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Point of View; A Critical Component to Success As a Trader

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Most people probably don't think of their 'point of view' being very important to their overall success or failure as a trader. When we talk about the 'edge' that our system gives a trader, we are talking from a larger point of view. But traders, while in a live trade, are usually most concerned with the live trade they are currently experiencing. Especially if the trade has moved against them or is the next trade in a sequence that hasn't gone very well for them. All of a sudden the instincts for survival assert themselves and we often find ourselves making split decisions that are not part of the tradeplan nor will serve our overall trade performance very well. We might exit the trade and avoid a further loss. We might even exit the trade only to watch the trade turn on its heels and move towards its target objective.

 

If the trade moves towards its target objective, and we bailed out of the trade due to some emotional human response, we would feel pretty bad about our decision. "Why couldn't I just stay with the trade? I'm sooo stupid!" In fact, it would be hard to not think of even harder phrases to berate oneself for making such an error. "Why couldn't I just 'lean' on the system?"

 

An even worse result would be if you made the 'right' decision on that trade by bailing out and avoiding a deeper loss. You would breathe a sigh of relief perhaps, and feel good in knowing you were able to make the 'right' decision and save some money. Unfortunately, while saving money on that one trade and feeling proud of yourself for being 'so smart,' you actually hurt yourself in a much more profound way than you probably realize. What are you going to do next time? How about the time after that? We're traders right? We have to take another trade. Bad habits are very hard to break, especially when you reinforce them with short term 'righteousness.' Before long, we're not even trading our proven trade method any more. We're trading something else and who knows what edge that gives you over time?

 

Making an emotional or human decision that proves to be 'right' on a particular trade will most likely prove to be very 'wrong' for your trading in general.

One of the things you'll hear me (and the rest of the NetPicks team) harp on all the time, is the importance of sticking to your tradeplan. If you are truly trading to make money, which in my opinion IS the only valid reason to trade in the first place, than you MUST practice your trade business in a manner that WILL make you money. The only way I know to achieve that objective, is to allow the edge that your trade 'method' or 'system' or 'tradeplan' (whatever you want to call it) gives you. It is NOT what happens on this particular trade or series of trades. Because guess what.. Now we have to take another trade. That's what we do. We trade.

 

So much can be written (and has been) about this very subject. Rather than rewrite another 'book' on this critical subject, I want to tell the story in another way. Below are two examples of our Russell eMini trades. The first, is an equity curve showing our system trades (most being called live in our traderoom) with the SST for 2011. It follows the very same tradeplan that I began using back on April 5th of 2010. In fact, the second example is the equity curve that includes all the trades from April 5 up to the end of yesterday's trading.

 

These two equity curves show you the same trades made this year, 2011, but from an entirely different point of view.

 

Equity Curve (see below); 2011 Trades: The Russell eMini is always a challenging market and like this same period of time last year and the year before, these first few months of 2011 have been a real challenge. You can see by this equity curve that there have been some tough sessions and tough losses. The curve peaked near the beginning of February, and then has been up and down and up and down ever since. There have been some downright difficult sessions, for sure. In fact, last week (the week prior to this one) was the worst performing week since going public with the SST and the TF. Wow! If you were a trader who just began trading the TF with the SST, you might have finished the week quite shell shocked. You can see the drawdown that happened, following the 3rd peak on the equity curve.

 

Anyone who did not follow our ongoing advice to create a strong foundation by digging your 'trader ditches,' that is, backtesting and practice trading prior to going live, would have been seriously damaged by the experience. Not because of a tough losing week, although that is the immediate, apparent damage. No! The real damage is the result of a very narrow point of view. Those that quit as a result of a tough week, without having the broader perspective and higher level 'vision' will throw a way an amazingly effective tradeplan, quit with their losses and will completely miss the next 'two steps forward' that lead us to all new record profit levels. This is the ongoing cycle for most traders. Always behind the curve, chasing the performance that already happened and reacting to the 'one step back' that again, already happened. What comes after one step back? Two steps forward!

 

This current week that just ended, turned around rather dramatically and we went on a 14 out of 16 trade winning streak, completely erasing the prior week's losses. You can see that on the equity curve too. Notice how we are just a few trades shy of making a new equity curve high. What a roller coaster! Especially if you did not already experience the 1000 or so trades that happened prior to these two weeks. Take a look at the next equity curve.

 

Equity Curve (see below); all trades since 4/5/10: Do you see the last part of the chart on the right? Notice the zig zagging up and down of the equity curve. It looks like a few bumps in the road when you put it in context to the overall curve that dates back to the beginning. In fact, it doesn't look like a roller coaster at all. You'll see other parts of the curve that also steps down. One step back leads to two steps forward. I don't care what market or timeframe or trade method you use, a healthy and profitable equity curve WILL contain tough sessions. There's no such thing as a straight line to ongoing profits. The road is always bumpy. If you keep chasing, you'll end up losing all your money even though you have a winning system. Yikes!

 

Sadly, those that quit will continue to experience this exact pattern. They'll see something they like and will begin trading at the end of the two steps forward. They'll catch the beginning of the one step backwards and their account will take what should be, a momentary drawdown in equity. But as the cycle continues to unfold, the same trader will quit, right at the moment they have experienced too much pain, and unfortunately for them, right at the END of the one step back. They'll quit with their losses and run for the exit, just when the two steps forward is about to get underway. They keep jumping on board the equity curve at the wrong places and continue damaging themselves by hopping off, also at the wrong place.

 

Is this YOU? Hopefully you can see and understand the theme of this article. Point of View is EVERYTHING! Are you the person lost in the forest, running around dodging a bunch of falling trees? Or are you the person taking the bigger birds eye view of your entire forest? The individual trades you take, the very trades that have you fretting at the right edge of the chart, making very human (and WRONG) decisions, are the trees in your forest. You are lost in the trees and can't comprehend your forest. Sure, you might successfully jump out of the way and avoid a falling tree, but you are lost in your forest. You can't find the edge. You can't benefit from the edge of your tradeplan, system, method.. whatever you call it.

 

Your equity curve IS your forest. If you can't be at peace with sacrificing 1/3 of the trees in your forest in order to grow your forest 2/3rds larger, than you will experience complete deforestation! It's all about point of view.

 

The longer term equity curve is sitting a mere 8 points below its all time profit levels, despite the last several weeks of difficult trading. At some point we will look back at this article and we'll be addressing these same issues again. Only next time we'll be on the verge to breaking our 800 point level, instead of skirting around our 500 point level. We will have grown our forest 2/3rds larger. Again. Where will you be?

 

Note: It doesn't matter if you are a forex trader, or a gold trader. It doesn't matter if you trade stocks or options. This is a universal theme. Do what is necessary to achieve the higher level point of view and you will have taken the first and most important step towards ongoing success as a trader.

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  • Topics

  • Posts

    • Date : 25th April 2018.

      MACRO EVENTS & NEWS OF 25th April 2018.



      FX News Today

      European Outlook: 10-year Bund yields are down -0.4 bp at 0.623% in early trade, the 2-year is down -0.5 bp at -0.5685. 10-year Treasury yields pierced the 3% mark overnight, but have fallen back slightly to currently 2.998%, while yields moved broadly higher in Asia with the 10-year JGB up 1.2 bp at 0.054%. Stock markets headed south in Asia, following a weak close in the U.S. with concerns about the earnings outlook amid warnings on profit outlooks hit sentiment. With a lack of key data releases in Europe today the focus is on the ECB meeting tomorrow, where Draghi will likely see through the recent run of weak confidence data to keep the ECB on course to end net asset purchases by the end of the year, but repeat once again that inflation is not yet on a sustainable path higher, which means the ECB is not ready to commit just yet.

      FX Update: USDJPY lifted back above 109.00 from yesterday’s correction low at 108.54, but has so far left yesterday’s 10-week peak at 109.20 untroubled. Ditto for EURJPY. Stock markets in Asia have been broadly lower following declines on Wall Street, with investors digesting higher yields — the 10-year T-note finally touched the 3.0% level (and first time here since early 2017) — and doubts about earnings growth. The USA500 closed out yesterday with a 1.3% loss, while the Nikkie 225 was showing a 0.3% loss in the late PM Tokyo session. This backdrop has likely curtailed yen selling, according to market narratives. In data, Japan’s February industry activity index came in with 0.4% m/m growth, slightly below the median forecast for 0.5%. USDJPY has been trending higher for a month now, from sub-105.00 levels. The dynamic has been concomitant with rising U.S. yields, with looser fiscal policy having given added underpinning to Fed tightening expectations. This comes with the BoJ continuing to peg JGB 10-year yields near 0.0%. Demand for foreign assets by Japanese life insurers has been a factor propping USDJPY up so far in the new fiscal year, while an abatement in concerns about trade tensions and cooling relations on the Korean peninsular have also been in the mix. Overall, we advise following the trend in USDJPY for now. Support comes in at 108.40-42.

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      Main Macro Events Today
        Credit Suisse Economic Expectations Crude Oil Inventories – Expectations – -2.043M Barrels from -1.1M last week BOC Gov Poloz & Wilkins speech – Poloz and Wilkins appear before the Senate Standing Committee on Banking, Trade and Commerce on Wednesday. Support & Resistance Levels



      Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

      Please note that times displayed based on local time zone and are from time of writing this report.

      Click HERE to access the full HotForex Economic calendar.

      Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!

      Click HERE to READ more Market news. 


      Stuart Cowell
      Senior Market Analyst
      HotForex


      Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
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    • Date : 24th April 2018.

      MACRO EVENTS & NEWS OF 24th April 2018.



      FX News Today

      European Outlook: Asian markets moved mostly higher overnight, following on from a positive session on Wall Street and amid ongoing USD strength with a weaker Yen underpinning a 0.75% rise in the Nikkei. The Hang Seng is up 0.94%, the CSI 300 rallied 1.75% amid speculation that the government is considering easing some policies put in to limit the credit boom. The absence of any negative news on the trade front seems to have given stock markets some breathing space and U.S. futures are also up in tandem with U.K. futures. Oil prices are also up and the front end Nymex future is trading at USD 69.14 per barrel. For now though bonds are getting a boost and stock markets are also higher, with most European futures posting gains in tandem with U.S. futures and after a positive session in Asia. Today’s calendar focuses on confidence data out of France, Germany and the U.K.. The U.K. also has public finance data and Germany auctions 2-year Schatz notes.

      FX Update: The dollar posted fresh highs against the euro and yen, and many other currencies after a bout of demand in Asia, which extending a broad rally the greenback has been seeing against for over a week now. The narrow trade-weighted USD index (DXY) posted its highest level since the first week of January, at 91.07. EURUSD logged a 10-week low at 1.2184, though euro demand has subsequently fuelled a rebound to the 1.2220 area. USDJPY lifted for a sixth consecutive session, making a 10-week high at 108.87. EURJPY is also firmer, though has so far remained below the two-month high it saw last week. The gains in USDJPY have been concomitant with the U.S. T-note yield nearing the 3.0% level, which has been generating headlines, which comes with the BoJ continuing to peg JGB 10-year yields near 0.0%. The Nikkei 225 closed 0.86% for the better, more than reversing the moderate loss seen yesterday. North Korea’s Kim said that he would be willing to accept IAEA inspections of nuclear facilities.

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      Main Macro Events Today
        German IFO – The German Ifo business confidence indicator, due Tuesday, comes in a new format this month, which includes the services sector now. For the new indicator a dip is expected to 102.8 from 103.2, and a decline in the expectations reading to 99.5 from 100.1 in the previous month. However, after the better than expected PMI readings there is a bias to the upside to the numbers. In any case, we don’t expect the April round of survey indicators to really change the outlook for the ECB, which is seen on hold this week, with officials seeing scope to leave the final decision on the future of the QE program open until July, when the risks to the global outlook may have become a bit clearer and the decision is becoming urgent. UK Public Borrowing – Expectations – at 1.6B pounds from -0.272B pounds last month. US Consumer confidence – likely declined to 126.0 in April, from March’s 127.7. US New home sales – expected to rise to 0.630 mln in April from 0.618 mln in February. Support & Resistance Levels



      Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

      Please note that times displayed based on local time zone and are from time of writing this report.

      Click HERE to access the full HotForex Economic calendar.

      Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!

      Click HERE to READ more Market news. 


      Andria Pichidi
      Market Analyst
      HotForex


      Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Addendum:
      http://www.thedailybell.com/news-analysis/if-you-limit-any-free-speech-this-is-what-you-get/  
      ...
      Anar  Chicagoans, etc, etc, -  wake up !
      This -> https://www.mintpressnews.com/cheran-mexicos-indigenous-community-that-rebelled-against-narcos-thieves-and-politicians-and-won/240979/
      instead of this -> http://massprivatei.blogspot.com/2018/04/smart-city-projects-are-really-police.html
       
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