Welcome all and glad you could attend. Google is unable to do her discussion today due to health reasons, so we will continue with the discussion on the Steps to Success from Mark Douglas's book The Disciplined Trader.
Last weeks discussion on the first 4 steps is posted along with the other trading discussions the room has had at the following link: http://www.dacharts.com/discussions.php
Did anyone try anything from what they learned last week? If so I hope you are willing to share your experience with us. Did anything from last week improve your trading? If you do not want to type, you may use the mic and I will type it in for you.
bartoktrader: I'm trying to learn 1 type of pattern really well, buffy.
Buffy_04364: great have you picked the pattern?
Buffy_04364: and sticking to it?
bartoktrader: I'm going to stick to divergences since a lot of people here are good at it. :)
bartoktrader: good support group.
Buffy_04364: and do you think it is helping?
elroch: I was trying to follow rules rigorously - partially successful, but today was poor
bartoktrader: specifically hidden divergence as continuation pattern in a trend.
elroch: Yes
bartoktrader: yes, it has helped me focus.
zack_100: Focusing on one pattern sure helps me see more of the nuances of that set-up
Ok to continue the discussion on the rest of the steps to success.
Step 5 - Learning to think in probabilities
Once you have mastered acquiring the discipline necessary to interact with the market effectively, you can start to use reasoning skills and intuitive powers to determine what the market is apt to do next.
This thinking in probabilities means you will want to determine the prevalent beliefs in the market and how these beliefs will affect price movement.
This requires you to be watching and listening to what the market is telling you instead of being focused on what the market is doing to you personally.
Douglas uses the following example: You buy the low cause you are sure it can't go lower. The market goes lower. The fact that the market did go lower makes it right.
If price goes through the low with follow-through, it shows many traders believed it wasn't going higher...and they outnumbered the buyers. The fact that you believed it couldn't go lower doesn't matter.
To help you be with the flow of the market, Douglas has listed questions to ask yourself on Page 216.
A few of them are: What is the market telling me at this moment?
How much strength is there?
What would have to happen to indicate the momentum is changing?
Is the trend weakening or is this a normal retracement? If it has been in a pattern, and that pattern has been changed, it is a good indication the momentum has shifted.
Are there places where one side will gain dominance over the other?
What will disappoint the predominate force of the market?
What is the risk of finding out in a trade?
Is there enough potential movement to make the trade worth the risk?
Buffy_04364: Anyone else have some good ?s to ask yourself?
elroch: Is it better to wait for a better price?
Buffy_04364: ok another one but more like is it possible there will be a better price might be a better way to ask it
coaster99: Has something completely out of pattern occurred? like an outside bar
Buffy_04364: as we are trying to think of possibilities
Buffy_04364: right as that would show a change
He goes on to say that we may never know what traders will in fact do but we can figure out what they will likely do if certain things happen.
Another great question he feels you should ask yourself - For this trade to be valid or continue to be valid, the market shouldn't trade to what point?
Your degree to which you hesitate after perceiving a trading opportunity to get in or out or reverse your position is an excellent gauge as to how locked in you are mentally. This information can be used as a reference point to build from.
Douglas has many other good tips and questions to ask yourself under this step.
CJack3: If you don't know what the answer to these questions should be, why ask the question
CJack3: how do you determine what the correct answers are so you will recognize them when you see them??
elroch: Is this retracement worth reversing for, or should I stick it out?
Buffy_04364: when in doubt stay out is my rule CJack
Buffy_04364: and your questions are good as they say you realize you need to learn this
Buffy_04364: before becoming a successful trader
CJack3: being a greenhorn at all this I am never able to see what I should have done until after the fact and even then I am not sure I see any indication of why I should have done it.
jimmer49: CJack - you ask the questions to see if you have answers. If you have no answers you should not take the trade.
Buffy_04364: good way to put it jimmer tks
p_8: paper trade until you know the answer
elroch: Need a list of questions short enough to still have a trade!
jimmer49: The questions should be asked all the time, not just at the point of entering a trade.
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Buffy_04364: thanks again scorp for the graphics to go with this
Step 6: Learning to be Objective
If we weren't demanding the market conform to our expectations, then there would never be a reason to be angry when it doesn't. We use anger to protect ourselves by an assault for our environment whether in life or in trading.
As Scorp's graphics show you can not be thinking about anything other than those items listed on the yes sign.
If you are, you may want to exit the trade to clear the emotions as it is not getting full focus with any emotions involved in your thinking.
To stay objective anticipate as many possibilities as you can and how probable each one is. The decide what you are going to do with each.
If the market does something you don't understand then get out and release yourself from the need to be right.
elroch: No bid is often the best bid, Buffy?
Buffy_04364: right elroch no trade is a trading decision
cluetrain: one trick to keep you thinking objectively about your behavior is to review your trades (we ALL review our trades, right?) in blocks of 20 or more......your tendencies/biases are there begging to be corrected.
elroch: Detached neutrality is a great objective to aim for
CJack3: my decisions are made on the basis of what I see in my indicators
Buffy_04364: reviewing your trades is a very important part IMO
CJack3: when a trade goes against the indicators
Buffy_04364: not with I should have and why didn't I
Buffy_04364: but constructively
CJack3: I have to ask myself if I am using the wrong indicators or combination of indicators]
Buffy_04364: indicators confirm price
Buffy_04364: not the other way around cjack
CJack3: or are the indicator settings correct
Buffy_04364: indicators with PA can be late
CJack3: true
Buffy_04364: this is how jimmers 2x came about
Buffy_04364: his looking over trades constantly
Buffy_04364: noticing how entries could be improved along with exits
Buffy_04364: it takes constructive analysis of the charts to do that
Buffy_04364: it does no good IMO to "beat yourself up" on what you should have done
Buffy_04364: need to approach it with how could I of seen this etc
Step 7: Learning to Monitor Yourself.
By paying attention to what you are thinking about and what market information you are focused on to know when you are starting to lose objective focus.
If you start to rationalize the market's behavior to support your position, you need to remember the market can do anything.
Buffy_04364: If you are not objective, you will usually only see market info to back up your position and many times miss the obvious
cluetrain: I find repeated humiliations an effective technique for crushing the troublesome EGO.
elroch: LOL
Buffy_04364: this is when you go over the trades at EOD and you say to yourself "what was I thinking"
Buffy_04364: I am sure we have all experienced that
Buffy_04364: it would be best if you could try to think back to what you were thinking then
Buffy_04364: what was clouding your processing of what the market was trying to tell you
al_gorithm: Debriefing after every trade and at the end of day is probably the single most important thing any trader can to do improve...imho
Buffy_04364: totally agree al it is
Buffy_04364: and it is the fastest way to improve your trading also if you are working with a system
Before you start trading for the day ask yourself are you ready to give yourself money today?
If not a great big yes then find out why and fix it before you start trading.
These last two weeks have just hit on the highlights of Chapter 16 in The Disciplined Trader by Mark Douglas. There is much more detail information in this chapter that any trader struggling to be consistently successful could benefit from.
In his final note Douglas makes the following comments
"After you have learned to trust yourself to always act in your best interests, the only thing that will hold you back is your degree of self-valuation."
"you will give yourself an amount of money that directly corresponds with what you believe you deserve based on some value system you acquired at some point in your life.
Buffy_04364: that last part from Chapter 17 is really thought provoking
Buffy_04364: and in his opinion accounts for the traders that get ahead and then give it all back
Buffy_04364: does it apply to you? Think about it.............
cluetrain: success can be truly frightening especially if it conflicts with what you believe about yourself
Buffy_04364: yes clue so true
Buffy_04364: some feel they should work harder for their money
Buffy_04364: there are many reasons he gives for it in the book
elroch: CJAck3 - I think you need a checklist of things to look for in order of importance
CJack3: a checklist of what kinds of things
elroch: I think I might buy the book
Buffy_04364: He has another one called Trading in the Zone
cluetrain: what was one flaw you discovered in yourself early on Buffy?
elroch: Patterns, indicator conditions, setups
Buffy_04364: I have not read it but some say easier reading than Disciplined Trader
CJack3: you are correct elroch
Buffy_04364: patience was a big one with me
CJack3: I have tried many indicator combinations and setups
Buffy_04364: and then getting stopped out and the market doing exactly what I expected it to do when I first entered
CJack3: and so far none have been reliable
wesley35: that's me buffy
Richard_: You're proving Buffy's point, CJack.
cluetrain: hmmmm, I fought opposite tendency...overstaying
wesley35: or just not having confidence to trust my setup and not lose money
CJack3: I wait for the right setup - execute when I see it
CJack3: then record the loss LOLOL
Buffy_04364: wesley that usually happens when you have lost money on too many trades
elroch: I manage either to exit early or late depending on if it's a large or small move :-)
Buffy_04364: you doubt yourself
Buffy_04364: cjack is the setup in indicator or price action?
Richard_: Personal Psychology rules everything in trading.
al_gorithm: The second biggest mistake new traders make is in not understanding that "indicators" only indicate, but the trade is taken on price action which proves (or at least increases the probability of a successful trade).
elroch: Have you all had a sustained period of success with simulated trading first?
wesley35: yes your right I sit there and see the setups, don't trade them and then when I get in I get anxious and go to early and often do let MACD get in line ...my issue I guess
Buffy_04364: I made myself switch back and forth between simulator and real account
elroch: al_gorithm - most indicators trigger on price action
CJack3: I watch price action, confirm what's coming with indicators and when I see the "correct indicator setup" I execute the trade
Buffy_04364: which is usually too late right cjack
Buffy_04364: indicators are a roadmap
Buffy_04364: price action tells you which road is taken
elroch: I find I sometimes take a trade in one direction which fails, then miss a great trade in the opposite direction!
CJack3: yup buffy - too late
Buffy_04364: because you weren't listening to the market and didn't see anything to indicate a reversal might be coming maybe
CJack3: then, of course, there is frequently contradiction in the indicators - 2 say up, 2 say down
Buffy_04364: learning to trade is the hardest thing you will learn in your life I think
Buffy_04364: when in doubt don't trade cjack
elroch: I find the problem with taking too much notice of price is that "noise" can be deceiving
CJack3: day or two ago all said down, mkt went up 10+
elroch: When was that CJack3?
Buffy_04364: trade what you see and not what you think
al_gorithm: elroch, yes, indicators trigger on price action, but you can tell when they are about to trigger, then position the trade based on the price action confirming so as not to get whipped out. If I'm am making sense.
CJack3: think it was yesterday
Buffy_04364: if you have the opinion it is going down, then that is all you are going to "see"
wesley35: that's a good pt buffy
cluetrain: aaaaaaaahhhh.....there's the rub
Buffy_04364: and that is why people stay short for a big loss when price is making HH and HL
CJack3: I rarely have an opinion as to which way it will go unless it is heading for support or resistance or a Pyrapoint line
elroch: I have a friend who went long on the Dow and held it for 2000 points south.
al_gorithm: ouch!
elroch: He had the idea that if he held on long enough it would recover - the "win every trade" syndrome
Buffy_04364: I have heard of that
elroch: Why's that?
Buffy_04364: usually because it has worked before
Buffy_04364: and bailed them out so they figure it will work again
wesley35: or ur looking for a short and then boom it moves up not in a position but for a setup HD or something happened couple of times today can't see the long setting or be ready for it
elroch: The sad thing was that trading MACD signals would have given him a 1600 point short gain
cluetrain: ....but you can not bet the previous race!
Buffy_04364: when you trust yourself to do what the market is telling you to do, enter, exit, SAR
Buffy_04364: that is trading without fear IMO
I hope all have gained something from the last two weeks discussion on the Steps to Success
and thank you for coming.
CJack3: tks buffy
Buffy_04364: next week will either be google on exit strategies
al_gorithm: Applause to Buffy and those that helped her....one attaboy for each!
Buffy_04364: or I will try to come up with one on basic price action
irod29: thanks buffy
zack_100: thank you buffy
cluetrain: thank you buffy
Lightfoot500: elroch, the really sad thing is if he didn't learn from his mistake!
Buffy_04364: then we will be open to more suggestions for topics
js1257: thank you Buffy
x21r: thanks buffy
Sgt_jay: thanks buffy
elroch: Lightfoot500 - I don't think lessons should be that expensive!
bartoktrader: hidden divergence
cluetrain: learn by example
Lightfoot500: elroch, if I lose my shirt, I go get another, (no they shouldn't be, but your friend obviously needed it)