the lack of confidence I took the trade.  I put this in as an additional point to reinforce it really as it is so pivotal.

3.  I watched the trade too much.  This is the addictive side of trading which I need to spot as it happens and overcome.  It went up initially and then plodded for two hours, gradually drifting down (the red bar just before the purple arrow).  I went out for about an hour and when I returned price was having a growth spurt and quickly moving in on my initial target.

4.  At this point I became greedy.  Sigh.  This has happened before.  I realised my target was not the full 1% and so moved my target further away by 4 pips.  Price hit my initial target.  It did actually reach the place I had moved my target to: 76.97 according to my charting software as you can see, but the broker's "spread" kept me in.  It then started to retrace in line with the normal way of things.

5.  From greed to fear.  The typical trader pendulum.  I became sensitised to all price signals for a move down and started to lose my bottle.  Price sat on the pivot point (the black horizontal line at 76.75) for some minutes (felt like hours) and when it threatened to drop below it I took the trade off for 0.25% profit. As you can see, the dip was price simply retesting the 50 Moving Average line (the red upward moving line) before shooting up at some speed to career through my target and beyond.

6.  I was influenced heavily by two other factors.   The overriding one was my strong desire to end September in profit and this trade was making a significant contribution to this.  I did end the month about 1.2% in profit. But this desire encouraged the greed and fear every new trader battles.

7.  I allowed myself to get drawn into managing the trade and then wanted to finish the trading and relax.  I ran out of patience...as well as bottle.

Seven errors...all in one trade.  And yet I have felt no pain.  This at least indicates I have moved on to some degree since my early trading days.  That and the fact that I can now dispassionately deconstruct all my errors, seeing them in clearer, sharper detail and hopefully understanding my weaknesses better.  Deep down I think I didn't feel I deserved that trade because it was unconventional and I lacked full confidence in it.  Apart from my moment of greed I was governed by this lack of confidence and so didn't achieve the 1% target I had seen as possible.

My resolutions going forward are:
1.  Only take trades where I have sufficiently high confidence that I will not be tempted to tinker.
2.  Do not interfere once in a trade - there lies greed, fear and ruin.
3.  Work on spotting the three key issues I have: being drawn into managing the trade (I see that as trading addiction), greed and fear.  I will raise my awareness of when I feel these three sins arising and learn techniques to banish them.  I've now developed a mantra for the early warning signs of all three and how I will talk myself out of them.  If this works it'll be material for a future blog...
4.  Stick to the plan - as the experienced traders have told me repeatedly from the beginning, plan your trade and then trade your plan.  End of story.

Onwards and upwards.  What ho!

Faceless Bureaucrat bids a fond farewell

Faceless Bureaucrat:  It is time I drew the curtain because the end has now come.  Faceless Bureaucrat has left the building.  As of yesterday I am no longer employed by the NHS, my only connection with the institution being that I am obliged to continue to look for suitable alternative NHS employment for a month and then am eligible to claim my redundancy cheque.

I now hand over fully to Bad Assed Trader to continue this blog with the passion for trading she has developed over the year.  I say to her:

"Our financial future rests now with you my girl.  I've done my bit, brought in the income to pay for your training and to support you for the first year.  I've even managed to secure redundancy to support you for longer whilst you steady yourself on your feet.  Hopefully you'll get your balance sufficiently early that you can put some of this redundancy cheque into the trading account and make an income with it.

"The time has come to fully shed the bureaucratic mindset, the institutionalised boundaries limiting your hopes and dreams.  I've tried to dent the universe for the better in my own bureaucrat way but it's been frustrating and limiting to say the least.  So now it's your turn. You are now in full control my girl.  There is no-one to stop you succeeding but yourself.  No-one to stop you failing but yourself.  You wanted complete responsibility for the outcome of your efforts, you wanted the chance to express yourself without inhibition, here it is.  Complete and unabridged, in the form of trading.

"I have faith in you.  So go on, step up to the plate and show us all what you're made of.  Find and exorcise your demons, find and nourish your angels.  I know you're not motivated by money alone.  I know your plan is to use money wisely and contribute to the greater good - so start making it girl!"

The Perils of Gapping Down...and an exciting trade involving the Swiss Franc

Bad Assed Trader:  Well it's been an eventful week, to say the least.  I still feel my trading is turning a corner so some good news there, but I've had ups and downs this week and my biggest disappointments have been concerning a couple of "gapping down" scenarios.

Last Sunday I did my analysis for the week, calmly and objectively.  It was good quality analysis as I managed to get into the flow of a number of markets, as I can see now that the week has passed.  Two trades in particular screamed out at me which is generally a good sign.

FTSE 100 daily chart

Firstly, the FTSE 100 (see chart on left) had just retraced up the 50 day Moving Average (the red line heading down).  Price had been ranging below a zone of resistance (horizontal blue line) since early August and price was just above this zone.  The last couple of times price got this high it dropped and the bar from Friday 16 September (the arrow is pointing to it) was a bit high testish (a long section at the top) which is a bearish (down) indicator - it shows price went up but was firmly pushed down again.
These signs all suggested price would come down so I placed a trade as an order to kick in Monday morning if price dropped below the low of that bar by a couple of pips (the horizontal red line shows my entry level at 5335.  My initial target for half my stake was for price to drop to 5108 (a target of 227 pips) with the other half to be trailed and I place my stop loss above the high of that bar and above the 50MA line at 5408.  So my risk was 73 pips with a possible reward of 227 - a decent 3:1 reward to risk ratio.
Now there's good news and bad news here, which demonstrate well the exciting, unpredictable and at times frustrating nature of trading.  But even with bad news there are lessons to be learned...

Monday morning saw the FTSE 100 "gap down".  This means that price dropped so fast that sell orders (such as mine) could not be filled at their order level and so were filled at a lower level.  Mine was filled at 5297 instead of 5335, increasing my risk by 38 pips.  This meant I had a decision to take.  Should I take the trade off as my risk was now over 1% (and my potential reward reduced too of course)?  Or should I swallow the extra risk and wait and see?  Or should I stick with the trade but move my stop loss down 38 pips?

It's a tough one.  Now of course I wish I'd just stuck with the trade.  If I had I would have hit my target on 22 September.  But I didn't do that.  Instead I moved my stop loss down by the 38 pips (mainly because most previous price action at this point did not show a rebound up to that level) and got stopped out at a loss of 1% when price went back up on 20 September.  So although my trade was technically good I made the wrong decision about the risk element.  Those extra 38 pips represented 0.5% to me and I wasn't prepared to risk that so instead I lost 1%.  Hmm.

EUR USD daily chart

A similar thing happened to the other trade which screamed out to me on Sunday evening. This was EUR USD daily (see right).  Movement is definitely down but there had been a retrace up to the 10 day Moving Average (the black line) and a reversal seller bar (the red one highlighted by the arrow) on Friday 16 September.  This bar is also an "inside" bar which means it is fully engulfed by the previous bar in terms of size.  This is an indicator that price is about to reverse direction. The fact that on the Thursday price had hit and rejected a horizontal resistance level (which I had marked by the blue line) also added evidence to these bearish indicators.
So again I placed an order with my entry at 1.3748 (shown by the red horizontal line along the bottom of the bar) with my stop loss at 1.3890 (142 pips above) and my target at 1.3506 (242 pips below).  A decent reward to risk ratio as well over 1:1.
So what happened?  Again the market gapped down (this had never happened to me before and now twice on one day!) and took me in during the early hours of Monday morning at 43 pips below my planned entry increasing my risk by about 0.3%.  Again I was faced with the three choices but I decided differently this time as the trade was in profit at the time I first saw it.  I reasoned that the trade parameters had changed and negated the trade so I took the trade off for a profit of 0.3%.  If I'd left it on it would have hit my target on 22 September.

Ouch.

What have I learnt and what will I do differently if it happens again?  I think that gapping down demonstrates a collapse in price to some degree and I should read that as a very bearish sign and not pull out of the trade unless I am exposed to an unacceptable level of risk as a result.  What is unacceptable?  I think in future I will put that at 2%.  So now I have a new and clear rule to stick to and have learnt something from the experience.

But I have one more exciting(!) trade to share with you which had a better outcome.  Although technically it was not as good a trade as those two so I'm rather embarrassed to share it.  I confess I was influenced by the fundamentals on this trade rather than sticking to technical indicators alone.

The Swiss bank had announced it was pegging the value of the Swiss franc to the 1.2 Euros so, in effect, guaranteeing price would not fall below this level.  That's tempting for traders if you can find a way in and to tuck your stop loss below the 1.2 level, which is what I did.  It's not often you can say your stop loss is protected by a massive and possibly rather obsessional national bank.  I took a trade on the Euro against the Swiss France (EUR CHF) on Monday 12 September when I saw some technical signals which allowed me a way in.

EUR CHF on the 5 minute chart (more exciting to watch!)

I then sat on that trade with it bobbling about for over a week (see chart on left, that flat price action on the left was like that for ages).  On Tuesday 20 September I was at a Forex Trading Bootcamp so I happened to be watching my trading account and charts at the time when suddenly what had been a marginally losing trade was zipping at great speed into a profitable position.
I checked my chart and as you can see it was absolutely flying.  I asked at the bootcamp if anyone had noticed and we were then all looking at the chart and trying to find out what was going on.  Someone said there was a rumour that the Swiss bank had raised the level at which it would peg the franc and so the market was responding to that.
It hit my target 1% (100 pips) within minutes.  And to be honest, I had considered taking that trade off that very morning.

Sometimes luck does go your way.

How did Gold go...and isn't it time I admitted I am an Earth Girl?

Bad Assed Trader:  Firstly a rain check on how Gold has gone since I rather boldly suggested on my last blog on September 12th that the price would drop, probably to around 1750.

Gold at close of September 16 2011

As you can see from the Gold daily chart to the left the price has gradually dropped down to 1762.50.  It might possibly drop further, but it does pretty much have what we call a "train track" at the bottom of the dip - this is where the seller (red) bar taking it down is matched in size by a buyer (green) bar taking it back up.  This pattern is bullish and suggests price is reversing and heading back up.
Where will it go up to though?  It's had some difficulty conclusively breaching the 1900 level and it is likely we'll get some interference at that level.  Price could push through this time, sometimes it seems to take a couple of tries before a third attempt pushes through a resistance level when it's a number of psychological significance which 1900 clearly is.
On the other hand we could end up with a head and shoulders pattern if price turns back down before reaching 1900.  This is a bearish pattern and so time to take a long trade off if that happens.
So that's gold and I'm still not trading it!  I do like to prove to myself that I can get into the flow of a market and anticipate moves but to be honest trading those moves is much harder as everything depends on your entry and exit points.  This is why we have strategies and why we have to conquer our psychology.

I've been taking my psychology into hand recently and it seems (early days yet) to be helping.  One way I've done this is by enrolling on a diploma course in executive coaching.  This has a number of benefits as my life as a Faceless Bureaucrat draws to a close in just 2 weeks and may generate private work to keep some income flowing my way.

My primary reason for doing the course was to learn to coach myself better with my trading.  The interesting thing is that I get free coaching on the course from other trainee coaches and I've started bringing my trading issues to them to work through.  Now you may recall I already have an amazing trading coach, Emmanuel, who I visit regularly at the live trading floor where I receive my trader training.  But I believe one can never have too many coaches - it all helps....

So just yesterday I was coached through my mindset when being a successful trader and when being an unsuccessful trader.  It was great to be able to describe out loud how I feel when I'm taking losing trades - or a string of them - as opposed to when I'm consistently winning.  I'm not talking about how I feel after the wins or losses, but the frame of mind I'm in when I'm trading which ends up bringing wins or losses.

Now I've been trading for over a year I'm starting to see and recognise the difference IN ME when I trade well and less well.  Maybe I'm just slow but it's taken a lot of trading to be able to start pinpointing the mindset, the feelings, the thoughts that guide or misguide me.

This is crucial if I'm to develop that level of consistent success.  Fully accepting (of course) that I will always have some losing trades as the market is so random, but that I have complete responsibility for creating the conditions to maximise my success.

This means controlling myself by putting myself into the optimum frame of mind for trading for a start.  For me this is a relaxed state, calm, almost distant.  I know that in life I am prone to getting absorbed in my tasks and I can't let myself get absorbed by trading or I end up letting my "ratty brain" as I call it control my actions and THIS ALWAYS LEADS TO MY BIGGEST STRINGS OF LOSSES.

I know, from recognising it happen twice, that after a string of successes I get absorbed in that way and end up over trading and giving it all back.  I know now I have to pause after a series of wins and regain my balance.

I have of course heard of this phenomena from other more experienced traders but I guess I was probably in denial.  Perhaps deep down I like to think I'm super human and not afflicted with the traits and weaknesses that others suffer.  Trading has shown me, with stark evidence, that I am actually a full paid up member of the human race and the sooner I come to terms with that and find ways to deal with it the better my trading results will be.  I suppose I should be relieved really to know I'm part of this big family of human beings, just a girl from the planet Earth and not part robot or alien or anything.

When I am in denial about my humanity in this way I am not acknowledging and therefore unable to recognise the completely normal human traits I have.  Coaching has already taught me that awareness raising about one's strengths and weaknesses is the key to improving performance.  I love this quote from John Whitmore in "Coaching for Performance" 


"I am able to control only that of which I am aware.   That of which I am unaware controls me.  Awareness empowers me."

This is just so totally applicable to trading and to where I am now on my journey of discovery.  By coaching myself I hope to gain deeper knowledge of my trading behaviour and therefore take more control of it.

It's one of the most exciting journeys I've ever made because I'm discovering parts of me that were unseen, unknown and yet silently pulling my strings.

We journey abroad to make new discoveries, sometimes the most fascinating are inside ourselves.