Bad Assed Trader: Despite my rather erratic performance at the beginning of this year I'm sticking to my guns and have continued with my usual daily routine of analysing all 30 or so of the currency pairs I trade.
I've noticed that after a while one does get into a sort of rhythm with the pairs and can spot which ones are behaving rather wildly (unpredictably) such as the Canadian dollar (shown right - daily chart). Otherwise known as "The Loonie" this currency pair has been fluctuating in a seemingly random fashion. This indecisive movement may just be consolidation of price in a down trend but I'm not keen to touch it when it displays such unpredictable behaviour. There's no trade there for me.
Experienced traders tell us not to take it personally when currency pairs don't do what you want them to do. That seems obvious to a novice, it's only when you've been trading for a while that you understand at a deeper level what they really mean. If you're looking through your charts for an opportunity and all you see is the likes of the Loonie (named after the Loon bird on the Canadian currency - not a politically incorrect nickname, apparently) bouncing around at random you start to feel a sense of frustration building up. You feel you can't take action and of course you want to because you want to do some meaningful work and make some money trading.
In the early days you feel it is your own inadequacy at not being able to find a set up for a trade. But after a while you do start to disassociate emotionally from the charts and you realise that if the charts are all behaving like Loonies then it does not reflect on you or your ability at all, it is simply their nature right now and the moment will pass. This is what the experienced traders mean by not taking it personally - not being affected by it emotionally, not feeling that frustration.
It does indeed seem that time and repeated exposure to these things gradually numbs one's emotional reactions. It helps if there is no sense of urgency to trade, no big pressure to perform hanging over one. Pressure simply gives one a reason for frustration.
Preparation in trading includes the psychological journey taken to learn, at a subconscious level, to let go of feelings of frustration when the market is not offering you opportunities. One of the biggest dangers is when one finds oneself repeatedly scouring the charts looking for a trade and inevitably bending (breaking) one's rules to give one an excuse to get into a trade.
My way of combating this feeling of redundancy is to at least take action by noting down what is happening in each currency pair so I have it written cleanly and objectively on my initial analysis and then writing what would need to happen in order for me to consider trading the pair. Every morning many pairs have the words "Clarity on the daily chart" noted because until I can recognise a clear trend (up, down or sideways in a range) I'm not interested in touching that pair and those words allow me to skip those guys with speed.
Patience is also a key part of the preparation side of trading and if one waits long enough then sure enough an opportunity appears. I've found with my daily analysis and noting what needs to happen for me to get interested that when it does start to happen I can raise my interest level further and start to check whether my rules are all getting met. As the experienced traders say, you wait for the trade to come to you. This means preparing your terms to engage with a trade.
Which is why I've chosen the blog title I have today: Luck is when preparation meets opportunity. Trading luck is about spotting the opportunity but without the psychological as well as analytical preparation one is often not able to take that opportunity. Those of us who have traded for a little while know full well that if the frustration has mounted and one has "relaxed" one's rules, taken trades that then don't make out and confidence is shot...then one is far less likely to take the real opportunity that then presents....and be bold enough to get a good return from it.
So, the happy news is that this week I had a really fun experience with a trade. I was Skyping with my two lovely trading buddies - both girlie girls like me - and we all took a short trade on the FTSE 100 four hour chart (see far left: entry level marked by pink arrow, stop loss by red arrow and target by yellow arrow).
The daily chart on the right shows that the uptrend had turned to a down trend and we are at the beginning of that down trend, the place where moves are often faster and sharper. One of the best things about this trade was that the risk (the gap between where the trade was entered and the stop loss, ie where I would exit if price went the wrong way) was only 40 pips so I was able to put a decent sized stake on and make 2.5% within 24 hours. All the better for knowing that my trading buddies were riding this wave with me.
I don't normally trade the FTSE 100 but it's on my list to analyse every day and so I had duly been watching and recording its movements for weeks before placing this trade. Not bothered when it faffed about and not frustrated when it made big moves that I missed. Just doing my prep by noting its little journey through life. Then, catching it for 100 pips when it happened to track across my radar just momentarily in a way that I expected.
I know this is the mindset I need to keep and that the mantra of doing the preparation to await the opportunity that will inevitably present is the one I need to repeat. It's all I need to be "lucky".
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| USD CAD: "The Loonie" |
Experienced traders tell us not to take it personally when currency pairs don't do what you want them to do. That seems obvious to a novice, it's only when you've been trading for a while that you understand at a deeper level what they really mean. If you're looking through your charts for an opportunity and all you see is the likes of the Loonie (named after the Loon bird on the Canadian currency - not a politically incorrect nickname, apparently) bouncing around at random you start to feel a sense of frustration building up. You feel you can't take action and of course you want to because you want to do some meaningful work and make some money trading.
In the early days you feel it is your own inadequacy at not being able to find a set up for a trade. But after a while you do start to disassociate emotionally from the charts and you realise that if the charts are all behaving like Loonies then it does not reflect on you or your ability at all, it is simply their nature right now and the moment will pass. This is what the experienced traders mean by not taking it personally - not being affected by it emotionally, not feeling that frustration.
It does indeed seem that time and repeated exposure to these things gradually numbs one's emotional reactions. It helps if there is no sense of urgency to trade, no big pressure to perform hanging over one. Pressure simply gives one a reason for frustration.
Preparation in trading includes the psychological journey taken to learn, at a subconscious level, to let go of feelings of frustration when the market is not offering you opportunities. One of the biggest dangers is when one finds oneself repeatedly scouring the charts looking for a trade and inevitably bending (breaking) one's rules to give one an excuse to get into a trade.
My way of combating this feeling of redundancy is to at least take action by noting down what is happening in each currency pair so I have it written cleanly and objectively on my initial analysis and then writing what would need to happen in order for me to consider trading the pair. Every morning many pairs have the words "Clarity on the daily chart" noted because until I can recognise a clear trend (up, down or sideways in a range) I'm not interested in touching that pair and those words allow me to skip those guys with speed.
Patience is also a key part of the preparation side of trading and if one waits long enough then sure enough an opportunity appears. I've found with my daily analysis and noting what needs to happen for me to get interested that when it does start to happen I can raise my interest level further and start to check whether my rules are all getting met. As the experienced traders say, you wait for the trade to come to you. This means preparing your terms to engage with a trade.
Which is why I've chosen the blog title I have today: Luck is when preparation meets opportunity. Trading luck is about spotting the opportunity but without the psychological as well as analytical preparation one is often not able to take that opportunity. Those of us who have traded for a little while know full well that if the frustration has mounted and one has "relaxed" one's rules, taken trades that then don't make out and confidence is shot...then one is far less likely to take the real opportunity that then presents....and be bold enough to get a good return from it.
 |
| FTSE 100 Short Trade 3 April 2012 |
The daily chart on the right shows that the uptrend had turned to a down trend and we are at the beginning of that down trend, the place where moves are often faster and sharper. One of the best things about this trade was that the risk (the gap between where the trade was entered and the stop loss, ie where I would exit if price went the wrong way) was only 40 pips so I was able to put a decent sized stake on and make 2.5% within 24 hours. All the better for knowing that my trading buddies were riding this wave with me.
I don't normally trade the FTSE 100 but it's on my list to analyse every day and so I had duly been watching and recording its movements for weeks before placing this trade. Not bothered when it faffed about and not frustrated when it made big moves that I missed. Just doing my prep by noting its little journey through life. Then, catching it for 100 pips when it happened to track across my radar just momentarily in a way that I expected.
I know this is the mindset I need to keep and that the mantra of doing the preparation to await the opportunity that will inevitably present is the one I need to repeat. It's all I need to be "lucky".
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