Do You Trade with a Market Bias?

Today, I had a conversation in the APA Zones skype room and this is how it went…..

G: Well so much for the Long Play today.

G: You know seeing the TF market retrace this much can give you second thoughts about if my bullish bias was really a good call this morning or not.

G: TF didn’t break out of its Globex Range at all.

Michele: It has been said by many traders that it is not good to have a bias in the markets at all but to let the market ‘tell’ you what it is going to do

Michele: Some people might call your bias a ‘limiting belief’ as it did not allow you to see with clear eyes all the opportunities presented, but focused you on looking only for long entries.

G: Yeah, it good to read the candle sticks and not how badly I want to be correct.

Michele: Here is the thing… if you don’t have a bias, you can’t be wrong!  And since our ego’s fight tooth and nail to make us right, ‘It’ limits the things we see to make a decision.  ‘It’ looks for what will support ‘Its’ bias/view/belief.

Michele: Then it becomes a right vs. wrong decision instead of an ‘it just is’ decision

G: So at what point does a trade setup become a bias?

Michele: It is based on the ‘probabilities’ of your set up working.  And this is based on your experience with your set up from the past uses of it.

Michele: It is a statement of “in the past, this has worked out more than not so I am taking this stand and we shall see what happens”  There is no real bias to it.  If we add the bias, then our ego and emotions get involved and we start doing things like moving our stops or targets or doing self talk that is not of a pleasant nature.

G: On the daily it looked like we really need to retest the previous High which we do on several of the markets.  But on the intra-day chart it’s HH/HL. type of deal.

Michele: So what does your experience tell you with those facts?

Michele: My 60 min chart says we are in consolidation.  With that, my experience says anything is fair game.

G: My bias is an open door for emotions.  So I need to keep that door closed.

G: Otherwise it’s too hard to take the GH/GL [Globex High/Globex Low] level or spot my reversal points.

Michele: very true.  And your vocalized biases can also influence others

G: Just like how I have let other people’s views in the past influence me in the past.

Michele: Not sure if there are others seeing this conversation but would like to know how your market biases have affected your trading….  please chime in

G: Taking the trade setup when you have a bias is limiting.  And is really trying to make the world fit into “my box”.

Michele: Exactly!  And we all know, we can’t influence the markets

K: Michele, so suppose we open above yesterday’s range, with daily or 60M chart already in an uptrend, wouldn’t you say that your expectation for that day would be buy pullbacks to demand? Instead, are you looking to sell supply zones?

Michele: K, it really does depend on your trade style.  If you are a trend trader, then you would look to buy pullbacks until the market did a move that told you it was switching directions.  If you are a counter-trend trader, then you would sell supply until the market told you otherwise.

Michele: Each of us analyzes the markets differently based on our trade plan and experience.  The rule is to also know that the markets cannot be influenced by our thoughts and so, we need to be open to what the market is telling us and not what we want it to do.

Michele: Now, part of that is how we approach the markets and the words we use.  Saying “I feel/think/have a strong belief that the markets are going to go………”, is different than saying “my indicators are all/mostly saying ……….direction and so I am looking for …….. set ups until my indicators tell me otherwise.”

Michele: The second statement; 1) leaves you open to see the change in the indicators, and 2) does not commit your Ego to a position and so allows you to trade the markets and not your beliefs.

Michele: Does that make sense to you K or anybody else reading this?

D: Makes sense to me

G: Yeah, so don’t attach your feeling into the statement rather just facts as you see them???

Michele: Exactly!!  If you don’t have a strong ‘opinion’ about it than your ego/body/soul/subconscious does not have to try and ‘prove’ you are right

Michele: It opens up so many more possibilities and keeps you from limiting yourself

K: Michele, yes it does. I use “expect”, “probable” for my pre market game plan. Of course the market is going to do what the market wants to do, but I think the game plan is also important. I am not going in and taking every PIN BAR I see on my chart when we are in an uptrend (whether it be on your trading time frame or longer time frames)

Michele: Good K.  And your trading shows it.  You are very skillful in your trade set ups and management of them.

Michele: Although it may seem like just a slight difference to use another word, it makes a BIG difference to your subconscious and how it processes the information and makes decisions.

G: I was just looking at the stock twit control panel.  It has a “bias” button.  And this conversation has me thinking if I ever want to use that button again to say if I’m going long short or what not.

Michele: yep

B: Makes sense Michele – I like it

G: We don’t like emotions in our trading!

Michele: The goal is to get them out of our trading.  They don’t belong there.  They belong in other areas of our life and not trading.

My question to all who read this is, “How has your bias effected your trading?”  Please contact me so we can get that bias out of your trading and allow you to see the market for what it is.

 

Until we meet next, Green Trades Everyone!

-Michele

Wait for It……

I have spoken to a couple of traders this week that are “disappointed” that they are not in a trade at all times.  Since they feel they need to be in a trade all the time or they are not going to “make the money,” they are always looking for a set up and then finding a rule that they think might fit at that time thereby being able to trade all the time (boy, that made me dizzy writing it….).  I asked them how they were doing on their balance sheets with this type of trading.  “Not so well” they said, “I always seem to be on the losing side.  It’s like there is someone on the other side of the computer and trades against me, and takes my money!”

Now, think about this realistically, can that really be true?  Do you think all the brokers hire a person to watch what you do and take the opposite of your position? Of course not but, at the time, it can sure feel that way.  You are actually trading against yourself.  Why do I say that?  Being in the trading world for any length of time, most of you have run into a trader or two that makes their living doing this day in and day out.  Have you ever asked them how many trades they take in a day or a week?  Well, I have. They usually say one to three and I’m done.  Well, if they only take one or two trades in a day, what are they doing the rest of the time?  They are waiting for their set up to come to them.  They are not forcing a trade out of what the market is showing them at that time.  A successful trader is not “in” the market all the time.  They spend a fair amount of time waiting for their set up.  The set up they have designed and practiced time and time again and know well.  They look for that set up and that set up only because they know the odds of its success is great when it shows up on the screens.  Now, why did I say you were trading against yourself earlier in this post?  Because, the market will always give you a mixed signal with every move it makes in the second it is making that move.  If you are not focused on looking for one thing, you will see many things, and when you finally get frustrated enough to take a trade, it is not a tried and true set up that you have good odds and faith that will succeed thereby creating failure just by definition and action.

There are many emotions that make traders feel they must be in a trade at all times.  Emotions are good for our family and friends but not so good for your trades.  What emotions are getting in the way of trading your plan to its successful conclusion?

Here is a quote I heard recently that I love:  “There is no reason to have a Plan B because it distracts you from Plan A”  -  Will Smith, Actor

This quote rings true for all the successful traders out there.  They have their Trade Plan A and nothing else.  It is what they trade day in and day out and makes them live to trade another day in great comfort.  You need to wait for your set up.  It is the most important thing you can do as a trader.  If you do this, you too will also live to trade another day in great comfort.

Until next week…Green Trades Everyone!

-Michele

A Personal Conversation…..

The markets have calmed down a little from last months’ volatility and seem to be moving in much nicer ups and downs.  I hope everyone is doing well with it.

I had a conversation with a client of mine yesterday and I would like to post it here.  It is a little different than my usual blog but I feel is it very much what a lot of people think trading has to be like.  Now, this person is a big baseball fan so you will see that I explained things to him in baseball terms.  Since we are all familiar with the All American Sport, I am sure you will all get the analogy.  Here it is….

Client:  You know any professional has pressure. You have to have it. You can’t be without pressure. The best baseball player deals with it all the time. From the opposing team or his own numbers or the guy in the minors that wants to prove that he belongs in your place. So, to trade without pressure is not something that is doable for most. And to me the pressure is important to be there because you groom yourself to achieve in the most stressful of environments. Paul sent me a thing about the men and woman who achieved in the most stressful of times. The pilot who landed safely in the Hudson etc. that makes sense. To think you are not under stress, or only trade when you not, will not help if you do this for a living. How you trade and handle yourself during those times is the difference between success and failure.

Me: I agree that how you believe and handle yourself during those times is the difference between success and failure but it is not my belief that it has to be surrounded with stress and pressure.

Different people will handle the same situation differently based on their views/interpretations of what the particular environment means to them.  Not all people will consider it to be stress/pressure.  But it is still how you handle the situation that makes the success not if it has stress/pressure or not.

Let’s take your favorite sport, Baseball and equate it.  A player coming up to bat with bases loaded and 2 outs.  It seems obvious to those watching that it is a stressful situation, but is it?  Does that batter see it as stressful or does he see it as an opportunity to do his best?  Does that put undue pressure on him or does it give him a challenge to overcome? Or does it relax him knowing that he is going to do his best this time as he does every time.

These are all different ways that a player can handle the same situation.  The ones that can tune out the “internal chatter” and focus on the play are the great ones.  Like your favorite player, Evan Longoria

Client:  I’m keeping that chat.  You are correct; strive to win when I am in that situation. Don’t look back, look forward. I am at that place in time because I put myself there. Seize the moment!

Are you all Seizing your moments?

Until next week…Green Trades Everyone!

-Michele

Trusting Yourself

This has been an interesting time in the markets recently and in the world.  The markets have been reacting to all of it and so might we be in our trading.  I have a client, and friend, who I chat with regularly during the trading day, and he is very regimented to his trading plan.  He is what we all strive to be with our plans.  He has also been on the floor of the CME as a trader and has gained much knowledge through that time. The other day he saw a set up that his “gut” told him was a good trade to take but it did not fit his plan.  He took the trade and made a great trade.  Green all the way.  But then he became very conflicted about it as he “did not trade his plan.”  And so much so that he proceeded to beat himself up about it for hours.  Now, how many of us beat ourselves up over a green trade?   I would venture to guess that not many beginning traders do.  Veteran traders might have a different answer.  There answer would be “depends on why I took it?”  What is the reason for this difference you ask…  This difference has to do with the discipline they normally show for their trade plan and the knowledge they have gained from trading the markets over time.

 In the beginning of your trading career, you have very little reference to go on for how the markets work and what they do at what time. There are many emotions involved with taking the trade or not, winning and losing and how you view trading as a whole. But, as we sit in front of our charts, day in and day out, we learn and our subconscious learns too.  We learn on a conscious level to trust our trade plan. That it works well for us and we should trust it.  We work on our emotions to not get in our way.  On a deeper level, our computer brain is learning too, and at a very fast rate.  Much faster than our conscious can keep up.  Our subconscious files all these learnings away in its file cabinets (neuron pathways to be exact).  As we are learning our trade plan, our subconscious is learning the market.  One day, after you have been trading a long time, your ‘gut’ tells you to take a trade.  ‘It’ has seen this set up many times and knows that the probability for a win is very high.  You can decide whether to take it or not at that time but it will present the offer.  In this case, my friend took the trade and later recognized why the feeling had been so strong in him to take it.  Yes, he went against his trade plan for that one instance (and that is the key, it was only for one instance in a long line of trading his plan), and he was successful.  And now he is back to trading his plan exactly as written.  Until the next time his subconscious ‘sees’ a great set up and lets him know.  He can then decide whether to take it or not.

How are your emotions during trading?  Are your entries just a matter of fact or do you have to wrestle with your emotions?  If your emotions are getting in the way of your trading, please contact me so we can talk and get you through it.  Trading is what you make of it and I hope you are making it enjoyable.

Until next week…Green Trades Everyone!

-Michele

Do You Let Your Emotions Do The Trading?

The higher our emotions are, the more difficulty we have staying grounded.  –Market Profile

I am sure you have, at some time in your life, gotten into a discussion and all of a sudden the discussion got completely off track.  You were originally intending to make a light point but then it became you on a soapbox.  Once you stopped, you looked around and saw, with complete astonishment, that the person you were talking to was just staring at you with open mouth.  This is what emotions can you do you when they are in control of you and you are not in control of them.  While that can be good in love and caring, it is not good in trading.

These last two weeks have seen many large swings in all the markets.  The emotions of the general populous have been swinging along with it.  There has been much joy and pain in the room where I trade in the early mornings.  And, as the day continued, these emotions became more evident in the trades that were taken.  I heard several newer traders taking trades and justifying the fact that they were not following their trade plans with many excuses.   Some of these trades worked out but most did not.  These traders saw the market ‘getting away without them’ and didn’t want to be ‘left behind.’  I also noticed that many of the veteran traders were sitting on the sidelines waiting for the trade to fit their trade plan.  When it did, they were in without hesitation. The veterans where not trading by their emotions but by their plan.  And because of this, they fared much better than the traders that were trading from their emotions.  A trader that has removed the ability of their emotions to trade for them, is not worried about ‘missing’ a trade as they know a new one will come along and it will be one that fits their trade plan exactly as it should.  And with this confidence and control, they are successful day after day, and year after year.

Do you let your emotions trade for you?

Until next week…Green Trades Everyone!

-Michele

What is a Mental Mindset?

In last week blog post, I mention “How we approach our trades is our Mental Mindset.”  What does that mean?  Webster’s Dictionary defines it as 1) a mental attitude or inclination; 2) A fixed state of mind.  How do we develop a ‘fixed state of mind?”  Through our programming.  From birth to about six years of age, our conscious brains are not fully formed.  That is why you can play peek-a-boo with a toddler and they actually are surprised when you remove your hands from your face and they see you are there.  At those formative years, you are operating from your subconscious mind.  This is the part of the brain that keeps us alive, beats our heart while we walk, tells us when we need food so we don’t starve, allows us to drive and keeps us safe from harm, or at least what it remembers as possibly being harmful to us.  When we do something that it views as a threat, it reacts by having us feel fear or a number of other emotions that it hopes will get our attention and get us to stop the offending activity. Emotional responses are one of the ways our subconscious mind communicates with us.

While we are learning all these new and fascinating things about the world, we form automatic responses so we don’t have to re-learn these things over and over again but can go on to learn new things.  These automatic responses are stored in our subconscious mind and are triggered whenever something happens in the world that matches the criteria for that response.  Much like a computer program or our trading plans.  Now, do you think the way you need to react to an event is the same now as when you were six?  I should say not!  Yet many of you find that you are doing some trading based on emotions that you are feeling at that time.  Maybe you move your stop to ‘give the trade some breathing room to work out,’ or you close out your trade before it reaches its target to preserve some green in your account balance only to have it go to your target.  All this is based on emotions and programming that was put in place before you were six years old!  Can it be changed?  The answer is a resounding YES!!!

Until next week…Green Trades Everyone!

-Michele

When Did You Decided That….?

I was speaking to a client a couple of weeks ago, let’s call him John. John and I had done some work in the past and it had been a good move for his trading career. We were catching up on things and he said something that caught my ear “I expect to lose 30% of my trades.” I asked, “When did you decide that you had to lose on your trades and by that percentage?” “What do you mean?” he asked. “Well, if you’re going into every trade wondering ‘is this going to be the loser?’ how effective do you think you are going to be in that trade?” He was a little confused so I explained further…
Now, I know that many of you think it’s the law of probability or numbers or whatever your word is but think about this…. How often do we get in our cars and think “Well, I wonder if today will be the day I get into an accident?” (After all, the statistics are high on that one.) Or when we go to bed at night, do we wonder “Am I going to wake up tomorrow?” Of course we don’t! If we did, we would never go to sleep or drive in a car or do a ton of other things we do to live our lives and have fun. But, we think it’s ok to wonder if this trade is going to be the loser that we are expecting or not…?
How we approach our trades is our Mental Mindset and what we concentrate on happening, will. What John had was a Limiting Belief. And it was limiting his trading success. Since he had such a strong belief that he would lose, of course, he would unconsciously make sure of it by letting his emotions and doubts get in the way of following his trade plan. He would limit his winners by closing them out as soon as they showed the slightest chance of reversing and taking his green. How many of you have done that before only to watch it turn back and go in your direction for a big win that you missed out on? It is a self-fulfilling prophecy and has no place in your trade plan.
We did some work on John’s limiting belief. If you ask him, he will tell you, while he thinks that losing may be part of the process of trading, he does not believe he has to lose. He no longer wonders if the current trade he’s in will be the loser. Short and simple, he does not EXPECT to lose when he takes a trade. This has made him more relaxed in his trading and is showing itself in his balance sheet.

Until next week, Green Trades Everyone!

-Michele

You’ve Done Your Homework, But….

You’ve done your homework and created your trade plan. Countless hours of putting your plan together, listening to your mentor and studying charts and books. Weeks monitoring the charts and trading your trade plan in your ‘practice’ account. You’ve done it by the book. Now your confident. It’s time to put your money where your homework is……

You’ve opened your charts, done your checklist and your first trade signal has presented itself in front of you. Confidence high, you take the trade, and get stopped out. First loss. Not a problem. You understood before you started that successful traders both win and lose and losing is a part of winning. You’ve also heard, more than once that “successful traders don’t win every trade.” Moving on, still confident, the next trade is taken. Another loss, but this one hurt your pride a little because you got stopped out quickly and then the market turned and went back in your direction and would have hit your target if you weren’t stopped out. You double check. Yep, you placed the stop where your trade plan told you to put it. You feel a bit wounded but are trading your plan and you must stick with it. The day is done and your account is down, but you knew that could happen. “Tomorrow will be the day.”

After a good night’s sleep and a few mouse clicks, your new trade is in front of you. Hey, this one looks good. It’s a little more risky than yesterdays’ trades , but look at that profit potential! You jump in the trade. With a nice start to the trade, you’re feeling good and now it’s time to move your stop to breakeven, just like your plan says. Surprise news – market reverses and blows through your stop…an unexpected loss. Is something wrong with my plan? Has the overall market personality changed, affecting my system and rendering all my back-testing irrelevant? Your confidence turns to doubt.

You decide to sit out the next trade and “watch” it. I mean, isn’t it wise to make sure the system gets back on track before you “throw good money after bad?” Isn’t that what a good trader does? Your “watched” trade is a winner!

You now “beat yourself up” because you know that when you started your “live” trading, you made an agreement with yourself to take the first ten trades…..no matter what….and here, you chickened-out and missed a big winner that would have gotten you even. What’s happening?!!!

What’s happening is that you are being controlled by your emotions. They are in control of you and you are not in control of your trading. The scenario above plays out in every trader….new or veteran.

However, the winning trader realizes what is happening and takes control and nips the problem at it’s heart. The winning trader seeks out a solution to this problem and gets their mental house in order.

There are many more losing traders than winning traders, and it is rarely their trade plan.

Until next week. Green Trades Everyone!

-Michele