Sometimes in our trading careers we find ourselves in a rut – in a place we have been before – maybe it’s another losing streak, maybe it’s another month of small profits, maybe it’s a whole lot of wins and then one big loss that wipes all that hard work and discipline away with one ridiculous trade, maybe it’s spreading ourselves too thin – looking at so many different types of market analysis that we get paralysis – paralysis by over-analysis! Let’s face it, there are many ways to find ourselves doing the same thing day in and day out and just getting nowhere.
It reminds me of a story my dad told me long ago about two friends of his who hunted every year in Alaska. This year was no different, a plane full of their things drops them off at a remote hidden lake and promises to be back in a week to pick them up. After hunting all week, the two friends are back at the lake with all their gear and all their animals – moose, bear and even an elk. Upon landing, the pilot declares that it will not be possible to load up the men and all their gear and all the animals from the hunt and takeoff; the plane will be too heavy and somethings will need to stay behind for a second trip and that will cost them an additional fee. Both friends demand that the pilot load everything up and take off. After much arguing, the pilot finally agrees and as he taxis to the far end of the lake, turns the plane around and then guns the engine they slowly pick up speed. By the time the plane has reached the other end of the lake it just does not have enough altitude or speed and crashes into the mountain. The good thing is nobody dies, but as one friend climbs out on the crashed airplane’s wing, the friend inside the plane asks, “How far did we get?” and the friend on the wing exclaims, “About a 1/2 mile further than last year!”
LOL – See the point? If you always do what you’ve always done, you will always get what you’ve already got! Now if that is money in the bank and an air of confidence in your trading that allows you to have consistent large wins and very few small losers in the market you trade – then by all means keep doing what you’re doing. But, if your trading more resembles the view from a crashed airplane’s wing, you owe it to yourself to try something else.
My suggestion is to start with something that works (shameless plug – one of the Trader modules) and then build your market knowledge around it. Let’s face it, if you master market profile from a day trading perspective and know, I mean you just know!, the the market should turn around in a certain area – when do you enter the trade? Is it when price first hits your zone with a limit order resting in place? Is it as soon as price hits the zone with a market order? Do you add to your losing position at the next move in your direction 20 ticks higher? And then again at 30 ticks higher? And then again – oh never mind you can’t take the heat anymore and you are stopped out – and then by golly, what do you know? The market goes the direction you knew it would all along!
Here is what I do that works for me. I put DotTrader or DivergiTrader on a chart and I set the amount I am willing to lose on a trade so that when its conditions are met, the indicator will tell me EXACTLY how many contracts I can risk (that’s important! and the only thing we can control in a trade – WHAT WE ARE WILLING TO LOSE). Now I spend some time examining different scenarios, market profile areas of interest, volume profile areas of interest, harmonic areas of interest, fibonacci areas of interest – I really do a lot of analysis! So, I have some areas I would like to buy from and I have some areas I would like to short from. When price gets to an area I want to buy from – do I blindly enter at market? NO! I wait until price action as defined by one of the Trader modules prints a trade. It would not be possible for me to perform all the computations on the fly that the Trader module does on each tick of a bar so I rely on these proven methods for solid entries. Once the trade prints, I know many things:
#1 – I know the odds are good that this will be a successful trade.
#2 – I know exactly how many contracts to enter the market with so I can limit my risk to a level I am comfortable with.
#3 – I know exactly where my stop is.
#4 – I know exactly where my first profit target is.
#5 – I know exactly where my second profit target is and where my stop now needs to be.
$6 – I know that if the market keeps moving my direction without hitting my stop I will keep making money until I am out of bullets.
Those 6 steps I will repeat each and every day over and over again. I did it today. I promise you I will do it tomorrow and everyday thereafter that I am trading. I don’t get lost in my analyses – if I’m thinking, believing, feeling, knowing SHORT but I don’t get a short print then I am not trading short. And that is my trading reality. What is yours? Maybe I can help.
You know where to find me,