Series: A Trader’s Diary of Fear 4
In the previous posting in this series, we talking about how feelings can help reveal a hidden value that might be in conflict with your trading decisions. Let’s now add to that discussion and talk about determining the higher value.
So what is the greater value in our trading? What is the standard by which we are going to make our decisions? These standards can be for almost anything that we do in our trading decisions. What type of method we are employing, the amount of money we’re putting at risk, determining whether the trade is worthy of our investment, and the way I feel about the trade and the decision. All of these can be guided by a higher value that is more important to us than just pulling the trigger and entering the market.
So here is an example of determining guiding values for a methodology. For the sake of this discussion, I’m going to use my self and my trading methods as the example. I’m not advocating my methodology or the methods of anyone else.
As a technical trader, I have literately thousands of indicators to choose from. And, if you believe the statistics that 90% of all traders fail, there apparently isn’t any one indicator that stands head and shoulders above the rest. So the decision of what I’m going to use as an indicator is very personal and needs to be guided by what ‘feels’ right for my style of trading and my perception of the trading world.
To decide what feels right starts with understanding what type of trader you want to be. I like trading trends. I determined this after many loosing trades trying to fight the trend or picking the tops and the bottoms. I also like trading smaller, intraday, charts. I like the sense of getting in, making what ever the market will allow, and being done for the day. There was a time when I would spend the entire day and part of the evening sitting in front of a computer screen. This obsessive behavior lead to an understanding that there is more to life than trading. Also, I value my coaching practice and working with clients. Trading the entire day would not allow me to work with others and their trading plans.
So now that I know I like trends and short time frames, I began building a method accordingly. (For more on building a trading method, click here.) I experimented with Bollinger Bands, Keltner Channels, various different moving averages, MACD, RSI, ADX with DI, a brief stint with Heken Ashi charts, candle stick patterns and formations, and market profiles.
After many incarnations , I’ve settled on what I currently use. It looks something like this:
That’s the other thing that I would like to emphasize. Our view of the world will change as we develop new skills and perceptions about the market. I often talk about trading as an art form. As the market changes, so must we change to adapt. What I’m looking at today, may not be what I’m looking at next year. The only constant in this venture is that the market is changing. That, too, can be a value we use to make better trading decisions.