Informed Observation / Correct Concentration

IMHO the best teachers give their pupils a physical exercise to achieve the correct psychological mindset (what to concentrate on) for achieving a task. A good example of this is a driving instructor getting their pupils to look in the rear view mirror every two seconds.  This exercise makes the pupil observant and while doing so they naturally adjust their speed and distance to match the circumstance. The magic is that the exercise is easier for them to execute than commanding their brain to "be observant".
This is informed observation because they are observing/concentrating on the correct things (front and back), if they were only looking at the Ferrari in front of them, they will more than likely have an accident shortly.
I am not aware of a correct physical exercise (informed observation) for trading. But I do know that the correct mindset (from all that I've read and been taught) is quality over quantity / going for high probability trades, not lots of them. From all that I can understand the highest probability trades are trend trades that occur in some kind of pullback (oversold in an uptrend) or rally (overbought in a downtrend). An argument could also be made for counter trend trades that are overextended from the mean but for now I'm going to keep it simple and just look for trend trades.
I would assume that staying up to date with the trend and it's changes would be the correct physical exercise to help one to trend trade successfully. Focusing on PB and RL are probably most important as these give direction and offer the highest probability trades. 

METHOD
An uptrend = a series of Higher Lows ( I should label these and draw a best fit UWTL touching as much as possible. Going for the most obvious TL!)

A Downtrend =  a series of Lower Highs (I should label each of them and draw a best fit DWTL touching as much as possible,Going for the most obvious TL)

To trade the trend I want to buy when price is Oversold in an uptrend, or Sell when price is overbought in a downtrend. These are the highest probability trades.  The best trades are  TL and EMA PB/RL or if price can't reach them entering on a 2nd,3rd,4th entry after a new trend extreme.

TL PB Trade

EMA PB Trade

2nd/3rd/4th Entry from Trend Extreme Trade

Once a TL is in place you don't need to worry too much about marking HLs/LHs until it breaks as this suggests a possible trend reversal.  On a TL break you need to label the last couple of HLs/LHs and continue to do so after the break to see if you have a reversal.

On a TL Break have no bias , be prepared for a trade in either direction, a reversal or a test of the trend extreme.

Uptrend Reversal Trade

Downtrend Reversal Trade

Initial Stop Loss and Trailing Stop Loss Methods
Long SLs

Short SLs

Week Summary 291113

Quickie as cant be bothered to bore myself or anyone reading this post...

POSTIVES
Trade entries were good with the exception of one.

NEGATIVES
1. Price Action reading.
2. Trade management / Discipline in following trading plan (one and the same thing).

FIXES
1. Price action reading I have fixed for the time being with a guide for identifying the trend and the best entries with it. I have had an additional thought I would like to add... That watching the PBs and RLs are probably most important things to concentrate on as these give direction and highest probability trades.

2. Trade management I just need to follow the guide but I could reorganise it with pics to make it more user friendly. This I have done and will update my Intraday Method tab shortly.

ADDITIONAL 
1. I would like to grade my trades so its easy to see where problems are occurring by using 3 categories...
"good or bad trade" (entry)
"good or bad management" (trade management/ plan discipline). 
"good or bad read" (interpretation of price action).
2.  I need real-time practice and a lot of it. For this reason after the London open session I am going to trade the M30 EURUSD chart throughout the day to gain more price action experience.

SUMMARY My LT goal should remain as doubling the account and moving into a real account. However my major problems are moving with the market and discipline in the trade. Conquering these should be my all encompassing goal and motivation! I don't care if I destroy this demo account or another 100, I've got to learn how to implement my method in reality. Without this I will never achieve my long term aspirations. This is what I've got to work on,

A Quote That Gave Some Cheer

I've been rummaging through that Market Wizards book again (as I'm sure we all traders do from time to time) and came across the Larry Hite interview. A couple of sentences seemed to jump out at me a couple of nights ago.

"There are really four kinds of bets: good bets, bad bets, winning bets and losing bets. Most people think that a losing trade was a bad bet,  That is absolutely wrong.  You can lose money even on a good bet. If the odds on a bet are 50/50 and the pay off is $2 vesus a $1 risk,  that is a good bet even if you lose".

It goes on a but this covers the gist of this particular Hite monologue.  To me the most interesting sentences in this group were.

"There are really four kinds of bets: good bets, bad bets, winning bets and losing bets". 
"You can lose money even on a good bet". 

 I of course know this but its the way in which he phrases it that it particularly pleasing (it's crudeness). In my head when I read these sentences back together I wanted to add to end "the only bet you need to avoid is the bad bet". On further thought I thought this could probably replace "you can lose money even on a good bet" So it reads...

"There are really four kinds of bets: good bets, bad bets, winning bets and losing bets. The only bet you need to avoid is the bad bet".

I actually haven't been taking terrible trades this week (one porker) and this quote helped remind me that I'm not doing as badly as I thought and even helped confirm/point to what I need to work on.  My entries are okay.  My trade management/discipline and reading price need work. And this is what I'm working on. 

Grrrrrrr! A Bit of Progress

P/L: R - 1.34   £-30.82

Okay started today with a clearly defined method I have been developing but seriously simplified it yesterday (I will post it shortly and update my intraday method tab too).

I followed this "new" method of analysing price action and even placed 2 good trades... But ballsed them up by using an incorrect TSL method in the first and letting fear overwhelm me when my ISL was approached in the second. Of course both reversed immediately and went straight into theoretical profit as soon as I did this.

Believe it or not I really do know better than this. I'm knocking the rust off of a month not applying trading discipline and am aware of my mistakes.

Positives: taking good entries, very slowly getting back into the discipline required.
Negative: poor management of positions.

Series of LHs =  looking for shorts along DWTL RL/ EMA RL/ 2nd Entries
1.  TL/EMA RL Short. Exit discretionary TSL good trade. R - 0.46
2. TL/EMA RL Short. Exit discretionary good trade. R - 0.89

Summary:  Stop Thinking, Start Following (the plan). Or how I originally put it "follow the fucking plan!"

Grading trades is very useful!

Home Truths

P/L:  R-2   £-43.44

UWTC break and , LL and LH =  initally looking for shorts.
1. L1 ,  nowhere near 21EMA also entered before my session started!,  poor trade. R -1
Got to expect a test of prior lows?
2. L2 ,  got stopped out again but this was a high prob trade so a good trade.  R-1
3. Failed L2 I missed, good trade but missed. R 4

My lack of real-time experience and ability to adapt to a changing market is really showing. I can see the trades after they happen and I know this is pyrrhic victory (but honestly a month ago I wouldn't have been able to see the failed L2, I didn't even know it was a setup, so this is progress).

My LT goal should remain as doubling the account and moving into a real account. However my major problem is my inability to move with the market, achieving this should be my all encompassing goal and motivation! Without this I will never achieve my long term aspirations. This is what I've got to work on, I need real-time practice and a lot of it.

Missed the Major TC

UPDATE: this post was written over emotionalized. I placed too much emphasis on the LTTC in this post. Actually the PBs and RLs would have guided me here perfectly well with the aid of short term TLs (10 bars). Trade 1 was a good trade, you just didn't change directions fast enough because you were not concentrating on the PBs and RLs.

P/L:  R -0.2  £-4.84

Initially there were a series of LH =  so was looking for shorts.
1. EMA RL Short, exit tick above a HM good trade. R -0.2
I missed the LT UWTC that trade 1 reversed at. I should have got long off the HM  I used as my exit but at that time there were no obvious DWTL breaks so this would have been a low prob trade. It was only later that I drew the more acute DWTL intersecting price action. 
Trend change:  at 2 after price BO DWTL and made a HH and HL =  long.  this was actually a late trend change. The first happened at the HM I used as my exit for trade 1. But I missed it because I didn't have the LTTC in place or the intersecting (but accurate) DWTL. Ironically this was probably the best trade of the session.
2. There were a HH and HL after a DWTL so this could have been a long entry but price was still in a large Triangle and I did not feel confident with an entry still inside the triangle. . Actually this was a HL after a reversal to long so should have been traded.

Summary: Despite missing the LT UWTL and later drawing in the intersecting DWTL that reversed trade 1 I still managed to stay with the trend mentally but my life was made significantly harder because of  missing the LTTC and the DWTL that intersected price as they lead to me having a general lack of conviction / feeling of uncertainty/fear in the move up.
The moral of the story is don't go to work unprepared. 
If I had got the LT UWTC on first thing I would have had strong conviction in the trend change (to long) and would likely have got in on the move. This should be the first thing I do: place the LTTC on the chart.
Also had I placed the DWTL defining the move down to the UWTC through price action, but along the clearest route I would have likely have taken the HM reversal that was my exit  in trade one.

ToDo.
Add to Method : Place LTTC on chart first thing.
Add to Guide:  draw TL along clearest route , even if it intersects price.

Feel like I'm Being Taunted ;-)

P/L: R -0.7   -£15.11

Price had broken above a DWTL and made a HH and HL = uptrend / looking for longs.

1. was an H1 but after the fact I realised that it was trade-able because it had a PC (polarity change) a Range BOPB (breakout - pullback). So was a 2nd E. 

2. was an H1 so was a low prob long and so I avoided it.

3. was an H2 which I took but exited early after price formed a SS(shooting star) and ticked below it. R -0.3

4. was an H3 which I took but probably shouldn't have as it was in a TTR (tight trading range), however I did trade it in the correct direction. R -0.4

Summary:

Good read.  Spotted all the potential trades in real time.  I managed to place a couple of trades. Both trades at market.  The first one because I didn't have time for a stop order, the second because my platform wouldn't except my stop price (it was too tight). Did spot but didn't give much weight to the TCOS. However this was a mistake because price could not maintain itself above the TC (it closed back below it one bar after it closed above it) so trades 3 and 4 were probably doomed to fail... 

Taunted feeling coming from spotting trades but not taking them because following method (they're not H/L2 2nd entries),  this also happened yesterday (missed a good trade because it was an L1)! I just want to trade every with trend setup provided it's on a PB /RL and the trigger is nearer to the 21EMA than the trend extreme. I'm not going to but so far it would have been more profitable. 

To Do:

Add to method: I can buy/sell any H/L1 that touches prior S/R. as they are 2nd entries.

TCOS break and hold above = trend strength,  break and re establish = trend weakness

Difficulty Reading in Real Time

First day back in "realtime". Expecting a few teething problems and fixes so not worried...

Clear set of LHs and a DWTL =  short.  Actually got confused with H/L setup numbering and the fact that H/L1s can be valid setups (2nd entries) if they are PB/RL to an area of S/R.

1. L1

2. L2 but both doji

3. L3 in BW so low prob

4. L4 i should have taken

5. L1

6. L2 I should have taken

7. L1 and near trend extreme

8. L1 but a 2nd entry because RL to 7 high so a valid trade!

To overcome this I need to add to my guide to label the hi/lo of each trend extreme and PB/RL (blue lines on chart).  And I need to ID every potential setup so I am aware of where price is in the order of things (numbers on chart).

TO DO:

Add to method:   label the hi/lo of each trend extreme and PB/RL (so aware of valid L1/1 trades)

Add to method:  Label every setup (so aware of where price is)

Swing Trade Reversal

My last EU and UC swing trades have gone against me (stopped on one, nearly stopped on another).  This is entirely my fault, rather than waiting for a 2nd entry I rushed in, so getting my fingers burnt I entirely deserved ( I know better than this).  They have now set up my main swing setup (a XO/XD of the 21EMA) and as such I am exiting these trades and going the other way. The new trades follow...

I read a good quote the other day that I thought was very apt for this situation and actually for most of my trading to date... 

"You can't make the same mistake twice. The second time you make it, it's no longer a mistake. It's a choice."

I don't think I had really understood that saying "I made a mistake" is just an excuse for poor discipline if I've already made it before. Anyway I like it and am going to try and live by this for a while. No more "shouldn't , could have,  meant to, If I had".  I'm not going to try and do it right, I'm just going to get it right in the beginning!

Waiting for Hi Prob w Trend trades

Clear up set of HLs and an UWTL =  looking for longs.  Just waiting for H2s ,3s and 4s nearer EMA than trend extreme.

Conflicting TLs, resorted to Highs and Lows

Day started with a series on HLs so was looking to get long. There were 2 UWTLs that could be drawn along this series of HLs. Price broke below one one these TLs but I still would have expected a test of the prior trend high , so still long. Price then failed to make a new high at the test of the prior extreme and created a M top and LH from which would have been an ideal short to catch the massive down move. Whether i would have got in on this I'm dubious of as those TLs would have been v confusing in real time ie which one was most important?  However the Highs and Lows seemed to light the path here.  Perhaps when there are conflicting TL's I should focus solely on the highs and lows. Price action is most important after all.

201113 EU and UC swing trades

Saw this and had to have a go.  Both had broken a Maj TL.
EU then made a LL - LH and put in a 2 leg rally to the 21EMA (ripe for a short).
UC had made a HH - HL and made a 2 legged PB to the 21EMA (ripe for a long).

Not the best entry, entered on close rather than Hi /Lo but can't handle watching the D1 chart while day trading so the price I pay.  Going for 1:2 RRR give or take but will watch closely would be happy with 1:1.

Importance of staying with trend even when climatic

Note to self... Don't fight the trend there were a load of traders in last hour or so getting busted by the trying to pick the bottom after this climatic sell off of the EU. The smart traders were staying short!

201113 Fighting the Urge to CTT Again! practice

Clear downtrend this AM with price making LHs . Even when price made a HH had to expect at least a test of the prior extreme low so still a short setup. Would have hoped I would have taken profits where marked at prior S levels.

Side note:  have finally finished Brooks book,  writing notes today.  Working on personal plan/method Thursday-Friday for trading next Monday.

191113 Practice staying w Trend

EURUSD Read. Clear set of HLs to start, so would have wanted to get long on PBs. Even on UWTL break still could scalp a long as had to expect a test of the prior highs.

Swing trade missed opportunities

This is a simple setup I have been using on the daily chart for the past six months or so. I find it works best on the EU and UC as they have a high negative correlation.  Unfortunately I was so preoccupied with my studying of intraday price action I missed them.  A fellow blogger alerted me to them as he uses a similar setup (http://longechoes-updownsideways.blogspot.co.uk/)

I buy when price closes above the 21EMA (short when it closes below it)

ISL:  low of confirmation (high if short)

IPT:  1:2

181113 Staying with Trend Read

Clear uptrend with price making higher lows.  An untradeable M top scalp because signal bar was far too large and nestled in barbwire, meaning the only acceptable trade was waiting for another w trend entry.

151113 Range to Trend Read

Still Practising. Clear overnight range had developed and price was stuck in it. So could only buy the lows and sell the highs to begin with. Then a down TL became clear,  bar 4 was definitely a trade but whether I would have taken it is questionable. However once price made a lower low and lower high before bar 5, I'm certain I would have taken the bar 5 EMA RL short.

141113 Second Entry Trades

Still practising. Pretty clear down trend from the start. A DWTL break occurred but had to expect a test of prior lows. As price didn't make a HH and HL, expected down trend to resume.

131113 Clear Downtrend, Fighting Urge to CTT

Still practising as digesting Brooks book. Trying a slightly different format today, all annotations on the chart.

Summary: Today demonstrated to me just how difficult following the trend is, despite it being the correct thing to do. Between bars 1 and 2 I was looking for every possible excuse to get long.  Trying to make price do a TC overshoot, counting 3 legs down,  thinking there might be a significant TL break. But all of these were nonsense. There were no meaningful TC or TL breaks and a trend can last longer than 3 legs.  The fact was price was making lower higher's and this was the direction to take and all that mattered!

Trading and Boxing

Something I have never mentioned before is my love of boxing.  I started boxing rather late, around 20 years old (most boxers who want to compete start at around 11-15). I was faced with the desire to compete but the realization that I had a huge knowledge and experience gap that I would have to fill if I wished to be a "competitive competitor". The long and short of this is I ended up training hard for around 4 years and had a few fights along the way. As I progressed my desire changed from wanting to compete to wanting to find a method of boxing effectively.  I did all I could think of to acquire knowledge, private coaching, books, changed clubs, dvds etc. I basically found that everyone had some good tips and advice but no one had an actual method.

I am now a boxing coach and continue to pursue this one method ideology not only for myself but for all I teach, i believe there's a reason boxing is called "the sweet science". There is a right and wrong way of doing everything, and if you learn the correct way you are highly likely to be successful in your attacks, while if you execute them with bad form you are likely to lose the exchange. Once you have this science down you can then bring in the "artistic" side and so legends are made,  Ali,  Ray Leonard, Tyson, Mayweather et al. This method approach I believe is entirely transferable to trading. I of course concede that teaching creativity is another matter entirely but I do believe all can learn the science. Over the years as a boxing coach I have developed my own method which I teach to my boxers and now watch them box competently and competitively. This method teaches the science of boxing in steps, I won't bore any would be reader with the details but they can basically be divided into 3 steps 1. physiology (physical correctness in all actions) 2. psychology (what to focus on while competing) 3. probabilities (learning and being aware of the best times to attack). I also guess a "pre-point" could also be made of warming up. The method is really quite simple, but that is what is required for a stressful environment and is probably why this method is on the whole successful (because it's easy to remember and learn).

Most aspiring traders have read "The Market Wizards" and are aware that those covered in the book made consistent profits while only a handful made truly astronomical sums. It is the former that I believe a method can be developed for...

Trading +boxing = Troxing?!

Ws / Ms and general weaknesses

Downward TCOS + "W" bottom =  bias Long
1. was an H1 , but was low probability so hope I would have avoided.
2.  was an H2 at 21EMA =  high prob,  would have traded into R/prior high (1 : 1.5)
3. is a TC OS
4. was an M2S (21EMA PB) =  high prob scalp into prior highs (1 : 1)
between bars 4 and 5 bars really started overlapping making any setup unlikely to work...
5. was a failed L1 / messy "M" top that couldn't even take out the low's of the 1st leg down and more importantly the  UWTL, making...
6.  H3 (failed L1) a high probability long scalp at least into 252EMA (1 : 1)

Summary: I know this stuff but sometimes it's good to hammer this stuff home...
1. overlapping bars are not good to trade around or in.
2. When overlapping bars occur I am better off waiting for a higher probability trade, have a bit of patience!
3. A W 2nd leg up should take out the high of the 1st leg,  if not this shows considerable weakness. The W bottom before my session started is an example of a strong W bottom,as the 2nd leg surpassed the 1st leg's high).
4.  a M top 2nd leg should take out the low of the 1st leg, if not this shows considerable weakness. The M top during my session is an example of a weak M top, as the 2nd leg could not surpass the low of the 1st leg.
5. Ultimately it's all about trendlines and high lows/ lower highs.  In a confirmed uptrend , if price continues to make higher lows, I've got no excuse not to get long at every opportunity (higher low).  The reverse is true for a downtrend.

Chop Suey Practice

Blimey what a morning. Clear overnight UWTC  broke down into a fairly clear DWTL with 3 legs until it hit the h1 21EMA where it "W" bottomed.

1. would have tried to take a swing long off the second bottom, esp seeing that the DWTL had been tested. but that fizzled out pretty quick for a loss (1: -0.2)
2. stopped out of first trade and price made a  "M".
A rather unclear UWTL could be drawn from the "W" first low so...
3.  would have tried taking a w trend long off the UWTL, price then stalled at prior highs for a BE (1: 0)
With so little progress either direction, price appeared to be in range so only option was to sell high or buy low.
4. Would have got short off the 3rd top at the RNG high back into H1 21EMA (1 : 1.5 at the v best)

Also looked at the EJ which was clearer than the EU , however the spread size would have made it hard to trade.

Clear DWTL with 2 legs down to test H1 21EMA, this then BO and PB to 21EMA made for a perfect...
1. MSR (21EMA PB) long swing for a (1: 0.7)
this move finished 3 legs up by bashing into R making it at least a valid scalp back into S so...
2.  2nd entry short into S ( at best 1:1)

Summary:  difficult , but EJ was definitely easier to trade than EU.

Struggled to read Action added a LT MA

A very difficult morning for me to read despite a clear UWTL break and "M" top earlier this morning. I struggled to find a clear TL / TC that defined the downward trend. The nearest I could get was the blue TC shown. I also struggled as the 21EMA was hardly acknowledged by price.   I added in the 252EMA (H1 21EMA) for extra clues.

Obviously after 3 legs up and an M top my bias was on the short side.

The first clear trade in my session came at...
1. TLOS short at least into the prior low (a scalp) would have been reasonable but the correct trade would have been to swing the short as the trend was down and the TLOS shows strength. However it would have been stopped out near BE. (1 : 0)
2. confused the issue as price made a "W" bottom
3. was a 21EMA RL short, but I would have struggled to takes this after the W however the TL had not been broken so the trend had not yet turned, so should have been traded. (1 : 0.7)
4. tested the H1 21EMA and made a 3rd bottom of sorts,  it marked the end of two clear legs down from 1 ,  and three messy legs down from the "M" top, so was a at least a scalp long, if not a swing long. (1: 2)

I also looked at the EJ as it is highly correlated to the EU and often has cleaner setups and was once my preferred pair... it proved a much easier chart to read today... clear TL and respecting the 21EMA

1. 21EMA RL short  (1 :2)
2. TCOS, test of 252EMA and 2 legs down =  long scalp back into TL (1:1)
3. Right shoulder long (1 : 1)

Summary:  It is an interesting day as I feel as though I should feel that I am cheating by switching pairs and adding an additional MA to my chart. I am certain that Brooks would condemn me for adding the additional MA but switching pairs i doubt he would have issue with as making money is paramount and finding the clearest action will help with this. But I must say that I don't feel particularly guilty for adding the 252EMA either. I understand that this is his method and it is not always going to fit with my psychology. TBH I think when in doubt adding a longerterm MA (at least for me) helps as it give me an idea of where price might retrace to.  It seems logical that if price is drifting around, a return to mean will likely give it some clear direction. 

Failed "W" turns into triple bottom

a clear TC and TL could be drawn this AM and the legs of each move were far easier to see too.

1 was a TLOS which is sign of trend strength so my bias was on shorting.
2.  was a L1 and as my bias was short I would have taken it and swung it into the TC (approx 1 : 1.7 IPT)
3.  was an H1 and marked the end of 3 legs down (so was the exit for the prior trade), which in itself is a REV but is an early entry so would have avoided.
4. broke the DWTL which is a trend REV so my bias would now be on swing long,  although expect a test of bar 3 low.
5. was an L4 , but after a TL break could only be scalped into the prior lows, so avoided this to prepare for the rev.
6. confirmed a "W" bottom and was an H2 so is where I would have liked to enter a swing long. (aprrox -0.7)
7. is an L5 and is where I would have been stoped out
8. marks a second small "W" (even a triple bottom) and is an H3 swing long  (approx 1: 2.3)

Summary : despite 8 not being within my trading session. I hope I would have stayed around for it as the short side was looking very weak.

More reading practice JAP closed

So there was a clear DWTL and UWTC that could be drawn this morning. But the legs of the moves were far harder to see.

Just before my session started price had entered a TTR (tight Trading range) which is usually a continuation pattern. So with a clear trend up I looking to get long near the low of the TC.

1. an M2S (21EMA PB) offered the first entry (approx 1:-0.2 TSL)
2. another MS2 (21EMA PB) offered the second entry (approx 1:-0.2 TSL)
3. a final MS2 (21EMA PB) offered the third entry (approx 1: 1.2 TSL)

Summary: a less profitable day, but with JAP closed this might have been a factor especially around the LON open.

011113 More reading practice

Quite easy to spot UWTC and various TLs

after the 3 legs up and TCOS that met prior resistance my bias was on a short Reversal, so was looking to swing.  

1. was a L2 after all the topping signals so a perfect short swing (approx 1:6 TSL)

2.  was a M2R (21EMA RL) and a good short swing( approx 1:-0.5)

3. was another M2R (21EMA RL) and a good short swing( approx 1: 1.2)