WOW I knew it was awhile since my last Rant but I did not realize it has been 7 weeks! My how time flies. Tempus Fugit. What have I learned these many weeks past? I’ve been distilling an emotion that I have identified while I am in the Market. The simple shift in my mental approach from “Trading” to finding Opportunities has (simple tho it seems) focused my attention on the latter, finding opportunities (based on my DBRS signal) and more importantly, reducing my risk by trading less. Yes trading less. How did I come to this? It all came together SLWM. June 26 2010, 1:30 PM, Bahama Breeze on I-Drive, Orlando FL. What is SLWM you ask? Since Lunch With Mike. In the weeks leading up to our lunch visit I had identified an emotion that presented itself  whenever I was up for the week (as I look for 10%), especially when I am ahead way before Friday. I was aware of the emotion but only that it exist and not that I needed to do anything about it, or did I put a label on it. What happens is that this emotion rears its ugly head and….ok, I probably need to describe it here. Ok so I’m ahead of my target and I’m now feeling good, excited but now there is this gut feeling that I’m going to do something stupid….after all I’ve got pips to “Trade” right? Well lo and behold I do not disappoint… I’ll go right ahead and roll the dice ignore the fact that my trusted signal is not there fully or not at all…let’s just see what happens. What happens is that I start asking myself  “Why did I do that”? After the fact everything is clear. Then I begin to defend the position to protect my integrity. And at the point that it becomes ridiculously obvious that I have now “Traded” my gains away I succumb. Now I have the hill to climb again. Mark Douglas talks about such a scenario in his books. What should I call this thing? I’ll call it my Mid-Week Crisis. So Mike and I discuss this Mid-Week Crisis situation and he opens the door to the possibility that I do not have to participate. Hu? Not participate? What a concept. You mean just not do anything? Since I’m ahead why not get waaaaayyyy, waaayyy ahead then? He offered having the experience of ending the week on a high when I have my (newly labeled) Mid-Week Crisis. Trade less, make More. Protect your Capital. Winning is a habit… just as Loosing is also a habit. This is what I have learned these past weeks: I can choose to win. Selah.

Ahh, another Sunday and what have I learned? I learned that I can take advantage of a larger, 30 min, time frame using the same signals that I use for the 30 sec, 1 min and 5 min.  ( I did, after all, spot that Pin on the EUR monthly!) I thought more about my Mid-Week Crisis and it led me to a light review of my past results and which days of the week, if any, were better than others. Well it turns out that I seem to have a pattern of Tuesday or Wednesday being a low. How to explain that? I can only attribute it to Market Fatigue. That’s what I’ll call it. Market Fatigue. The point at which you throw caution to the wind and jump into the market just because, ahh let’s see, the last candle spoke to you. Yes, that’s it, never mind that the previous 20 candles disagree, lol.  Could this Market Fatigue have anything to do with my 30 Second Nano Time Frame and the requisite attention necessary to take advantage of the Market Opportunities when they present themselves? Quite Possibly. (I hear you Tina) So I’m going to try an experiment for the next couple of weeks (noting that a “couple” in Jamaica can be anything from 1 to 100). I will watch for the Mid-Week feeling around Tuesday or Wednesday and, if it is present, I shall take the Market day off, relax and clear out the cobwebs, get that I can’t wait for Sunday feeling on a Thursday. Selah.

Well, It’s Sunday and time for my Rant.

I just came back from a mini 4 day vacation to the Florida West coast in Anna Maria Island / Holmes Beach. It’s wonderful over there. I had time to do lots of sleeping and to let the Sea Breeze waft through my brain….it does a body good. I was about to start my Rant but decided to check my email and there from the Elliott Wave Club was a free download of a “Complimentary 32-page Trading eBook from EWI’s Jeffrey Kennedy”. Well though I used and respect the Elliott Wave, I no longer use it and more over I don’t know who Jeffrey Kennedy is. Never the less “free” is still a powerful word. So I pulled down the 32 pager and began to read  because anything on Market Psychology now gets my attention. (In my opinion charting and all that technical stuff should come after Market Psychology but yes, I know, it’s not as sexy and would not sell). Anyway, as it turns out, Jeffery spoke exactly about what I had on my mind. There are no coincidences (this I believe). I’ve gone over it before but he puts it together very well so here is an excerpt from Jeffery Kennedy:

I. How To Make Yourself a Better Trader

From The Trader’s Classroom Collection: Volume 1

 Define Yourself: What Kind of Trader Are You?

 As a trader, it is imperative that you define your approach to the markets. For instance, do you follow the trend or do you like to play breakouts? Are you a commodity trader or an index trader at heart? What’s your trading time frame, five minutes or five weeks? Moreover, how do you analyze markets, fundamentally or technically? Do you prefer using a black box type trading system or making your own calls?

My trading style is to trade with the trend. Specifically, I like to buy pullbacks in uptrends and sell bounces in downtrends. My markets are commodities, and my time frame is three to five days. If I catch a trade that has some legs to it, and it lasts a little longer, that’s fine with me. Bottom line, though, I’m a take-the-money-and- run kind of guy. This is who I am as a trader.

 In addition to the Wave Principle. I include basic chart reading and bar patterns in my analysis. While I do use a few select technical studies in arriving at my decisions. I have always believed that “price” is the ultimate indicator and that everything else is secondary.

 Remember, success in trading comes from the consistent application of a proven methodology. If you don’t define your methodology, then your trading style could change with each new issue of Stocks and Commodities magazine. Trying a variety of analytical techniques rather than consistently following one is a problem for traders, and it’s also a great way to lose your trading account.

[September 2004]

 Why Emotional Discipline is Key to Success

 To be a consistently successful trader, the most important trait to learn is emotional discipline. I discovered this lesson the hard way trading full-time a few years ago. I remember one day in particular. My analysis told me the NASDAQ was going to start a sizable third wave rally between 10:00-10:30 the next day … and it did. When I reviewed my trade log later. I saw that several of my positions were profitable, yet I exited each of them at a loss. My analysis was perfect — it was like having tomorrow’s newspaper today. Unfortunately. I wanted to hit a home run, so I missed hitting singles and doubles.

 I now call this emotional pitfall the “Lottery Syndrome.” People buy lottery tickets to win a jackpot, not five or ten dollars. It is easy to pass up a small profit in hopes of scoring a larger one. Problem is, home runs are rare. My goal now is to hit for singles and doubles, so I don’t let my profits slip away.

 Since learning that lesson. I’ve identified other emotional pitfalls that I would like to share. See if any of these descriptions sound familiar.

 1. Inability to Admit Failure

Have you ever held on to a losing position, because you “felt” that the market was going to come back in your favor? This behavior is the “Inability to Admit Failure.” No one likes being wrong, and for traders, being wrong usually costs money. What I find interesting is that many of us would rather lose money than admit failure. I now know that being wrong is much less expensive than being hopeful.

 2. Fear of Missing the Party

 Another emotional pitfall that was especially tough to overcome is what I call the “Fear of Missing the Party.” This one is responsible for more losing trades than any other. Besides encouraging overtrading, this pitfall also causes you to get in too early. How many of us have gone short after a five-wave rally just to watch wave five extend?

The solution is to use a time filter, which is a fancy way of saying, wait a few bars before you start to dance. If a trade is worth taking, waiting for prices to confirm your analysis will not affect your profit that much. Anyway, I would much rather miss an opportunity then suffer a loss, because there will always be another opportunity.

 This emotional pitfall has yet another symptom that tons of people fall victim to – chasing one seemingly hot market after another. For instance, because metals have been moving the past few years, everyone wants to buy Gold and Silver. Of course, the worst time to get into a market is usually when everyone is talking about it. To avoid buying tops and selling bottoms, I have found that it’s best to look for a potential trade where (and when) no one else is paying attention.

 3. Systems Junkie

 My own biggest, baddest emotional monster was being the “Systems Junkie.” Early in my career, I believed that I could make my millions if I had just the right system. I bought every newsletter, book and tape series that I could find. None of them worked. I even went as far as becoming a professional analyst — guaranteed success, or so I thought. Well, it didn’t guarantee anything really. Analysis and trading are two separate skills; one is a skill of observation, the other is a skill of emotional control. Being an expert auto mechanic does not mean you can drive like an expert, much less win the Daytona 500.

 I am not a psychologist or an expert in the psychology of trading. These lessons are just a few I’ve learned along the way … at quite a cost most times. But if you are serious about trading, I strongly recommend that you spend as much time examining your emotions while you are in a trade as you do your charts before you place one. What you discover may surprise you.

 Recommended reading: The Disciplined Trader and Trading In The Zone by Mark Douglas

[February 2004] Jeffrey Kennedy

So there it is. There are parts that really hit home for me. The part about being a systems junkie…I did that. The part about missing the party… I’m working on this. In fact, recently I have been particularly focused on this because when you look for Opportunities on the 30 sec TF there is very little time for reflection…you have to be quick …LOL. I have limited my holding onto a losing position by automatically including a stop and the SL is equal to my 2% risk so I am hard pressed to increase the risk. (I’m not saying that it has never happened now…lol) I think that all the emotional, Market Psychology boils down to two things Pride and Vanity. They have no place in the Market. Pride is the emotion that gets you into a Market position because you “know” where is it going. Vanity is the emotion that keeps you there because you “know” it is coming back (even though the Market is screaming that you are wrong). Pride and Vanity; watch for them. Get a big stick and beat them into submission. Selah.

Sunday and it is a Sunny Day here in Orlando. I had a wonderful week, Praise the Lord. This more relaxed “trade less, make more” approach seems to have some teeth to it. It even has me looking  further afield (read larger Time Frame) for Opportunities….noooo I’m not hanging up my Guns, lol, the ol’ sniper sights are still firmly affixed to my Mouse. So, what have I learned this week? I learned that I can wait on the Opportunity to present itself and that nothing happened when the Market moved without me. Nothing. My account did not go up but better yet, it did not go down. And how did I feel? Hmmm, I felt like it would have been nice to ride every wave but it felt better that I did not (falsely) justify the increased risk of a late entry and the warm and fuzzy of (actually) not breaking my rules. A question reared its head this week and it’s been swirling round my head. Would I do anything differently if I had an account that was seven figures? Would I take greater risk, keep it the same or would I take less risk? I have not answered it as yet…mostly because I don’t know…. but I’m building the mindset necessary to manage an account that is Seven Figures! Selah.

Rant Lite this week. I got beat up right at the end of the week. I put up the week’s reward but the Opportunity was not forthcoming. It lead me to ponder if there were many other Careers, Professions or Jobs that required one to put themselves on the line for every single moment that they decided to engage. A soldier? He gets paid live or die. Pro Sports? They get paid win or lose. Golf? hmmmm not sure here. There may be some professions but I don’t think there are many. Not like being in the market where it is possible to fall on the knife at every moment. The only thing keeping one from completely wiping out one’s account is, well, the desire not to. Where the very desire to win can expose our personality flaws and frailties; giving us a glimpse of the magnitude of our deficiencies. In the face of all this, we soldier on, convinced the we can beat the odds and make the necessary adjustments required to be consistently successful in the Market. (One good Market Opportunity does not a career make) “And this above all unto thine own self be true and it shall follow as the day the night – thou can’st not then be false to any man.” – William Shakespeare. Selah.

So what did I learn this week?

“And this above all unto thine own self be true and it shall follow as the day the night – thou can’st not then be false to any man.” – William Shakespeare.

I ended my rant last week with this quote and I am starting my Rant with it again this week. I decided to experiment a little this week and move to a larger 30 min. time frame. As most of you know I love the shorter TF’s but because of my 9-5 it is difficult, if not suicidal, to take Opportunities on the 30sec , 1 min or even 5min TF’s if you cannot watch them. Well, I watch them anyway. Anyhow, I was in a few 30 min Opps. and got some but got whacked at the end of the week (2nd week in a row) because the Market reversed (it being in consolidation pretty much) before my TP and because I was not able to watch it and move my stop to breakeven when I was in Pips….I got stopped out. So this experiment did not work, plain and simple. At least I know and can put that puppy to rest. Dixie Cup Market Opportunity. This IS My Style. Time and Time again I find that I am (consistently) way better at singles than home runs. So I think I’ve gotten this longer TF out of my system (during the US Session). The DBRS and PIN patterns are wonderful in the US Session…but I’ll just have to pretend I am in a museum and admire the beautiful pictures from a distance! Selah

And what did I learn this week? I learned that I think about the Forex Market almost all the time. When I take advantage of a Market Opportunity (a “trade” to others) there is hope, anticipation, an expectation of success, verification of my market savvy or lack thereof. And, when I’m not in the Market, I’ll be looking for ways to get in. I learned that Praying, Luck, Chance and a Voodoo Dance have no place in building a career in the Market. Reliance on one’s Self and confidence in one’s own ability is the bedrock on which to build a massive account. I guess if it was easy everyone would be a millionaire. I see the Market as an uncharted Landscape, and the road to success is unlimited. Each one of us has the ability to chart our own course, pave our own road. Some roads are crooked and winding, some are highways some are byways. I started on a crooked dirt road, got my GPS so let’s see where it leads. Selah

There will be no Ranting this 9/11 weekend. God Bless America and our Troops.

By all indications this was an exciting week especially on Tuesday 9/14/10 when the Bank of Japan woke the sleeping Market with its intervention. Exciting if you were long before the intervention and did not have a TP, but even more exciting if you were short and did not have a stop in place. Believe me, I know how that feels! I distinctly remember being at my first class at MTI and speaking with one of their advisors about “Trading” the Fundy announcement. His reply was that he did not. My reaction to this was disappointment because he was obviously crazy not to be a part of those wild swings. All you had to do is hop on use huge stops or none at all and go for the ride. Sounds exciting. Well, that all sounds more like going on a roller -coaster ride at Disneyland now. How my focus has shifted. A consistent Walk In The Park is now my focus rather than the Thrill Of The Ride. Selah.

Wow it’s been one month since my last entry…hasn’t seemed that long.. I know it’s not Sunday but I had a moment of clarity today, Wednesday October 20th 2010! An epiphany you might say. Something wonderful happened today…I lost 25 pips. Earlier I took 22 pips so I’m net -3 pips. What could be wonderful about that, you ask. Well here’s the story. Most here know that I use the DBRS (see www.fxepic.com for how that works) for my MO’s (Market Opportunities) and recently I have come to find that the 10 minute chart (and I have Liz to thank for this) on the Meta4 platform gives wonderful DBRS signals. About four weeks ago it dawned on me that the pip take from the signals (on the 10min TF) are best only at certain TOD (Time Of Day). This is not to say that signals generated at other times were not valid, only that the ones at certain times were stronger  and went for more pips. I’ll leave this for a bit to move to another topic that I have struggled with so that I can tie it all together later. Most of you also know that my personality is that of a Sniper (I prefer this to Scalper), and, as we are told by the more experienced Forex pioneers, it is best to form your strategy around your personality. This will allow for Forex System Synergy rather than Forex System Stalemate. Why you ask? Because when your personality flows with your system they support each other rather than having your personality fight or oppose your system. So what does this mean? Well, for example I simply like a Snipe. In ….Out, count my pips. I go crazy being in a MO for hours. That may change, but for now I use lower TF’s. (The 30second is a favorite of mine lol) All of this to say that I struggle with being patient. Waiting for the MO to appear. Sitting in front of the screens watching every tick. Sooner or later taking a manufactured, rule braking MO. And the inevitable question, Why did I do that? And the lament, if only I had waited. Patience. Time OF Day. How are they related? In a moment of clarity today, I realized that I simply have to WAIT for the right Time Of Day! That’s IT! Patience now has some meaning! I’m not waiting in vain. I am only waiting for the most Opportune time to take advantage of the Signals that my System produces. Suddenly Patience is not this daunting activity that I have to struggle with. It has lost its sting! Now, I can’t wait to be patient!!! This “Clarity” happened when I was waiting and watching for my 9:30 AM MO to appear on the 10min TF. Sure enough BAM there it was! Right on queue. Finger on the button….and …. I’m at work and let’s just say that I have to wait.. Maaaaannn. This MO took off like a bullet..140 pips later, I am livid. Revenge. I am telling myself  beware of the Revenge Entry. Do not do it. Ok so you guessed it. I did. I had taken 22 pips from an earlier MO at 8:30AM so I put my Risk at 25 pips. Seemed reasonable at the time. Nothing to lose right? Wrong. That was disrespectful of my hard earned pips. Easy come, easy go. That mental attitude will get one nowhere fast. I did wait…. I was patient for some time. But the time that I took the MO was not the RIGHT time! It was not the TOD for my entry. It all came to me after the loss that I would still have my pips if I had waited…for the right Time Of Day. The TOD that my signals appear AND have the greatest probability of being successful. Yup, stack up those probabilities, pile them on. It does not guarantee a successful MO but it does give you an edge. I can’t wait to be patient… but I can wait for the TOD! Selah.