Charting Life: Market Thoughts By TraderBiegs

Lifestyle Design Through Trading

Archive for November 2011

Finding Your Path

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One idea I had for a blog post might have been titled “Knowing the Path vs. Walking the Path.”  The gist of the article would have been about the fact that “knowing” or intellectually “understanding” something about trading is entirely different than doing it while trading.  Welcome to the human race.  Especially for the more intellectual or cerebral of us, there’s a world of difference with which we must come to terms when we enter the trading arena between knowing what’s right and acting right.

This post focuses on the prequel to the knowing-vs.-walking episode, which is finding your path.  If trading is life, and if life isn’t one-size-fits-all, then neither is good, consistent trading.  That’s at once wonderful and challenging.  After being at this for a number of years, I finally came to the realization that for the better or worse, I am someone who simply wasn’t going to be able to take someone else’s system and execute it on my own with consistency or confidence.  (I’m comforted somewhat by the fact that in recent months and years, it’s become mainstream among the online pro-trader arena that this is true for all (or at least the vast majority) of us.  On the other hand, I don’t really trust much once it becomes mainstream among any quantifiable group.  But, I digress.)

As it turns out, I am a pretty needy trader.  For me to execute a set of trading rules with consistency and confidence, I need to:

  1. As the Market Profile guys say (paraphrasing), understand what the market is trying to do and have a method of evaluating how good a job it is doing at getting it done.
  2. Understand whether the odds & probababilities are in my favor for a move of a certain magnitude in one direction before a move of a certain magnitude of another direction (trend identification is a big part of this).  This defines the degree to which I’ll give a new trade room before it makes an effort to work for me. (If I’m trying to catch a falling knife, I’m not going to give it “room” once I get in.  I want to know I’m right pretty quickly and with pretty tight risk, otherwise the knife’s going to go right through my hand.)
  3. Know what the most relevant levels are above and below me where there are strong odds of responsive action that must be evaluated when price arrives at that level.
  4. Understand what I need to see in once I get to an area of interest in order to execute a trade where I know that the expectancy is favorable and that my risk:reward parameters are clear and defined.
  5. Understand when unfolding market action after the initial entry suggests sitting tight vs. exiting the trade early because the odds are no longer in my favor.

If many or all of these things don’t matter to you, then by all means, I wish you the best of luck buying someone else’s setups or red/green system.  I’m envious of your ability to be able to separate yourself that much from your execution… and I hope the system you buy into is everything it claims to be.

Here’s the dilemma I faced.  I needed to come to these conclusions by myself and understand them in a way that really made sense to me.  In pursuing that path, I deprived myself of the ability to seek guidance from someone who has mastered the game and from whose style I could learn.  I have been fortunate enough to stumble upon bits and pieces from various sources that helped me eventually come to me own view and understanding of how I can trade the market in a consistent manner, but it was a long, truly painful, and emotionally wretching process that took years.  I cannot and would not want to imagine living through a more difficult trial by myself than I endured in my pursuit of consistent trading.  As much as I loved and still love the challenge, the game, and endless opportunity for growth and self-mastery, there were so many crushing defeats along the way, it’s truly a wonder and a marvel that I didn’t give up.

Every trader must identify his path in order that he or she may then engage in the effort of walking it.  It’s not a simple or even a sequential process.   You will identify a path, try to walk it, and realize you need to go back tweak the path.  Then you start the walking process over again on the revised path.  You may go through hundreds of iterations that you can’t avoid because you can’t know what’s limiting about the current path until you try to walk it and experience the limitation in real time, often more than once.  The end result for those who survive is a complete, clear, and tradeable set of rules you believe in and that work.  But this is a really, REALLY hard thing to get to on your own.

If I could boil this all down to one piece of advice that I, myself, wish I could go back in time and give to myself back when I started this journey , it would be this:  don’t try to figure this out on your own — no matter how many books, videos, courses, or tweeting blogging gurus you follow for free or as part of a paid service.  Find someone who will teach you and work with you, one on one, for an extended period of time.  A true mentor.  Perhaps I will cover in a future post what criteria this mentor should have, but in a nutshell, he or she should be a real trader (duh), should be expending real time and energy focused on only you when supporting you, should be in it for the long haul (months-to-years)and should be able to articulate where you are in your trading path better than you can for yourself.  If these four criteria are met, you should consider paying what may sound like an exorbitant amount of money as early in your journey as possible.  Avoid as many cycles of bad ideas, habits, and scars from too many painful and ineffective efforts as you can.  There is one caveat, unfortunately, and that’s that I don’t know if the uniqueness of every individual makes most mentor/student matches incompatible.  That said, if you dedicate a full year to finding someone who as a person and as a trader is a good match, and you then wind up paying the person tens of thousands of dollars over a 1-3 year period, you’ve probably spent your time and money about 1000% more efficiently and effectively than almost all of the rest of us do.

So go.  Go west, young man (or woman).  Go forth, and prosper.  Find your path.

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Written by TraderBiegs

November 17, 2011 at 3:13 pm

Posted in Uncategorized