Emotional Attachments

Faceless Bureaucrat: During my lifetime as a Faceless Bureaucrat I've often reflected on initiatives I've led and dwelt long and hard on why something was so tough to achieve or, on occasion, what did I do right that led to the success.

One of my formative experiences was leading a reorganisation of NHS trusts on behalf of the health authority I worked for.  Although I had a personal view about how things should turn out I set that to one side and took a more facilitative role as I knew this was what was expected.  I didn't resist when it became clear that the power in the system would lead to a different outcome to that which I personally preferred.  I let it happen and I did my best to enable it smoothly and with maximum support and justification.

You could say I sold out.

My boss was very pleased with my work and told me how many senior managers and clinicians had commented on how well I'd managed the process. I learnt from this that I am but small fry and by emotionally detaching from the outcome of a process I can do a "good job".

To be honest, it wasn't with my natural inclination.  Following that job I moved briefly into the civil service and learnt what it was to become completely detached from the end goal (that's the job of politicians after all).

But within a year I was back in the service nailing my colours to a mast, getting emotionally involved in pioneering and advocating service changes and continued to do so for the next 10 years or so.  One of my favourite quotes I used at the time was Professor Dumbledore's "There comes a time when you have to make a choice between what is right and what is easy" (from Harry Potter and The Goblet of Fire). This quote sustained me during some difficult times when I was sticking my neck out against the dominant bureaucracy because I believed what I was championing was right.  I had mixed results for my efforts - sometimes I lost the battle but strangely was awarded a high performance bonus all the same and other times I won the battle but felt the force of the organisation weighing in against me.

It seems in the NHS that when you're managing change if you want an easy life you stick with where the power lies but if you want to follow what you consider the right path, ie allow yourself to be emotionally attached to the outcome - beware that if you win the bureaucracy will find some way to get its own back.

Bad Assed Trader:  I reflect on the issue of emotional attachment because I have learnt that there is no place for it in trading.  It is clearly an inclination of mine - to attach myself with passion to what I do - but I have to learn that the passion in trading has to be focused on the improvement of one's trading overall rather than getting attached to any one trade and therefore ignoring the mounting evidence that the trade is going against you.  The best traders feel nothing at pulling out ruthlessly from a failing trade. I am still cutting my teeth on this one.

The transition from impassioned and embattled NHS manager to ruthless, bad assed trader requires some significant exorcism and transformation.

The FTSE 100 - could this be a "Double Top"?

Bad Assed Trader:  I thought I might share with you some thoughts on the FTSE 100 in case you're interested, with a few charts to show you what I mean.

The first chart below is one my coach Emmanuel kindly sent to me showing the way the market's confidence level is shown in the typical cycle of bulls (up) and bears (down). Note that the start of the chart shows the uptrend and the end of the chart is a repetition of this same returning confidence:

The Sentiment Cycle: Typical Market Moods

What I'm particularly looking at on this typical chart is the first couple of peaks (also known as a "double top") showing "returning confidence" and "enthusiasm" after a good climb.  You'll see that there are a couple of lines which, when broken through, provide warning signs that a drop is on the way.

This next chart shows the FTSE 100 index from June 2006 to July 2008:

The last FTSE 100 Double Top

What you can see in the middle of the chart is that double top, the twin peaks where price tries to push up again but fails to make a new high because the sellers are battling the buyers and starting to gain equal strength which then almost inevitably seems to lead to superior strength.  After the double top we get a couple of smaller peaks when buyers try to regain their previous lead but are overwhelmed and then price really starts tanking.

This next chart shows the FTSE 100 over the past year to date:

Where we are now...

Now I don't trade stocks and shares very much and haven't for a while as I've been fixated with the Forex.  But to me this looks like the FTSE 100 is losing steam and heading for a drop.  Compare this chart to the "Sentiment Cycle" at the beginning and it's not difficult to find the matching pattern. If I'm right then they'll be a couple of smaller peaks before it tanks completely but I'm going to start looking for some shorting opportunities soon.  Best to wait for another lower peak before doing this as there's likely to be a retracement up before another move down but worth keeping an eye.

What do you think?  Comments welcome - as always.

Peak Performance

Bad Assed Trader:  Following yesterday’s blog about the troughs of performance – in life and in trading – I hope you will bear with me whilst I indulge in a more self-congratulatory tone and dwell for a few moments on some of my performance peaks.  I don’t do this to brag but to share the learning…honest.

Today is the right day to do this as it’s my wedding anniversary and I’m thrilled to still be so happily married to my husband and looking forward to watching our wedding DVD in the near future with him when we can have a good laugh over it all again.

When following Steenbarger’s instructions to draw a line of peaks and troughs representing my life and another representing my trading (see yesterday’s blog "Is trading more stressful than having babies?" for explanation) I would put my wedding day as one of my highest peaks – along with the birth of my two girls.

Why would I mark it as a peak?  Not just because it was such a happy day but because I feel it represented my strengths being deployed to the very best effect.  For example, I had started planning my wedding speech (yes, readers, I’m afraid I was a bride who insisted on inflicting a speech on her guests) over a year before the big day. 

There were so many important things that I wanted to share with everyone and I spent that year crafting that speech.  I wanted to make people laugh and cry because part of the joy of weddings is the celebration of emotions.  I wanted to tell them why I love my husband so much and I wanted to acknowledge the huge contribution his late wife – who had died 8 years previously – had made to him and his daughters and therefore to me (I had never met her).

When I was delivering the speech I was heartened by the laughter at my little quips which sounded genuine (bless them) and kept me going.  But it was afterwards that I was astonished and rewarded for my efforts. 

I had wanted people to cry, I know that sounds a bit odd but I wanted people to feel as I felt and to appreciate what it means to marry someone who was very happily married before and so tragically lost their love.  But as I asked people to toast my husband’s late wife and then went to sit down I turned to my groom and saw tears in his eyes.  That made my heart leap as he’s not a man who ever cries or shows tears.  Then I saw a neighbour dissolve completely in tears and as I looked around the room I realised the impact I had had on the 120 people present. 

People then applauded and started coming over to congratulate me, many of them telling me it was the best wedding speech they had ever heard, and although I think they were being kind I did believe they meant it right then because it really was pretty good.  I’m not a natural speaker but I had put so much time and effort into that speech that I really did achieve my own “peak performance”.

My husband and I both put a huge amount of work into planning our wedding day and it really did go absolutely perfectly in every respect.  We had amazing friends who helped us enormously – they offered and we accepted.

When I think about the strengths I used to best effect in planning my wedding day and compare that performance with the best trades I have placed I know that there is no substitute for good planning and considering every possible risk and taking action to mitigate it.

I understand that to make it at trading I need to be operating at peak performance for a greater proportion of the time I spend trading than I have been.  Going the extra mile is easy when you are preparing your wedding day – you have huge emotional attachment to the outcome of your efforts and it’s a once in a lifetime effort.  With trading it is difficult to sustain that level of performance consistently but I know it needs to be done.  If you start to compromise on your standards your performance drops dramatically.

I have struggled with this issue because so often in life I’ve been able to get away with being “good enough” quite easily.  It makes you lazy and complacent.  It’s difficult to admit to this when you generally see yourself as a relatively high performer in life.

Being “good enough” does not appear to be possible in trading.  You have to be consistently excellent in your objective and yet flexible analysis, consistently excellent with your standards in selecting only the highest probability trades and consistently excellent in your discipline in executing your trades in accordance with your plan and still maintaining an objective and yet flexible assessment of the potential of the trade.

My coach, Emmanuel, once said to me “It’s a fine line between profit and loss” and his words have haunted me ever since as I’ve seen the evidence of it with my own eyes.  The minute you drop your standards and trade at less than peak performance you start to cross that line from profit to loss.

It’s thrilling to be involved in an endeavour that is so personally challenging and I find myself constantly thinking about how I can improve my performance.

So when I reflect on the glory of my wedding day and recall the emotional investment behind its success I understand that to succeed at trading I must make a similar investment, every trading day.  There has to be passion to the point of obsession.  Nothing less will work.

Real "Peak" Performance: Our Wedding Cake

Months of Practice for the First Dance...

Is Trading More Stressful Than Having Babies?

Bad Assed Trader:   You may think I have no business discussing babies on a trading blog but there is method in my madness, stick with me on this one.

In “Your Daily Trading Coach” – the book which is currently guiding my efforts, Steenbarger suggests that the reader draws a line representing the peaks and troughs of your life and another representing the peaks and troughs of your trading.  We are instructed to label the troughs with the toughest times of our lives and the peaks as, you guessed it, the high points.

We are then to do the same with the trading line – peaks are the best trades and troughs the worst losers.

For our peaks and troughs we are then required to describe the circumstances, the strengths we used to achieve the peaks, the weaknesses that kicked in and led to the troughs.

Steenbarger invites us to find patterns between both lines – we should expect to see that where we succeeded in life we used our strengths which were also applicable for our great trades.  And vice versa for the losers.

Our next step is to start to recognise the warning signals before the weaknesses actually take hold and direct our behaviour.  This way we can start to prevent the repetition of loss. 

So this advice has led me to reflect on the difficult moments of my life and why they were so tough, to see what is applicable to my trading.  This should help me to identify the weaknesses I need to overcome.

You may think I've listed more than enough weaknesses throughout my blog and isn't it about time to get onto my strengths?  Ah, if only.

But I will come to strengths in time as they are even more important really - it's what gets us to the performance peaks after all.

Back to my troughs of life then.

As I've been around for a while my troughs are quite numerous, but I think the most stressful time was having babies.  

I don't mean the act of giving birth which actually, on both occasions was a peak.  No details here you'll be relieved to know.

I mean the time afterwards, when you are dealing with something unpredictable, uncontrollable, that soaks up your time and money and gives little back initially except being fun to watch - but is sometimes painful to be with.  Is that a description of trading or looking after a baby?

Now I love my baby girls (currently aged nearly 16 and 26) more than life itself but they had their moments when they were tiny tots that personally I found far more stressful than trading.  And I'm someone who has always loved babies and looks forward to seeing more in the family.

When the older daughter was a five month old baby my older sister sat her on the edge of a very high hospital bed and walked away.  She fell forward - slap - onto the hard floor and there was silence before the screaming.  I was distraught to the point where my head felt as though it would burst.  Thankfully there was no damage (babies seem to bounce) but that moment was definitely a trough.  A moment where my responsibility was huge, my control was nil and the situation was potentially dangerous.  

It was compounded stress-wise by the fact that it was my older sister who had caused the problem and my relationship with my sister was that she was very domineering and it simply wasn't done for me to yell at her.  I had to contain my anger, I couldn't allow myself to express it.

How does this relate to my worst trading?  My worst trades are those where I jump in prematurely - where I have failed to work through the possible consequences of taking this action.  When I heard the "flump" of my baby hitting the floor I felt completely responsible - but as though I had failed to see the consequences of letting my sister take charge of my daughter's well being.

The most stressful trades I've had have been those where I was not clear at what point I should come out - whether it was taking a loss or a profit.  When my baby was screaming and potentially badly hurt and my sister was responsible I didn't know what to do.  I was angry but couldn't express it and I was frightened for my baby but distraught to the point of paralysis - I was useless.  I ended up walking away and finding someone else who I knew and trusted nearby to talk to.  In effect I expressed my anger by walking away and punished my sister by leaving her holding this wailing baby.

My younger daughter, darling though she is, was a right puker as a baby.  This may not sound very stressful but it was a big deal at the time.  I'd be woken at 2am to feed her, spend an hour feeding and changing her nappy and be just about to put her, a sleepy tot, to bed when she would projectile vomit across the room, soaking us both in half digested yukky stinking milk in the process.  I'd then have to deal with a crying baby and clear up the mess - another half an hour - before getting back to some desperately needed sleep, still uptight and anxious about the fact that as she seemed to have thrown up most of the milk I had produced for her, may wake again soon hungry and there'd be none left. 

She'd also routinely chuck up in the mornings on my way to work, always just when I'd be in the fast lane overtaking someone on the motorway.  There'd be baby sick coming out of her nose even and she'd be wailing and wet with it all and I'd be trying to wipe it up a scrap of tissue found after rummaging in my bag with one hand whilst steering at 70mph with the other - one eye on the baby from sick hell and the other eye alternating between the central barrier and car in front which incidentally was guaranteed to be breaking sharply at this point.  The car always looked like someone had exploded a balloon full of sick inside.

These screaming, puking babies that cause so much stress at the time when you can't get them to stop screaming and/or puking and when you can't get them to sleep (that's another whole episode of stress I haven't introduced...) do, gradually and eventually stop screaming/puking, start sleeping and then grow up and talk back and give you a different set of stresses.  In my view none of the later ones come close to those when they are tiny and can't communicate or be influenced in any way.  But it takes months and years.  Trades don't generally last that long and are not on 24/7 to the same degree.

How does that stressful babyhood compare to the worst trades? That feeling of being unprepared and out of control.  That's what I aim to avoid in future.

That and puking, falling babies.

Beware: This causes stress like you've never known when trading...

                           

Trade what you see...not what you want

Bad Assed Trader:  My coach, Emmanuel, has liberated me this week which is both daunting and exciting.  The weight of responsibility feels heavy on my shoulders.  And when he looked directly into my eyes and said "I trust you" I felt there was no way on Earth I could let him down.

What exactly is he trusting me to do?

Firstly, to not blow my account.  In this respect he's backed a winner as I won't be doing that anytime soon given the tiny amounts I now trade as part of my acceptance that I'm still very much in the Learning Zone.

Secondly, to behave sensibly in using the skills I have developed over the months.  He has liberated me by removing the requirement that I stick to one strategy with tight rules and trade it to death, so I must rely on my skills and use them well.

At our coaching session last week he suggested that perhaps I needed to adopt a trading approach which uses both left and right sides of the brain - the knowledge and the creativity. Immediately this resonated for me and I'm always keen to try a new approach.  We discussed the general rules I would be following: trading with the trend and the usual risk management (which I never have a problem with) but the main thrust of the new approach is that I am to look at the market environment first, see where the action is (eg where is price trending well) and then look for a technically justifiable way in.  No currency pair or commodity/index/whatever excluded.

The acid test is to find a market where I can see what's likely to happen next and weave my way into it.  I  like the sound of that.

But we all know that in trading, life is never that simple.

I've tried this approach for just two days so it's far too early to talk about performance.  But the interesting thing for me is how much this has shone a spotlight on my strengths and weaknesses.

I've looked back at the five trades I placed and realised that in four of them I found the move that was about to happen.  The fifth was a good old "snapback" (see my recent blogs) which didn't, er, snap back.

I also looked back at the analysis I do first thing in the morning where I summarise for each time frame where each currency pair and gold are at.  This is more than just up, down or chopping, I also try to assess where they are in their cycles to anticipate the next move and whether I should be looking to buy or sell or just stay away.  I was right 36 out of 51 times.

One of my weaknesses, I found, was that I then failed to follow my own advice!  For example, I wrote next to gold "Don't!" in my "Buy or Sell" column on Friday and then placed a long trade in gold.  It did start to go my way initially (so I was probably reading the immediate price action fairly accurately) but then tanked because I failed to take into account the market conditions I myself had earlier assessed. Duh*.

*For my readers from India, China, Russia and other far away places (I love you all!) the meaning of "Duh" is: "Used to express disdain for something deemed stupid or obvious, especially a self-evident remark." ...Hope that clarifies...!

I also took a long "sniper" trade on the New Zealand dollar (NZD:USD), putting a target 44 pips away.  The price shot up 30 pips pretty much straight away, a lovely move, and then it gradually drifted down until it stopped me out a few hours later...whilst I was having my hair cut.  When I looked back at my morning analysis, the previous day I had noted that the NZ dollar was "turning to phase 2" (ie about to start retracing back down), that on the hourly chart it showed it was losing steam and that the MACD indicator was diverging, suggesting it was losing the upward momentum.  These notes should have guided me to set a more conservative target if I was going to place a long trade on this pair.

Duh and duh again.

It was heartening to read the notes which then proved so true - EUR JPY on Friday where I wrote "WATCH OUT - could just tank" (it had been ranging all week on the daily, 240 and hourly charts and now was starting to droop on the hourly).  And tank it did.

And EUR GBP on Friday when again I wrote "Don't" and "Could spring up, down or chop" and when I looked back I found it had sprung up, chopped and then tanked.

I should confess here (as I do like to confess) that my analysis of cable (GBP USD) was crap all week (buy, buy/sell, buy) until Friday when I finally got it right...sell.  But by then it was a question of stating the bleeding obvious!

So, some confidence in the bag then regarding my analysis.  But more to confess.  Hence the title of my blog.  When I reflected on the trades and the outcomes (which were not so inspiring) I realised there is a recurring theme lurking behind my trades.  Regular readers will sigh and say "duh!" when they hear this. I seem to be setting my targets too optimistically.  I know it's a problem with some traders that they don't let profits ride and cash them in too early.  Well I seem to do the opposite - I let them ride all the way and back again.

Traders say "Trade what you see, not what you think" - very wise words.  But for me right now the message is as per my title.  I want the profit to be at the more ambitious target so that's the one I choose, rather than where price action and evidence shows, if I cared to look.

I'm a bit reluctant to start using my discretion during the trade too much as I prefer to set targets and leave the trade to unfold - and given that I do still work 3 days a week in the good old National Health Service I don't always have time to manage the trade.  But I'm going to have a new rule and I've pinched it from the traders' bible "Trading in the Zone" by Mark Douglas which I've mentioned previously:

I've read this book four times now - it's a must read for anyone seriously considering trading.  Mark Douglas describes on p193 his method for minimising risk and taking profit simultaneously.  He describes it as dividing your position into thirds and scaling out as the market moves in your favour.  For example, if you are risking 1% of your capital for a 3% return you might take a third of the profit when price moves one third of your objective pip target in your favour.  Another third of a percent is taken when price hits this objective target you have set (at which point you move your stop loss to break even).  This objective target is based on some longer time frame of support or resistance, or on the test of a previous significant high or low.  So you now have a net profit whatever happens to the final third of a percent.  He describes this last third as a "risk-free opportunity" and then he says "I can't emphasize enough nor can the publisher make the words on this page big enough to stress how important it is for you to experience the state of "risk-free opportunity". When you set up a situation in which there is risk-free opportunity, there's no way to lose unless something extremely unusual happens...you get to experience what it really feels like to be in a trade with a relaxed, carefree state of mind."  He clearly feels we all need to experience that relaxed and carefree state of mind to become confident and successful traders.

Mark Douglas was prompted to develop this routine when following analysis he found that only one out of every ten trades he placed was an immediate loser that never went in his direction.  Out of the other 25-30% of trades that were ultimately losers, the market usually went in his direction by a few tics before revising and stopping him out.

Why am I going to use Mark Douglas's approach to taking profits?  Two reasons.

Firstly I reflected on why I am setting such ambitious and optimistic targets and sticking to them in the face of evidence from price action (or my earlier analysis - as I discovered this week) that suggests these targets will not be hit.  At first I did the self support thing of acknowledging that I am an optimistic, quite steely nerved in terms of sitting the trade out rather than banking profit prematurely and always had some technical justification for my trades.

Then I did the honest thing of acknowledging that I am greedy and want maximum profit for each trade.  I was setting the target where I wanted price to get, rather than where - taking ALL evidence into account - it was most likely to get.

I also acknowledged that I don't like the thought of "missing out" and that for me as a trader it is more painful to leave money on the table than to lose a trade.  It really is.  I've wondered why and in "Your Daily Trading Coach" (see my blog of June 5) Brett N Steenbarger prompts us to reflect on how our trading mistakes reflect learned patterns from the past - usually pain avoidance.

Many traders take profits too early or kill trades prematurely because of fear of loss.  I don't do this because my fear is of missing out - so instead I set unrealistic targets and ignore evidence to the contrary.  I believe this stems from the fact that I was lucky as a child not to experience any significant loss (eg death of family member or friend) so my actions are not guided by avoiding the pain of loss.  But I was the third of four siblings and even in well off households there is a lot of competition amongst siblings for resources - whether that's parental attention, gifts, or chocolate biscuits.  I have to put my hand up and say that a large part of my childhood (and even teens!) was spent checking whether I was missing out on what I perceived to be my fair share of the resources on offer and making sure that people heard my cry of "It's not fair!" if I felt I was.

My Mum, who kindly reads my blog, will be nodding and smiling at this.  Mum - I don't blame you by the way, sibling rivalry is just normal.  I'm not a child anymore and it's time I got over it.

And my second reason for using Mark Douglas's approach?  Because coach Emmanuel has been telling me for ages to scale out and because of the reason I explained above and all my emotional/psychological baggage I've resisted doing this.  But now I've worked through it and acknowledged the deep seated behaviour that's been controlling me I've taken it's power of control away and am free to follow his advice.  Steenbarger says "When you describe a pattern of behaviour, you're no longer identified with it."

You will, I'm afraid, read again in future of relapses in this new rule.  In fact, you've read before of my intention to do this and wondered why I hadn't already. And now you're wondering why I am so stupid if I am aware of all this and not just doing it.  Well, Steenbarger explains that it takes time to identify old and entrenched pain avoidance behaviours and even longer to change them. He recommends seeing your old (unhelpful) behaviour as the enemy and says:

"It will take sustained effort to tackle your enemy, but it can be tremendously fun and empowering as well.  Each time you notice your old ways of loosing money and refuse to engage in them, you've won a victory against your enemy - and struck a blow for your own sense of confidence and mastery."

Getting over Sibling Rivalry for better trading:
...and how does the mother feel, faced with this??

Going for Gold

Bad Assed Trader:  Yesterday I tried my first Gold trade.  I was only looking for 12 pips but could I squeeze even that out before price hit my 24 pip stop loss?  Could I buffalo.

I put the trade on at 08:16 (GMT) and watched as it dipped and fuffled about.  I went to work and - because no-one can see my computer screen - at lunchtime checked it out every few minutes.  I was waiting for price to go up.  So it sunk a little, then a little more and then suddenly, at 13:15 it started gaining some strength in an upmove.  Great, I thought, finally.  But no sooner was I feeling things were going my way when price started tanking back down.

And it took me out.  Oh well, I thought.  Next time I looked, just half an hour later, well b***** me if price hadn't completely shot up almost off the screen - 70 pips in 15 minutes.  It then took a little rest and went up another 40 or so pips.

Ok, this has happened to me before enough times that it's not actually physically painful anymore but I can't pretend that it doesn't p*** me off because it does.

There, I've said it.  I've got it off my chest.

Now what did I learn from this experience?  A lot of traders have rules about deleting a trade that's not going anywhere.  The trouble is that when I've done that in the past about 30 seconds later price tends to shoot in the direction of my trade and leave me cursing so now my rule is to stick with the trade.  But it does seem that often if price doesn't go your way fairly soon then the chances are it needs some movement the other way before it can spring into action in line with your strategy.  I think of Zebedee from The Magic Roundabout at this point - the chap with a spring instead of legs.

                                 Zebedee: the bounce you need for your trade                                                                             

But when to take the trade off?  At what point?

It certainly didn't feel right to take it out when it started to move up with some strength.  But perhaps when it then started to turn back rather than continuing up would have been the right time.  A question for my coach, Emmanuel, I think.

Thanks for reading.   Comments are most welcome.

Gold Fingers

                                                

Going With The Flow

Bad Assed Trader:  As readers will see from my last blog, posted yesterday, I've adopted a new trading strategy because the one I had been working on since January wasn't providing any set ups for entry in May.

I haven't given up on that strategy - a "sniper" strategy - but have realised that at times the market is not conducive to certain strategies.  My sniper relied on the Euro and Sterling being in a clear trend against the US Dollar.  When they are in "phase 2" (ie retracing: heading for the hopefully brief dip in an uptrend or the momentary peak in a downtrend - because nothing goes straight up or down) I can't trade that strategy.  The result was that initially I kept trying to trade the strategy by changing a rule and lost out.  Then I sat on my hands and bit my fingernails (not at the same time...) and then I tried to make poor set ups into good set ups in my head and - surprise surprise - didn't make any money.

Brett N Steenbarger, in his absolutely brilliant book:
talks about how vital it is for traders to be flexible in their calibration to the market.  So, for example, if the market is very volatile (swings wildly, like the  youth of the Sixties) then traders get used to setting their targets and stop losses in places which go with the flow of a volatile market.

If that market then becomes less volatile (barely moves - rather like the progress on our NHS Health Bill at present under good ole Lansley's leadership) then traders who have failed to adapt to the new conditions will find themselves frustrated as their systems no longer work.

I failed to adapt to the new market conditions in May.  I had my hammer and I was going to try and use it to hit a nail, but the nail had gone and instead there was a screw which needed a screwdriver.  It took me a whole month to twig that! Ah well, live and learn...eventually.

I have better insight now into the fact that for that strategy I need to be much more calibrated to the overall market conditions - despite it being a strategy which is timed by the 5 minute chart.  I need to Go With The Flow and to do that I need to know what the Flow is.

No Half Measures

Bad Assed Trader:  Faithful readers will know I've had my ups and downs in this trading journey.  May was looking to be one of the Big Downs for a very large part of it.  At one point I looked back and saw 28 trades, with only 3 winners. Ouch.

Once again I thank my lucky stars that I'm still trading very small.

But as my Mum will tell you, "Stubborn" is my middle name.  So despite the evidence pointing to a conclusion that I could just be the dimmest trader this side of Alpha Centauri, on I pressed.

Still,  I'm not immune to indications that things might not be working in my favour and it occurred to me that I may have thrashed that particular trading strategy to death and beyond.  It really wasn't working well for me.  Perhaps it was that market conditions in May were not ideal (retracements on both currency pairs I trade) or perhaps that strategy was just too tough for my inexperienced brain.  Whatever the reason, I seemed to be spending most of my time waiting for a set up, then when one did occur I was either changing (read "breaking") the rules and losing money or sticking to them and...losing money.  

I know I have a high pain threshold (partly from years of working with doctors who are very good at being blunt with managers) but it was starting to become a source of irritation, even to thick-skinned old me.  

I reflected on the fact that I had chosen that strategy because it had worked well in April and quite well in March but it dawned on me - finally - that perhaps I need another strategy too.  To be of use in those down times at least.

So on Bank Holiday Monday I tried a new strategy. Trading with the European markets I started to test the "Snapback" strategy which is a good one to use in ranging markets and I expected more ranging when London and USA were out of the trading for the day.

I traded tiny amounts at first and it seemed to work.  As a strategy I found it easy to execute and it seemed I had no problems sticking to the rules (later analysis will confirm or refute this).  So I continued on Tuesday and after two days' trading had won 10 out of 12 trades, something of a breakthrough compared with my previous performance.  I had never had such a successful run.  I was 3.5% up and feeling good in a "was that just luck or chance evening out my previous bad run?" sort of way.

By close of play on Friday I had placed 32 trades, 20 winners, 10 losers and 2 break evens.  I was only up 1.5% because with this strategy most of the time the winners are worth half of the losers.  But given my recent trading performance this was encouraging stuff.  It's only my first week with this strategy and I'm now analysing each trade to see exactly what happened so I can learn to sift out the poor trades in future.

It's been a really full on week trading wise - I haven't had a bath since Sunday!  I'm off to the gym in a minute as I desperately need some exercise after being rooted to my arm chair peering at the screen intently for hours.  This may seem excessive for the reward but if I'm to make it in trading I think I have to give it my all - No Half Measures.

Oh - and we had some real excitement in our town this week.  A gunman held up a local bank and caused a bit of a to-do and some inconvenient traffic jams for shoppers (no one got hurt & he got caught).

I heard helicopters circling overhead all morning and a series of still unexplained bangs and so I was checking the website of the local paper to find out what was going on.  The best bit was reading the comments written by witnesses, one said:

"Saw some police marksmen pointing their weapons at the bank, distressed people had rushed out earlier.  Town centre cordoned off.  But Pound Land still open so no panic."

I've never been to Pound Land ("Everything just One Pound!") but this reader has prompted me to reconsider.  Given my erratic trading performance to date it may become my New Best Friend.

Trading Dedication: No Half Measures