A New Strategy: the result of a hypnotherapy session

Bad Assed Trader:  I participated in a training day on clinical hypnotherapy last Saturday which was fantastic.  I learnt how to hypnotise another person and how to hypnotise myself.  I also experienced being in the trance state - a state of deep relaxation with an alert mind.

This is a new skill I want to use more often as part of training my mind to achieve clarity and focus for trading and to be able to recognise when my emotions are getting in the way.

I reflected on my trading after the experience and I realised that my mind had become cluttered with my rules and I had lost sight of what is important.  It dawned on me that I need to simplify things big time and stick with price action as the key to my trading approach.  I had been finding support and resistance levels where they barely existed as an excuse not to place a trade and I was giving too much weight to indicators when price action is, as they say, king.

I discussed these issues with my coach, Emmanuel, on Monday and he agreed that de-cluttering my approach would help, sticking to trading with the trend and using price action as the lead for placing and managing the trades.

My process of reflection following hypnotherapy made me realise that the old trading mantra of "trade what you see not what you think" has been the most difficult thing for me to embrace.  I have traded in a way that has involved thinking/guessing far too much and this of course encourages engagement of the emotions which always ends up working against one.

So Emmanuel has supported me in developing a new, simpler strategy which trades with the trends using the four hourly chart and is led by price action right now.  I no longer set targets, but trail the stop loss behind the swings on the four hourly chart.

I took a short gold trade yesterday using these rules and so far it's moved over 1.5% in my favour - I've managed to lock in 0.5% of that in profit by trailing my stop loss and we'll see how it goes.

My new rules are as follows:

I trade Price Action with cyclicity on 240 in the direction set by the daily backed up by weekly.  I do not think ahead on my trade, I just look at what price action has been doing recently within its context and read what it is telling me right now.

Entry

1.    Identify direction of travel on the weekly and identify the trend on daily – daily is the chart I’m trading: Up, down or ranging, all are ok but clear & unambiguous trend exists

2.    Once clear of trend watch price action on 240 chart and wait for a pullback.  It could be shallow or deep – looking for at least 2 bars against the trend and then a return to trend

3.    Price action must show a reversal bar indicating a return to trend on the 240 chart

4.    Enter on the break of that reversal bar with the stop loss behind the opposite end of that bar (protected by any nearby moving averages or pivot points in case of a retest to that level)

Mixed Signals means indecision and a warning to stay out

Management of the Trade

Make a note of support/resistance levels which may trigger a turning point in the trade and watch price action at those levels.  If price suggests a turn (doji, low/high test bar, two inside/outside bars) when it gets there consider moving the stop loss down but remember that price often reacts to levels without changing direction so always give room to breathe.

Trail the stop loss behind swing highs/lows on 240 chart, protected by any nearby levels of support or resistance eg moving average. 

I let price action take me out of the trade - never kill a trade.

If price is fuffling this is not a reason to delete a trade, consolidation is normal before a move.  

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.

  

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          

The Spiritual Side of Trading

Bad Assed Trader:  When people think of traders it isn't usually a spiritual person that springs to mind.  But the more one learns about trading and successful traders the more one realises that the spiritual side of trading is key to lasting success.

As part of my personal development - for trading and because I want to develop and grow - I've been learning more about spirituality, what it means to be "awakened" and how these qualities are not only applicable, but vital for traders.

It was Emmanuel, my incredible trading coach, who first introduced the concept to me that traders can be, and often are, spiritually, psychologically and philosophically aware.  He happened to mention that he was reading "The Road Less Travelled" by M Scott Peck, a book I read 30 years ago and loved.  Once we found we had a shared interest in this type of subject we often discussed books in coaching sessions.  Emmanuel told me about "The Power of Now" by Eckhart Tolle and showed me on YouTube the videos of Oprah Winfrey interviewing Eckhart Tolle.  These books and videos contain powerful insights and incredible lessons and at the moment I can't get enough of them.

I also recently came across this amazing video on YouTube by Louise L Hay called  You Can Heal Your Life which beautifully demonstrates so much of what is being promoted by spiritual teachers like Tolle. Don't be put off by the title - I didn't feel that my life needed healing but the principles are applicable to us all.

In my research on spirituality in relation to trading I discovered this website, Joe Ross Trading Educators, which I found fascinating.  I don't personally subscribe to any religion but I'm very interested in deepening understanding of values and spiritual awareness so although the Biblical references on that website didn't resonate for me the lessons it promoted certainly did.

What I took away was that to be a successful trader one needs to embody many spiritual traits.  For example:

To trade successfully we need to be able to read the language of the charts clearly - to receive that information clearly.  When one is fearful of anything one is not open to receiving information objectively (let alone acting on it!) - fear gets in the way, it distorts and limits our ability to receive and understand.

Therefore to be most receptive to information from the market we must feel good about the market.   That good feeling needs to include feelings of acceptance, appreciation and respect.  To many people the word "love" conveys appreciation and respect.  We know that when we love someone we accept them, we appreciate and respect them and these are all spiritual qualities.  I've heard many experienced traders talking about need to accept the market the way it is and to respect it - resisting the way it is simply leads one into trouble when trading.

The passion that traders have for trading includes appreciating the markets, accepting their unpredictability and the fact that they cannot be controlled and being OK about that at a deep level.  I believe this takes some significant spiritual growth to achieve.

All traders lose trades but to be successful traders have to be able to pick themselves up, dust themselves off and continue without these losses affecting their self-esteem and sense of self.  Non traders may see this level of resilience as arrogance but arrogance and pride tend to lead traders into self destruction as, like fear, they blind us to the market information and distort our perception (we believe we've become all powerful and everything we touch turns to gold and this optimism skews our analysis).

This resilience is not arrogance in successful traders - it is more about being sufficiently self aware as to realise one's self worth is not changed in any way by market behaviour.  As new traders we all go through countless losses which reduce our trading account and make us feel not only lacking in confidence but, basically, crap.  Having the tenacity to pull oneself through this, the insight to see when it is happening and the wisdom to know what to do as a result are all hallmarks of spirituality.

Spiritual qualities include self discipline, perseverance, humility and yet a deep knowing of self worth due to the belief of being connected to or part of something greater than oneself.  The overlap with trading skills is clear.

Spiritual Qualities:  Applicable even to Forex Trading

Spirituality is also often described as being meek and temperate.  In traders the need to be temperate, or consistent, is fundamental.

To me, being meek as a trader is about not getting angry about trades that go wrong, it's about accepting the market is what it is and that you can only surf it for a little while to make your money.  It's about letting go of trades when the time is right to do so - not outstaying your welcome when the trade has gone the wrong way (by moving the stop loss further away for example) and not by being so aggressive in the chase for profit that we are unrealistic and end up losing that profit.

Meek sounds like the opposite to bold but I don't believe it is when it comes to spirituality or trading.  Having the courage of your convictions and beliefs is vital for finding spiritual awareness and for successful trading.  Being receptive to new and different information that challenges your previous perceptions or assumptions is about being bold and confident enough to learn and think differently.  But this boldness is not born of greed.  Greedy traders end up losing through their greed - all experienced traders are clear on that one.  They take daft risks and lose their perspective.  The boldness is more about having faith in your beliefs about your strategy, your edge and the markets - having faith in your knowledge.

For new traders that is one of the hardest things to gain.  And it is really only achieved through that perseverance, consistency and the ability to retain your sense of self worth whilst you undertake the journey to greater experience and to enhanced skills.

Resistance is Useless...or is it?

Bad Assed Trader:  A recent conversation with my older daughter gave me a different perspective to the power of the subconscious mind in subverting our hope, dreams and goals - trading and otherwise.

We were discussing jogging, of all things.  Now I should start by making it clear categorically that neither of us are serious runners.  We both exercise for our health and to try to keep our weight down but left to our own devices we would not actively seek out running opportunities.  We run slowly with occasional bursts of moderate speed.  So I'll stick to the word jog.

She jogs freestyle, by which I mean she'll don her kit and head off into the park and just go.  I jog in a controlled environment - the gym.  I had not realised just how different the two are until I tried to  freestyle and kept grinding to a halt.

In the gym the treadmill propels me along at varying speeds determined by my expert trainer/coach Chris.  My body just has to keep up but my mind has very little to do other than keep motivated to stay on the treadmill until the programme has done its job.

So I asked her, how do you keep going?  I find my body just slows me down until I'm walking. Then I'll realise I'm not running and make another start at running but very quickly the body seems to become a dead weight and draw me to a walk again.  I'm perplexed that the speed and duration of my run on a treadmill is so difficult to replicate when freestyling.

Her answer was fascinating and it applies completely to trading.  What I learnt from her is that it is all a matter of mind over body.  She made the following points:

• Our subconscious doesn't see the point in running - it is naturally set on a default of Conserve Your Energy - which means walking
• When we run we have to override that default setting consciously
• This means concentrating continuously on keeping the running going
• This means finding a strong reason to run which more than offsets the pain of the lungs from breathlessness and of the muscles from exertion
• The minute we stop consciously concentrating on that motivation the subconscious takes over and before we realise it we've slowed right down 
• After sustained efforts along these lines one has hopefully retrained one's subconscious to accept running as a new default setting which can be switched on at will - the length of time involved being different for each of us

This lesson in running reminded me immediately of the similar struggle in trading to override the impulses of the subconscious mind.  I have often experienced the same issues:

• The subconscious, when trading, is set on a default position of greed unless it has recently suffered losses which has then led to the default setting switching to fear - temporarily
• When we trade we have to override those default settings by consciously getting our mindset into one which is objective and open to receiving all the information provided by the charts - information both for and against taking a trade and being able to judge and weigh it all according to our rules
• This means continuously concentrating on being objective, focusing on the chart information rather than how much money we feel we want/need to make, how much we have just made/lost, how great or crap a trader we feel we are right now
• This means finding a strong reason to be objective, finding an override switch which allows you to turn on that objective mindset
• The minute we stop consciously concentrating on being objective the greedy subconscious takes over (it knows full well we're doing this for the money) and - particularly if we've had a good run - it starts relaxing the rules just like it relaxes our legs when we're out there trying to have a good jog in the park
• After sustained efforts along these lines  one has hopefully retrained one's subconscious to accept objective rule based trading as a new default setting which can be switched on at will - the length of time involved being different for each of us

This subconscious mind is clearly the engine room of our brain, keeping our body ticking away without us having to pay any attention to it which is great.  It's obviously the result of hundreds of thousands of years of programming to achieve certain default settings which worked at the time.

The interesting thing about trading is that to succeed at it we need to rework those inherited default settings - consciously.

The Vogon: A Representation of the Subconscious Mind?

But from a position of great strength (those hundreds of thousands of years of evolution) our subconscious minds are quietly chanting "Resistance is useless" just like the ugly green Vogon in the epic "Hitchhiker's Guide to the Galaxy" who had Ford Prefect and Arthur Dent in a vicious headlock before chucking them into the spaceship's disposal unit ready to be ejected into outer space.

In the story they are rescued by another space ship which works on an infinite improbability drive.  Conscious trading is all about assessing the probabilities of the movement of price action and selecting the highest probability trades.  So the trick is to spot that Vogon mindset and make an active switch to consciously determined probabilities.

Who'd have thought that "The Hitchhiker's Guide to the Galaxy" could provide insight into the role of probabilities in rescuing us from our Vogon subconsciousnesses when trading?