Less Action More Reflection

Bad Assed Trader:  First the good news. I've had a good day trading today with a great trade on Euro swissy (EUR CHF) which I took short for 38 points for 2% profit so there's still hope for me.

But my performance is taking a long time to consolidate into the right direction, ie up.  I feel I am improving but it's slow progress.

I'm blogging about this because I know I have to spend more time analysing and reflecting on my trades, I just find it so hard to carve out the time to do it.  Let's face it, nothing is more fun than getting into the trades and watching the movement.  It is exciting.  Whereas filling in the spreadsheet recording your trades and taking a long cool look at your efforts is definitely the more boring/painful side of this game.  Emmanuel, my incredible coach, has been telling me to get on and do it and I know he's right.  I also know he often has to tell me things two or three times before I actually do it - why am I so slow to twig??  I know...I don't really want to hear it...

I'm still trying to work out how to motivate myself to do this reflective practice.  It's like putting together my tax return, or doing the ironing...it gets put off and put off again.  Wikipedia describes reflective practice as:
"the capacity to reflect on action so as to engage in a process of continuous learning", which, according to the originator of the term, is "one of the defining characteristics of professional practice"

The Steph Gibb Model of Reflective Practice

Wiki also shares various models of reflective practice such as this one on the left.  Going through this circle of analysis means there's nowhere left to hide.
I know I need to do it and if anyone has any ideas about how to give myself an incentive to do it then please let me know.  In the meantime I am blogging about it to at least acknowledge in writing that I know I need to do it.  And I will.  I will post a blog sharing what I've learnt when I finish.

In fact I'm going to get onto it right away.  Straight after I finish the tax return and the ironing....although I'm feeling a bit tired and might just have a little nap first....

Reflection: Seeing more deeply

What happened to EUR GBP in the end?

Bad Assed Trader:  Those who read my earlier blogs of 3 July and 6 July might have wondered what did happen to the EUR GBP pair in the end so here's how the down move played out:

EUR GBP at July 19 2011

I've shown the full move which ended on 18th July with a low test bar (the second to last green bar with the long tail) which indicates a move back up is coming and it has gone back up ever since.

I only traded the beginning stages of that move as it was against the underlying up trend.  I took it as far as the 20 day moving average (the blue line) and made 3%.

This morning I've checked the charts and most currency pairs have already moved quite a bit during the Asian markets so I'm waiting to see if any "snapbacks" might come up.  These are very short term trades where I trade on a 15 minute time frame and look for over extensions in a ranging pair which I can then trade back to the average.

I look for snapbacks when most pairs have already moved a lot as they often then chop about which is frustrating if you're looking for a longer move.  Better to go with the flow and adopt a choppy strategy I think.

More again soon...

Being Led by the Market

Bad Assed Trader:  I seem to have reached a turning point recently.  No doubt it will continue to be a long turning point but I'm definitely experiencing more occasions where my trades are turning to profit rather than loss.

As I mentioned in my last blog, this point seemed to come shortly after my coach, the amazing Emmanuel, suggested I try a different approach - look for where things are happening and find a way in...but still use the technical justifications for all your decisions.

The fundamental difference in this approach for me is that I now look at the market first and try to read what it is telling me.  Previously, as I mentioned in my last blog, I had my strategy and all too often tried to force an entry.

The interesting thing is that this new approach again reinforces the point that many traders say is fundamental to success in trading - being in the "now" moment, the present.  This seems to be about focusing on the information around you right now and your understanding of it and responding to exactly that.

It doesn't mean you can't use your knowledge and experience, rather it is about adapting how you respond to what is happening now.

Emmanuel and I discussed this at our recent coaching morning.  We talked about Darwin's assertion that:

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.


Adaptation is about being in the "now" moment.  It's about leaving the baggage of the past - what may have worked previously - behind.  It's about focusing on what is needed right now and delivering it.


This is currently my main learning point and primary aim with my trading - to objectively assess the charts before shaping my trade. To be led by the market first and foremost. This will determine not only when I enter but where my profit target and stop loss go.  I will do everything I can to get into the market flow.


Faceless Bureaucrat: Not to be left behind Bad Assed Trader in my personal development I'm also embracing the idea of being led by the market.  


I recently attended a commissioning conference during which I heard doctor after doctor speaking about how difficult it is to lead change and how many clinicians resist change.  It made me realise how much support they need in taking up leadership of the direction of the NHS as required by the new Health Bill.


To help meet this need I am responding to the market - I've enrolled in a Diploma in Executive Coaching and   should be qualified by Christmas.  So if trading takes longer to generate an income than I'd hoped I have an alternative way of earning money post redundancy.


The good thing about learning how to coach others is that you can apply the principles to yourself as well.  So in between my coaching sessions with Emmanuel I hope to coach myself into a better trader too.  

Dinosaurs: Scary but failed to adapt...so where are they now?

Trading: The Ultimate Shape Sorting Toy?

Bad Assed Trader:  Tomorrow I’ll be spending all morning trading with my coach, Emmanuel. His first question will be: “How are you getting on?” 

In the first six months of my trading journey whenever he asked that question I felt an overwhelming urge to grab him by the shoulders, shake him vigorously and plead “You’ve got to help me!  I’m not making any money here!”

After six months I calmed down and realised that it was normal not to make money in the first year  and that he would show me the way, or rather help me to find the way, no problem.   There have been occasional moments since where I’ve felt a little lost and at sea because my trading account has not been increasing consistently but generally I’ve accepted that this is a long game and I’m learning all the time, about the technicalities but also about myself.

In the last month I seem to have accepted this point at a new and deeper level because with redundancy by October looking ever more likely I’ve been casting around for other possible income streams to supplement my redundancy package.

The plan was that I take redundancy and then dedicate a year or so to trading exclusively, living off the redundancy package until hopefully trading generates sufficient consistent income.  But I have come to understand that I trade better without pressure and an alternative source of funds will help keep the pressure down, as long as it doesn’t distract me from trading.

I hit upon the answer to the question of an alternative income recently and will blog more about that in my Faceless Bureaucrat mode shortly.  It’s all very exciting and will help, rather than hinder my trading.

Coming back to my answer to Emmanuel’s question I do feel that tomorrow is the first time I will be able to say that I believe I really am on the way to turning that corner.

I know I’m the everlasting optimist.  And a good thing too or I’d have given up ages ago, which I understand is what most people do when they start learning to trade.  But I will share with you how I will explain it to Emmanuel.

The story starts about a quarter of a century ago when my oldest daughter was a baby.  When she was old enough to sit up and pick things up to play with I bought her a “shape sorting” toy.  It was a brightly coloured plastic box with different shapes cut out of the lid and it came with different coloured hard shapes that fitted into the holes.  There was a star, a triangle, a square and a circle.

We spent many a happy hour learning which shape fitted into which hole and trying them all for fun.  And a couple of decades later here I am basically doing the same thing with trading.

At first I couldn’t tell what shape the hole was, let alone select the right shape to go into it.  Translated into trading terms I basically struggled to see when the right pattern occurred on the charts to offer an opportunity to trade.

Sometimes I would spot the opportunity – see the shape – but I’d pick the wrong shape to slot into the hole.  In trading terms I would take the trade, it would start to go my way but I wouldn’t benefit because I would set the stop loss or profit target in the wrong place and get stopped out for a loss or at breakeven.

Then Emmanuel instructed me to stick to particular rules and just trade one strategy.  This was like saying “Take the square peg and wait until the square hole and only the square hole appears.  Ignore the star and all the others, just go for the square.”

What this revealed to me, about me, was that I’m not a very patient person and I do get a bit frustrated with waiting and sticking to rules so diligently.  I know this because I did often find myself trying to bang my square shape into a circular hole telling myself it was a squarish sort of circle and would go in if I pushed and bashed hard enough. This tactic lost me a bit of money.

If I’m honest I can see that my years as a Faceless Bureaucrat had encouraged me to look at the operational context and then seek to influence it, a process of negotiation when planning and decision making.  Often I was able to impact on that context and so if I had the equivalent of a square shape (the resources I had available whether that was money, staff, skills, time) I could mould the environment to accept it.  But the Forex market just doesn’t work like that – it is much more like the shape sorting toy and accepts only what it accepts, not what you want to inflict on it.

The last time I saw Emmanuel he moved us onto a different track.  He told me to spot where things were moving and find a way in.  Now the shape sorting box is different and I’ve responded better to that I believe (though only time will tell).

Now when I look at the charts I sometimes see fuzziness and no shape, so I don’t trade there.  Other times I see the shape and I look down at my box of shapes to see what will fit.  I have a variety of shapes and they are no longer hard plastic but more bendy and flexible.  I can’t change them much but enough to make them work with the opportunity in front of me.  So if there’s a circle I can take my oval and bend it into a circle (this relates purely to the shape sorting image – there aren’t any circles on trading charts…).

Emmanuel has given me permission to use the rules I have learnt to exploit the opportunities I see in a more flexible way.  This appeals to the Faceless Bureaucrat in me because I was very happy scanning and interpreting the environment in which I worked and then shaping a tool (writing and implementing a plan, for example) that delivered what was needed.

Looking back I realise that this was the style I adopted when I first started trading although not consciously and because I hadn’t fully learnt the rules or about my own weaknesses I wasn’t doing it well.

I know now that one of my biggest trading weaknesses is my optimism and confidence.  I tend to expect price to move further than it often does.  Now I’ve learnt this is my weakness I check myself and act pessimistically.  Recently this has turned what would have been losing trades into winners.  Strange but true.

As I say, only time will tell whether I really am discovering my true trading personality and how to use my strengths to trade successfully with this new approach.  The good thing about having a morning with Emmanuel is that I can show him the trades I’ve been taking recently and he’ll tell me honestly whether it’s luck or improved skill that has led to my better results.

Fingers crossed...

Am I the only one who sees trading like this?

So Far So Good on Euro against Pound

Bad Assed Trader:  Either my luck is changing or my trading skills are improving. Fingers crossed it's the latter....

Anyway, an update on the Euro Pound (EURGBP) movement I blogged about on Sunday.  The latest daily chart now looks like this:

EURGBP Now

As you can see, the green bar at the top of the last peak was the one I highlighted on Sunday as hopefully the top of the peak.

Monday saw the start of the move downwards but with some hesitation - as you see it's a doji (looks like a cross) bar so although sellers came into play, buyers came back in to push price back up so that the opening price and the closing price were the same which creates the cross.

Tuesday's bar is a nice decent sized down bar (red) with price closing considerably lower than it opened (the blip on the left of the bar marks the opening price, the blip on the right marks the closing).

Today (Wednesday) has so far seen price go up and back down.  This promises further down move or possibly chop, where price just bobbles around for the rest of the day.

So have I made any move from spotting this move yet?  This is always the difficult part - it's not just about seeing where price is going to go but catching it at the right part of the move because price cycles all the time so in a down move it goes down then back up a bit (retraces), down again and back up a bit.  You don't want to start trading it short (down) if it's just about to go back up a bit.

I took a short trade on Monday and made 1% and then another this morning for another 1%.  I also have a longer time frame trade on which is currently doing well and I hope reaches its target 2% within the next day or two.

I'm watching carefully as it's a counter trend trade so price could bounce back at any time - I'm looking for it to make it down to the 20 Moving Average or just above anyway, so far so good....

Is the Euro heading for a fall against the Pound?

Bad Assed Trader:  It's Sunday evening so I'm looking through the charts to see what opportunities may be coming up this week and thought I'd share one with you, in case you're interested.

The Euro against the pound (EURGBP) is generally in an uptrend as shown on the chart below:

 

EURGBP now

As you can see, in the past week it's headed up strongly - due to the Euro having a good week against the dollar despite the Greek shannanigans.

When will this rally end?  Well, the end could be nigh imminently...as indicated by price hitting the top of the uptrending channel where we might find resistance kicking in.

EURGBP: The last few weeks

The Doji High Test Bar

When we look closely at Friday's bar (the last one before the red dot on the left chart) we see it is a doji bar - like a cross - with a high test (top section much longer than the bottom of the cross).

The doji indicates indecision - sellers equals buyers - and the high test means that although price made a strong move up in during the day it made a strong move back down again.  Together these signs indicate a turning point and coupled with the fact that the bar is at the top of the channel it is a strong signal that price will retrace back down.

As the trend is up then to trade this would be counter trend - where might price drop to with so many Moving Averages in the way to interfere with price action?

A look at how price has reacted previously on the first peak of this uptrend (see below)

EURGBP: The first peak of the uptrend

shows another high test doji (or as good as) bar at the peak followed by a steep drop to the 20 Moving Average (the blue line) before chopping and bouncing up to recover about half the move down and then more downward move to the 50MA (red) and beyond.  The second peak of the uptrend showed a not dissimilar pattern (see below) with another high test doji followed by another strong move down

This one basically careered through the 20MA barely only to acknowledge its existence before hitting the 50MA and chopping about for a while prior to the last part of the down move to the 200MA in green.

Given this previous form, might we then expect a couple of strong down days on Monday and Tuesday this week?

I had a little look at the Euro against the US Dollar (EURUSD) and interestingly enough Friday was a doji day again which suggests reversal of the previous price action which was up.

The EUR USD now

So this suggests the Euro might turn downwards against the dollar at least.

I also had a quick look at the pound against the dollar which is heading downwards generally but has been retracing the last few days.  It is possible this retracement upwards may continue.

This all compounds the evidence in favour of a move down for EURGBP.  So, having done this general scan of the context as I'm an intraday trader I hone in on the hourly chart to see what this might have in store to back up the overall picture I've gathered.

I like what I see here...why?  I'm particularly interested in the MACD indicator at the bottom of the chart where I've drawn in a nice pink trendline showing a downward slope.  As MACD is heading down and the hourly trend is heading up this means we have "MACD divergence".  When MACD disagrees with the price trend then it may indicate a turning of sentiment shortly.  So MACD is telling us that a down move is heading our way.

It may be counter trend on daily price action to trade the EURGBP but I will be watching for an opportunity to short the pair on an intraday basis.  I'll need to wait for some confirmation of the turn on the hourly and four hourly chart before I do and I'll let you know how I get on.