Continue reading »]]> You’ve heard it said before that “Trading is not a sprint, it’s a marathon”.   Since it seems to be the done thing to compare trading to a running race, I’m going to jump on the bandwagon.  And mess it up a little.

While trading certainly isn’t a sprint, it’s not really a marathon either.  Marathons are long – for most people trading is rather short if the numbers are to be believed.

Trading is really more like stunt car racing if you ask me, but that doesn’t work for the analogy so I’ll have to go with hurdles.

A lot – most – traders start off believing their trading adventure is like a 100m sprint, only to find out 5 metres in that there are massive road-blocks that they had no idea existed.

And just when you think you’ve cleared one major hurdle, another one is right there in front of you.

To be honest, that’s part of what I love about trading.  There is always a new challenge, something to over come, and something to grow you in some way.

The thing that most people aren’t ready for is the fact that growing hurts.  It hurts your bank balance, it hurts your emotions and it can hurt you mentally, too.

So if you’ve started trading in the hope it’s going to be fast, heart-pumping action with thousands of people cheering for you as you haul in the gold, you might want to hold up a little.

An Index of Trading Hurdles

Hurdle – Your First Big Loss.

The first hurdle is a stealth hurdle. No-one ever sees it coming because the trader thinks he’s running a sprint, and since it’s completely invisible they can’t help but run into it at full tilt.  Invariably, the traders are left shocked, gasping for breath and quite often shaking and sobbing on the track.  Although it’s possible that was just me.

After this nasty encounter most traders start to realise that they are not running the race they signed up for, and will probably quit.

Hurdle – The Next 10 Losses

The traders who don’t quit here tend to proceed a bit more carefully.  They’re aware that the race is booby-trapped and are on the lookout for the unexpected.  The problem is, often they don’t realise just how badly hurt they are.  Because they smacked right into Hurdle 1, every subsequent step they take puts pressure on the wounds and knocks against the bruises.  At times, the old wounds can totally re-open and once again the trader can find themselves in a whole world of hurt.  (More sobbing, more shaking, and add some nausea for good luck.)

Hurdle – Learning How To Trade

After the initial hurdles are smashed through (rather than leaped over) the trader starts to realise that they have no idea what they’re doing and need to learn some stuff.  For most traders, this is when they sit on the sidelines for a bit.  Books get read, blogs get followed and real trading knowledge starts to osmosis its way into the trader.  This stretch of the race isn’t particularly taxing but it’s loooong.

Hurdle – Finding Out That Knowing How is Different than Actually Doing.

This is hurdle is a nasty one that tends to catch you right on the shinbone.  Now that traders know about risking no more than 2% and all the other trading wisdom you read about everywhere, naturally they expect to win.

But they don’t, and it’s a shock.

What’s happening is that they are losing less quickly but still not really getting anywhere.  They understand that they have to jump to clear the hurdles, but lack any kind of technique so mostly are still knocking them down.

Hurdle – Working Out a Method

The thing about refining technique is that there is no real short cut.  You can try to trim off some of the time by learning someone elses profitable system, but when push comes to shove most times you need something of your own or you’ll struggle to trade it because of internal conflict.

For example, I learned a brilliant long-term system of trading that made sense and was profitable – except I love short-term trading and it’s all I’ve ever really wanted to do.  Longer timeframes drive me nuts with impatience so there is no way in heck I can spend my career looking at my charts once a week.  I would bite my fingers off trying not to fiddle with the system.

The problem with designing your own systems is that just when you think you’ve got it – thwack!  There’s a hurdle with the drawdown. And another, with the position sizing.  And, oh look!  Another hurdle, because you’ve become addicted to whisky and Tim Tams.

Hurdle – Trading Your Method

Finally, you have a profitable, tested method or system to guide your trading.  You’ve been practicing on the sidelines, paper trading and back-testing, and you’re ready to go live with your precious little money machine.

Right now is when all the hurdles you’ve previously knocked down or just barely passed decide to gang up on you, just so you don’t get complacent.   But this time, the hurdles aren’t external anymore, stemming from a lack of knowledge.  Now, they’re internal.

They’re YOU.  And you have to fix it.

Hurdle – Trusting Your Method

This is where the hurdles are becoming a bit easier to navigate.  There are still a lot of them, but when you can see improvement in both your bank balance and your actual trading it’s the first real moment of encouragement you get.  Your dedication to training (and trading) is starting to show, and you have the first glimmer of proof that it has all been worthwhile.  Phew.

But – this hurdle is a big one.  You know you have to trust your system, follow the rules and the profits will come.  But how do you do that, when it’s new? When you haven’t got the runs on the board yet?

When you are just starting with a new method, you are constantly doubting yourself.  During a run of losses, you wonder if the market has changed and you’re doomed to lose forever.  When you’re winning, you wonder – just a little bit – if you’ve actually just been lucky.

This hurdle is the hardest because you just have to do it.  You have to bite the bullet, trade your method and just suck it all up so your method has a hope of showing you it can achieve the results you think it can.  The key here is just putting one foot ahead of the other, until all of a sudden you’ve been trading your method for a year and can see real, physical results in your bank account.   Suddenly, you have no reason to doubt your method anymore.

Hurdle – Dealing With Profits

This is a lovely, gem-encrusted, $GLD plated hurdle.  They get prettier as you go along, it seems

But dealing with large profits is a real hurdle, despite it’s gleaming good looks.  Big wins are known to cause sloppy trading because arrogance and ego tend to take over, and suddenly what was a huge profit has dwindled to a pittance.

Ego is not the only factor here, either – sometimes having a large (or even a not-so-large) amount of wealth rubs the wrong way with our psyche.  I have a friend/acquaintance who could never seem to grow his account higher than $20k.  As soon as he reached that point, he’s start losing.  I know, it’s weird.  He ended up taking away half his account to trick himself into believing he only had $10k, and sure enough he had no trouble building his account right back up again.

(He has since gotten over this and is earning well over that amount.)

The point is, that sometimes dealing with profits can be just a troubling as dealing with losses, and keeping our hard-earned wins is just as much a hurdle on the road to success as is our very first face-ripping loss.

The market has new and unusual ways of keeping you on your toes, no matter how successful you are.  Don’t get too comfortable because you can be sure the next hurdle is just around the corner.

***

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Continue reading »]]> With the $DJIA hitting a brand new high last night, things are looking more bearish than ever out there.

Yes, you heard right – bearish.  Apparently, according to various bloggers everything is over-bought.  Nothing can go up anymore, because there’s no-one left to buy.   Copper isn’t going up.  It’s obvious to everyone, this thing is sunk.

Huh?!  What?

Let’s take a look at the facts, here.  Real quick – it won’t take long, I promise; in fact, the quicker you look the better.   You don’t even need to look at the names on the charts, I’ll tell you later.

Alright? On your marks!  Get set!  GO!!

 So?  What Do You See?

What do you notice when you flick through those charts?  How many are going down?  Any?  Oh, really - none?

Wow.  So, the $DJIA, the $SPX, the $NKY (Nikkei), the $DAX and the $EWA (Australia) are all going up!

The whole world is going up right now, folks – you might just want to think about buying something.

It’s a bull market, you know.

Mr Partridge, Reminiscences of a Stock Operator.

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Continue reading »]]> Everyone knows the main thing that draws people to the markets is the promise of mega returns.

Particularly when the banks are offering us next to nothing for our savings, there comes a point where we think there must be a better option – and what better option is there, than to manage our money ourselves and return a bajillion dollars a year instead of the generous $3.50 our banks are offering?

New traders tend to come into the game thinking anything less than 1283% per annum is an outrage, and that living off investment returns is a given.

But in truth, they have nothing at all to base that assumption on other than the claims of the various market spruikers trying to capitalise on their stupidity.  They certainly don’t know anyone returning that kind of money.  They just ‘know’ its possible.

I came across the Forbes “40 Highest-Earning Fund Managers and Traders” list this morning and was disappointed to see that I had, once again, been pipped at the post by a few no-name hedge-fund managers.  But after my tears had dried enough that I could see again, I noticed that these high-earners didn’t make such outrageous returns.

You know, a mere 30% or so was about the top return, and this was in a bull market where a do-nothing buy and hold strategy on the S&P500 ($SPX) would have returned you just under 12%.

It makes you think.  If these ‘top’ fund managers – the best of the best – are returning 20-30%, are our expectations wildly unrealistic?

What Can A Private Trader Really Achieve?

Personally, I think a trader can achieve anything they set their mind to. The article is about top earners in a dollar amount so it really isn’t a leader-board in terms of return.  I know there are private traders out there who earn substantially more than that every year in percentage terms – but that does not necessarily mean it’s a given for everyone.

The problem is, most people start out grossly over-estimating what they themselves are capable of.  Not everyone is going to be a great trader earning 100% or more every year, and in reality most people will struggle to even be a good one, especially to start with.

Returns can depend dramatically on a few factors which will vary considerably between traders.

• Skill Yes, you need skill and bucket-loads of it to make any kind of (consistent) return, let alone an out-sized one.  Do not under-estimate the time, practice and devotion to your craft that is required to see success in this.  It’s pretty safe to say that aiming for a 100% return on your account in your first year is going to leave you pretty disappointed.  In fact, if you get to the end of your first year and your account is in the black, you should be happy-dancing around the table.
• Time Frame With all else being equal, a trader using 5 minute charts will out-perform a daily chart trader simply because they get more opportunity to trade.   Their edge is presented more frequently, trades are closed more frequently and as a result the profits accumulate much more quickly – assuming, of course that their system is a profitable one.  A 5 minute trader can trade a 7R trend in a day, where the same trend on a daily chart will take weeks, if not months to develop.
• Trade Risk Some traders who earn mega-returns take stupid risks to do it.  There is no point shooting for out-sized gains by risking your whole bankroll when it means you’re finished if it goes wrong.  Keeping things more moderate means a slower accumulation of profit (and loss) and lower returns, but it will also ensure you have a chance to make some kind of return year after year, rather than having your star fall and explode as quickly as it rose.  Common wisdom suggests keeping risk on each trade to less than 2% of your account.
• Portfolio Risk Some traders will keep their trade risk small, but have a large level of portfolio risk.  This is when a trader risks say 1% per trade, but has 25 positions open that are not yet at break-even.  Again, kinda dumb as all it takes is a shudder though the market and a quarter of your account is gone.  But, you’ll also get higher returns when things go right. 
  
• Trader Conservatism or Aggression  Our personalities will dictate to a large part what our returns have the potential to be in any given market.  Someone who is more conservative might decide not to add to profitable positions, while a more aggressive trader might add to their positions through the use of options, for example.  In a favourable market, that can be the difference between a decent return and an amazing one.
• The Ability to Change Course.   The sad fact is that the market does not always go up.  Traders who have the ability (or some kind of mechanism that shows them) to change course quickly is a trader that will earn more simply because they know how to profit from all market conditions, and can recognise which conditions are prevalent in the market at any given time.

All this just goes to show that there is no real answer for the “What kind of return can I expect?” question.  Return is a huge balancing act between market conditions, personal skill and risk appetite; there is no ‘standard’ return for a private trader.

So How Do We Know How Good We Are?

In trading as well as life, it’s usually counter-productive to compare yourself to other people.  As you can see from above, there are so many variables that it just isn’t helpful.

However that’s not to say you shouldn’t have some kind of benchmark to rate yourself against.  It is helpful to see yourself improving, or having something to tell you somethings changed and things aren’t going so well.

For example, If you trade the constituents of the S&P500 on a daily time frame, you would want your efforts to outperform the index otherwise what you’re doing is a waste of time and you may as well just buy the $SPY.

Or, if you trade just one thing like I do, you could look at the percentage change for the period, and compare that to your results.  For example, it’s the last trading day of February today, and in the month of Feb the $EURUSD fell about 3.5% . I want to return more than that, and if I do I’m a happy girl.  (I’m a very happy girl this month )

When you’re just learning, you can compare your own progress in a not-return way.  For example, how often did you stray from your plan this month, compared to last month?

At the beginning, no-one knows how good they are going to be, it’s something that slowly gets revealed as a trader progresses, but the facts say that most people will fail.  So for most people, 30% return is brilliant but there will always be outliers who are capable of more.  But before you try for outsized returns, prove you can make ‘insized’ ones, and then, with time and experience the outsized ones may come.

*Do you bench-mark differently?  Love to hear your thoughts in the comments section!

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Continue reading »]]> I’ve been back in the ring for almost 2 weeks now, and I have a problem.  It’s a good sort of problem, but it’s making me more angry than any other trading issue I’ve ever had to overcome.  So maybe it’s not good after all.

You see, I’m profitable – which of course is very nice and not really a problem in itself.

BUT – I’m nowhere near as profitable as I should be.  And that makes me mad.  Really mad.

The reason why it makes me so angry is because it’s my own fault.  Well, really everything in trading is your own fault, but this feels more like my own fault than usual.

I’m a premature profit taker, and in a new and surprising twist it seems that even when my plan is correct, I don’t have the guts to stick with it to see my plan fully unfold.

Seeing as I don’t mind the odd bout of public shame and humiliation, I’m going to air my failure to the world as punishment so you can all laugh and point and throw tomatoes if you wish.

My $EURUSD short entry is the circle. (If you open the chart in a new tab, then click it will enlarge.)  As I mentioned on Stocktwits, I could see a head and shoulders forming, so felt pretty happy being short.  The red arrows signal my two exits.  As you can see, they suck.

My first exit was simply because I got twitchy, and my second was because I didn’t want to see anymore profit disappear – despite the fact I had planned to hold it until there was a good technical reason not to, which for me means an upside break from a range.  That was not a range.  That was good, old-fashioned panic.

(Notice that I managed to get out at the worst possible moment – I have a special skill for that. )

So, Am I Destined For a Life of Profit-taking Mediocrity?

No way, punk.

Taking early profits is just another head game that traders have to observe, poke around with and overcome.  There is always another skill to learn and the sooner I deal with this, the sooner I can work on handling massive profits instead of average ones.

I must admit, I’m looking forward to working on that one – but first things first.  Here’s my plan.

• I’m going to practice.  The first thing I’m going to do tomorrow is find random intraday charts of pairs I’m not familiar with, and I’m going to trade them candle by candle – making a point of not exiting when I’m uncomfortable.  I’m going to mark my entries and exits, and note how much profit I left on the table.  Importantly, I’m also going to note my thoughts about my exits as I make the decision which will help me pinpoint any unhelpful, limiting internal chatter.
• I’m going to look through my trading books for some visualisation exercises I can do to get used to sitting through minor pull-backs within a trend.  I know visualisation is very namby-pamby and real men don’t do it, but I’m not a real man. In fact, I’m not even a pretend man.
• I’m going to start an “Exit Journal” where I will document all my thoughts as I exit real trades.  This will be helpful to see any common themes, as well as to note improvement when it happens.
• And then, I’m going to hit up some trading gurus for some pointers and I’m actually going to do what they say.

Gosh – this trading business is turning out to be quite a lot of work!  Who knew?

***

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Continue reading »]]> After having six weeks away from the markets, it’s great to see that nothing much has really changed.

The trends are still trending, the traders are still twittering, and the perpetual $EURUSD bears are still trying to pick a top in a Forex pair that continues to climb.

I came back from holidays yesterday to a great deal of whooping and delight – I figured either a circus was in town, or maybe everyone was inordinately pleased to see me; but sadly it just turned out to be a 100 point drop in the $EURUSD.  Ah well.

Before Christmas even the non-EU traders were noticing that the pair were looking pretty darn bullish.  On the weekly chart it had broken its down trend and was happily making some fresh highs and everyone knew it.  Well, everyone except the forex traders, it seems.

To my amusement a large proportion of the traders on the stream were determinedly trading the short side, fading every breakout and basically getting cleaned up.  Come on, it is a little bit funny – there really is no excuse for fading a ripping trend.

Anyway, at that time the $EURUSD was bullish on EVERY time frame, yet these stubborn bears were continually calling the top.  And occasionally they’d be ‘right’, in the same way a broken clock might be right, and score a few pips.

But the real question here is why the heck are traders trying to score these tiny, anti-trend wins when there is an up-trend on all timeframes over 1M?  It just doesn’t make sense.

These traders are not flicking from long to short, trying to get swings.  They are calling tops on miniscule time frames whilst utterly ignoring what is really going on the pair.

Trend? I can’t see no trend!

But – But – My Indicators Say Over-Bought!

The crazy thing that everyone either doesn’t know or chooses to ignore is that in a great trend, a pair will be over bought on the RSI  (or any mo-mo indicator) a LOT for the simple reason the best trends have great momentum.  I know, it’s a shock.

Personally, I think the terms over-bought and over-sold are stupid because they imply that price has gone too far.   Here’s some news – the market doesn’t give a crap what your indicators say.  It will go up and be ‘over-bought’ longer than you can stay solvent.

You can’t look at some random indi in exclusion from everything else and blindly rely on it without checking to see if what it’s telling you makes sense in the context of the bigger picture.

Which brings me back to right now and yesterdays drop in the $EURUSD.

Is The $EURUSD Trend Over?

To quote a rather old and corny song, “It’s not over, till it’s o-o-ver”.  And I don’t know about your charts, but mine tell me that it’s not over.  The huge up-trend, that is, not the 100 point drop.

I know you’re just busting to know how I know that – it’s actually very easy.

On a short timeframe, a 100 point drop looks enormous.  On my 5M chart, it looks wonderful – there is some great profit potential in it and it’s a bit of fun.  But it’s really important to recognise it for what it is – which is a perfectly normal move in the context of an over all up-trend.

You can see in this daily chart that the $EURUSD has a reasonably large down day every so often, even within the up-trend.  This is not the time to start calling the EU at 1.28 by the end of the week.  Sure – it could happen.  But trading is not about vague possibilities, it’s about probability and likelihood.

After one down day, the likelihood of a massive sell off is pretty darn slim.  Call it if you want – after all, every sell-off starts with a down day.  You just need to recognise that, right now, the odds are not in your favour.

***

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Continue reading »]]> Hi!  I’m Jess.  I’m a Trader, and you subscribe to my blog because, well, you just do.

I thought I’d better re-introduce myself because you’ve likely forgotten exactly who I am.  It’s been a while, hasn’t it?

As you used to know but have probably forgotten, I’m on my way to becoming a trader worthy of a chapter in Jack Schwager’s next book.  Assuming, of course that the book’s title is not “The World’s Crappest Traders Ever”.

I’ve temporarily cut back on my writing and blogging because I need to focus which, quite frankly, is not my best talent.  It probably ranks somewhere just above singing, and just below window cleaning which those who know me at all will agree is not a very positive sign.

Last week I posted a short TED talk which outlined the 8 Words to Success by Richard St John, which I loved so much I promptly bought his book.

Mr St John talks a lot about focus, and an honest look at my life and habits showed just how appalling my focus actually is. Once I wrote down everything I have on the go I realised that my scatter-gun approach to life assured my productivity rate was about as good as a 3-year-old on a sugar high.

Sure, I got things done and made progress, but when you’re spreading your time between literally 15 different projects, the rate of achievement in each is going to be minimal, at best – and a whole lot of noise at worst.

On the upside I had been making progress in all my tasks, so I was encouraged by the idea that if I diverted focus from 15 things into perhaps 3, my rate of progress in these three most important tasks would show some pretty fabulous, focused results.

And so far, it has.

Focusing Effort For Superior Results

So what does focusing on trading actually look like?

The Old Me – trading 5 FX pairs intraday, US markets on a daily and weekly chart and ASX equities also daily.

The New Me – Trading the $EURUSD intraday.  And that’s all, other than looking after the left-over trades from my US market stint that are still looking the goods.

It’s amazing what cutting down your focus can reveal.  The first thing I’ve noticed is that suddenly I can read the $EURUSD like a book.  Its secrets are suddenly revealed to me because this one chart is literally all I look at, ALL DAY.

Small nuances I never noticed before suddenly made themselves clear when before I was just too busy to notice.

Now don’t get me wrong – I haven’t suddenly morphed into a super-trader in the space of 3 weeks.  I’m just saying that a few weeks of focus have changed my whole perspective on trading.

Through adopting a singular, focused approach to just one pair, I’ve discovered a new trigger that I had never even noticed, let alone traded before.

I’ve had the time to work specifically on breakouts, answering questions I had never bothered to properly ask before.  Just digging a little deeper can give a whole new world of insight not only into the success rate of each trigger, but also the best way to manage the trades that come from them.

You can’t treat a reversal the same way you treat a breakout – they have different personalities, different optimal risk and different profit potential, all of which have to be taken into consideration when placing each trade.

It’s not a one size fits all thing, which is kind of obvious but I never really took the time to get to know the intricacies that each trigger requires before.  I just took each one at face value using the existing knowledge I had and understandably got rather half-assed results.

If you’re struggling to  make a head or tail of the markets, try focusing. Cut back your trading universe and become an expert on just one thing.  It’s great to have a working knowledge of lots of different things, but there is the risk of becoming a jack of all trades (ha ha!), but a master of none – and in trading, if you’re anything less than a master you’ll struggle to pay the bills.

***

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Continue reading »]]> I came across this today care of Chris at The Trading Game and thought it was particularly relevant to where I’m at right now.  It’s short and sweet, so take the three minutes to grab a little inspiration.

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Continue reading »]]> You may have noticed it’s been a bit quiet around here, so let me reassure you that I’ve not, in fact, ditched my life and run off to join the Kalahari bushmen.  Although a simple life that involves a great deal of sitting about in the desert does at times seem rather appealing, it’s not that much different from my normal life, minus a laptop and clothes.

What I have been doing is sorting myself out.  You see, I’m not sure if I told you before, but I’m going to be a kick-ass trader.  Not just a normal old everyday trader making a few bucks here and there, but an absolute rock star trader.

But right now I’m not.  I’m probably just at the point where I feel like I might contemplate auditioning for the X-Factor – ie, not a total embarrassment, but no Beyonce, either.

The thing is, there is only so far you can go on your own before you just don’t know how to get to the next level. And without some kind of new input, you find yourself faffing about and going around in circles.

That’s pretty much where I am now.  Or was, last week.  So how the heck did I get some momentum to propel me from this point to the next?

I had a trader contact me out of the blue, and kick me in the butt.  Which wasn’t half as bad as it sounds, but sadly not many people have a butt-kicking trader fairy godmother who appears out of the blue right when you need them.

So, assuming you are butt-kickerless, what can you do?

Here are 4 things I’m doing right now to turbo-boost me into the next realm, which for me is full-time trading.

1. Planning

I thought I’d done enough planning – after all, I knew I was planning to be a full-time trader, so I had planned very carefully to turn my laptop on, sit down and trade full-time.

Then I had the fortune to be asked by my trading fairy – although he’d probably rather be known as something decidedly more manly – “So, how much do you want to earn through trading?”

Oh.

I don’t know, really.

“What ever I manage to earn” had been my thought – I didn’t want to put a sum on it, in case that was all I managed to make.  I didn’t want to limit myself, but in doing so I had basically determined that I wanted to earn nothing.  Whoops.

So now I’m planning.  I’m planning how much I aim to earn, how much I need to give to the tax man, how much I am going to give to the kids living on rubbish dumps, and how much risk I am going to take to achieve that.

The thing is, if you don’t know what your end result will be, creating a plan to achieve it is impossible.

2. Make a Road Map

If I want to earn “x” amount a week, I need to know exactly what I’m going to do to earn that money.  I need a map to take me to my end destination, so I don’t get distracted and accidentally end up in Salt-Mine World.

For example, right now I have a very simple trading method, which I can trade right now.  However, I may want to add to it with a different type of signal to open up a few more opportunities which will of course require a getting to know you period with my new addition.  Because as I found out the hard way, it pays to know it intimately before I invite it into my life. Easy enough to say, but exactly how am I going to do that? That’s the path to my first destination.

And once that’s done, what then?  Am I going to trade with full risk right off the bat, or start off with just one contract and a teensy risk level to get some runs on the board?  At what point will I increase my risk level, and add in extra contracts?   Will I look for additional systems, or just focus on one thing for a period of time?

All this stuff is getting written down on a great big bit of paper, and it’s going up on the wall so I can look at it anytime I feel a little lost.  And everyone who comes to my house can look at it too, seeing as my office is in my lounge room.  At least  it will be a conversation starter.

3. Do something to move along the path every single weekday.

I don’t know about you, but some days I get to the end of the day and even though I was busy all day, I can’t think of a single thing I actually achieved.  Usually, it’s been a whole day of doing pointless stuff like shopping for groceries with a dodgy internet connection, or paying bills; writing emails and getting bogged on Twitter because I’m pining for conversation.

It’s kind of sad when you get to the end of the day only to realise you’ve done absolutely nothing to get yourself any closer at all to the things you really, truly want to achieve.

So, as of right now I have a list of my ongoing projects, as well as my road map stuck next to my head so that whenever I find myself spending more than 3 seconds on Facebook I can nip that rubbish in the bud and do something that will actually have a meaningful result in my life.

Not only that, but I get my secretary* to book out chunks of time that I devote totally and absolutely to the most important stuff which for me right now looks a lot like testing.

*My secretary is imaginary, and slightly incompetent.

4. Practice Discipline

This is connected with number 3, but deserves its own number because it’s probably the most important thing I’m doing.

More than anything, success requires discipline.  And I’m not just talking about trading success, it goes for success in everything.

The thing is, I’m a procrastinator.  I’m desperately social.  I love emails, and answer every one I get – especially when there is something else I should be doing like testing a method, or filing paperwork. 

It’s possible for me to waste hours exploring the internet, reading blogs, and doing things that don’t feel like a waste of time but actually are.

So I am making small changes that require me to excersise some level of discipline.

Little things like shutting down all my email, twitter and other distractions while I work seems like a pretty small and easy thing to do, but for me it’s like quitting drugs.  I’ve usually got at least 6 tabs open in my browser, along with spreadsheets, word docs, and charting software and to find myself without something to flick to every 20 seconds has me kind of freaking out.

If I can manage to wean myself from my tab-addiction and spend 1 solid hour of working tab-free, I will have achieved something.  And from there it will become 1 and a half hours, then 2 hours…you get the idea.

I know I can do discipline.  I get up to run every morning.  I eat good food.  I’ve cut back my alcohol intake.  I can do that stuff so now it’s time to apply what I know about living well and start applying it to working well and trading well.

These small acts of discipline are going to manifest themselves in my trading.  If I can work for an hour without clicking to a new tab, I can sit and watch the $EURUSD skyrocket and not chase it.

If I can run for an extra two minutes without slowing down, I can hold my winning trade for the extra 3 pips it’ll take to hit its target.

It’s all part of the training required  for what is undoubtably a performance sport – something I’m realising more and more every day.

***

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Continue reading »]]> I’m going through a ‘patch’. A great bit soggy quagmire might be a little more accurate, actually.

I don’t really like writing that.  I’m normally a very capable, unemotional, get-the-job-done kind of girl, (and fun – don’t forget fun, because all that sounds horribly boring and secretary-like) and I’m really not really one to sook and sob and weep for any length of time so it’s all very out of character and really kind of wimpy.

Please don’t pat my back and tell me it will be okay, because I might accidentally punch you.

Normally, I’d most likely ignore the ‘patch’ and carry on, and I’ve probably been doing that a teensy bit too long – hence the putrid swamp I now need to haul myself through, rather than an easily navigable puddle.

Trading is Not a “Section” of Your Life.

It seems I made the mistake of thinking that my outside-of-trading-life could carry on happily without affecting too much in Trading-World.  I was wrong.

Really, I knew this – it shouldn’t have been a surprise. But when things are coasting along as they should, it’s easy to get used to those calm waters and ignore the little ripples – right until all those little ripples gang up on you and tip you right out of the boat.

At the risk of boring you with the finer details of my life, I’m going to bore you with the finer details of my life.

Ripple Number 1

You probably know I live remotely.  To give a little perspective, I live 1000km from the nearest Starbucks, and in saying that I can see that my sanity must a be little questionable to begin with.

Living that far away from the real world can, at times, make things a little tricky – dealing with a property subdivision, for instance, organising a bathroom reno, and figuring out a new and exciting location for a wayward leach drain probably all fall into the “don’t try this from a-far because it will drive you mental” category.

In retrospect, my “I Can Do Anything” motto didn’t serve me especially well in the leach drain scenario; but on the upside now I know first hand where the saying “It’s like pushing sh*t up a hill” comes from.

Ripple Number 2

This ripple is a bit new and unusual for me.  Somewhat related to Ripple 1, we’re also building a house and as you can imagine the costs associated with the whole subdivision and new build project are rather ginormous.

Normally when I’m trading, I’m absolutely comfortable with the risks that I’m taking.  I know what I can lose, and I can sleep well with that knowledge.  But when you are writing cheques for tens of thousands of dollars at a time, suddenly the risk doesn’t sit so well.

All of a sudden, I’ve got a sense of foreboding about a crash-type scenario where all my risk is wiped out at once, and it makes me really quite uncomfortable – even though my portfolio heat level is set so that only a small chunk of my capital is at risk at any time.  So even if  October 1987 did decide once wasn’t enough, I’d actually be okay.  Relatively.

Regardless of this, and even though my trading account is my trading account, and not at all ear-marked for the building process, the tight budget involved in the property project is making itself felt.

Weird.  But its a real obstacle, and one that I haven’t as yet quite decided how I’m going to manage.  Cutting risk seems obvious, but there comes a point where risk becomes so small that you may as well not bother.

Ripple Number 3

This year is my last year as a stay-at-home Mum.  My littlest guy is off to full-time school next year, and it’s time for me to stop being a princess and actually pull an income.  And that’s what this year has been devoted to – working out a way to trade for income, rather than longer-term profits.  All of a sudden, I’ve noticed I’ve only got a few short weeks to get ready  – and I’m not there yet.

Forex is proving tricky for me; I haven’t nutted it out and my time is ticking away.  It’s secretly freaking me out – I’m the anti-Cinderella, where once the clock strikes New Year I lose my shorts and thongs (shoes, you understand) and magically transform into a boots and Hi-Vis wearing Salt-Miner.

I totally under-estimated how long the process of finding a reliable income producing trading method would take.  Either that, or it’s possible I’m retarded.

Regardless, I’m spending every spare moment testing new ideas, figuring out what works and what doesn’t, and putting the puzzle together in a way that is robust and will stand the test of time.  It’s not quick work, but it will be undeniably worth it in the end.

How to Keep Trading Separate From Real-Life Problems Struggles Learning Opportunities

You can’t.  Trading is not a separate thing because trading is you.  It is you and your reactions to the information the markets present that determine your trading actions, so if you find yourself in a situation where you’re starting to come unstuck, it’s time to regroup.

When so much is demanding your attention outside of trading, it’s extraordinarily difficult to fully focus on the job at hand, and it’s pretty much guaranteed that you won’t be a particularly effective trader when you’re preoccupied with stuff that needs your immediate attention.  So when things are overwhelming, take some time off, and step back.

To be clear though, I don’t mean step back and cry.  This is not the time for sobbing as you cram 3 packets of chocolate biscuits into your mouth, and it’s also not the time to wash them all down with whisky straight from the bottle – because as comforting as that sounds, it actually won’t help.

If you want to drown your sorrows, at least get a glass.  And a pen and paper.

And get to work on those ripples.

***

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Continue reading »]]> Good morning!

During my weekend chart-fest, the first thing that caught my eye was not an equity chart – rather, it was in index or three.

The US equities I trade are all in either the Nasdaq 100 or the S&P500 so it was interesting to see both indices sitting on important lineage after Friday’s sell-off.

$NQ_F Nasdaq 100 – Daily

Fridays sell-off brought the Nasdaq smack on its upward trend line and firmly into short-term bearish territory as evidenced by the moving average ribbon at the bottom of the screen (I like a 90WMA, not that it matters.  It’s not magic.)  My thoughts here are that while the weekly chart is still in bullish territory – and it is – this is a buying opportunity.

Sadly, I’m maxxed out risk-wise at the moment, but if i wasn’t I’d be looking for previous break-out candidates that are setting-up technically for a retracement trade, or stocks that are displaying continuing strength in the face of adversity.

S&P500 – Daily $SPY $ES_F $SPX

The S&P500 paints a similar picture. On the weekly chart it looks like the index is consolidating above support which is bullish, but closer inspection of the daily chart shows that each test of 1470 is being met with slightly more resistance as you can see by each progressively slightly lower test.  This daily chart suggests to me that momentum is to the downside and it wouldn’t surprise me to see it retracing back down to about 1360, where it comes into support and also the longer term upward sloping trend line.

Naturally, that isn’t what I hope as I’m long this market, but I’m prepared for whatever the market gives me.

ASX200 – Daily $EWA

And just to rub salt in my wounds for being horribly disloyal to my home shores – the ASX 200 is breaking out.  Take that, traitorous leach.   I am still holding some performers from before I decided to abscond, so this chart is a very welcome sight.  It will be interesting to see what kind of impact any US bearishness has on our Aussie high spirits – I’m hoping (wash my mouth out with soap!) for Aussies everywhere that this is the beginning of something fun.

$PHM

$PHM was one of the few interesting charts that came up over the weekend.  I love a breakout, especially after a good Stage 1 consolidation like this one.  I also love that it managed to close strongly for the week in spite of a big down day on Friday.

Have a great trading week!

***

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