10/16/2014: Great Day of Trading Despite a Mistake... The Debate That Raged Within

I am thrilled to be able to say I was up 56.4 pips today (Thursday)!  As someone who has struggled mightily with my trading, I now feel that I am starting to turn the corner and become a consistent, disciplined, and profitable trader.  It feels GREAT to have made my goal for the week.  

I took three trades today (Thursday morning New York session).  All were to the short side.  I took a +19.7, a +6.1, and a +30.6.  I could talk for ages about all three of these trades, but this post will focus on the first trade of the morning.

I had tried to trade the Aussie session from around 6:30 - 9:00 on Wednesday night and it was flat as a table (by GBP/AUD standards).  One of Wade's great pieces of advice about the Smart Money Profile (SMP) software is to pay close attention to where the market is at in the volume curve.  Usually the market is pretty wide awake during that Aussie session.  However, while I was watching, the volume on the hour stayed almost exclusively dark blue.... ice cold.  This really helped me stay out of the market.  Sure there were some pips to be had as the market rolled back and forth in a 30 pip range, but I stayed true to my trading plan, exercised some discipline and stayed out of the market.

This morning I got online at around 5:05 am pacific time.  The first thing out of my mouth was, "Ohhh Nooo!"  Why?  I saw the market had run up over 200 pips!  I was ticked off.  On Wednesday morning I had seen an excellent entry, but didn't pull the trigger on a trade that would have paid at least 50 pips.  On Wednesday evening, there was nothing to trade.  Now I come in on Thursday morning and the market has already made it's move?  What??

I realized had a decision to make.  Was I going to be an idiot and stay upset, or was I going to exhibit some emotional intelligence and get ready for the next move?  Thankfully I chose the latter.  I pulled out Wade's awesome Trading Questions and started evaluating the market.  Here's what I noticed (see screen shot below):

1. As the market continued to run up, price on the buy side went above 1.8400 to open up a bunch of retail trader longs.  The market makers then snapped it short by about 18 pips to stop out all the longs that opened up at the double zeros.  Then they took the sell side up to about 1.8408 to open up a bunch of longs again.  Then the market makers snapped the market short all the way down to 1.8357.  If the 18 pip stop taking didn't get you, the 51 pip smash definitely knocked you out.
2. At this point, my intuition told me that I should be looking for a retracement so I could get in short.  I was conflicted because the market had pushed up for several hours and I felt like I was trading against the overall trend.  However, I trusted my instinct and looked to see if we would get a retracement back close to the market maker activity dot from 5:45 at 1.8389.  I wasn't sure if price would go there, or go all the way back up to the blue liquidity line at 1.8402.
3. Price hit 1.83988 on the 6:20 candle and turned - basically right at the average price.  However, because I wasn't sure where price was going to turn, I was nervous to get in right away when price started to turn down off the average price dot.  

• I finally got in going short at 1.8380 - not great entry, but not terrible.  It was pins and needles for the first 7 minutes because price actually went back up.  It got as high as 1.8391.  However, because price had not really cleared the average price dot, I did not have any confirmation that I was wrong in the trade.  I am proud to say I did not allow the fact that I was uncomfortable with price get me out when the overall story had not yet changed.  After a few white knuckle minutes, price pushed down nicely for me and quickly reached 1.8350.  
• As so often happens around power numbers, price then backed off.  This is where the debate started raging in my head.  Once we hit the power number, things seemed to be happening at warp speed.  Although not terrible, I did not exhibit the best decision making here.  Here were my options as I saw them:

• Option A: Move my stop so that if price backs all the way up to 1.8380, I get out with a zero.  In actuality, this was my original trading plan and I had already moved my stop to 1.8380.  I had no risk of losing anything of significance and the potential upside to staying in the trade was huge.  My target when I got in the trade was the yellow liquidity line all the way down at 1.8280 - so I had a legitimate shot at a 100 pip trade!  Obviously the market is going to breathe during a 100+ pip run, so the fact that it took a breath at the power number was not a surprise.  If I'm ever going to learn to pull 50's, 75's, and even 100+ pip trades, I have to learn to stay in the trade and be willing to take the chance that the trade doesn't pay me at all.
• Option B:  Get out right when price started to hesitate after hitting 1.8350 and book 30 pips.  There certainly is nothing wrong with booking 30 pips!  My goal for the week was 35-50 pips and, after a slow week, I could have reached the low end of my goal with that one trade.
• Option C:  Options A and B were both pretty good.  Unfortunately, I went with option C:  Let the market breathe back and once the price action makes me uncomfortable, allow the market makers to bully me out of the trade.  Yes, this is the exact behavior I managed to avoid at the start of the trade.  
• Now, don't get me wrong, I was pretty happy with my 19.7 pips.  However, it turned out to be dumb because the market only breathed back about 1 more pip before it took off again (doff of the cap to the market makers for their skill at getting people out of trades).  
• Now you may say that hindsight is always 20/10 in the market and you'd be right.  The real reason it was dumb was because I gave up the upside AND gave back 10 pips for no reason.  If I'm not going to have the stomach to stay in the trade, then as soon as price starts stalling, especially around a power number or another sticky point like average price, then I should just get out of the trade.

So, other than sheer panic, why did I actually get out?  Here's what I was thinking in the moment.  I knew that when the market makers tapped 1.8350, there was a chance the market could breathe back significantly.  Knowing that the target for the trade was over 100 pips short from the start of the move, I felt there was a good chance the market might breathe back much more than 10 pips.   I thought it very possibly could breathe all the way back to 1.8375.  

Now, remember, my entry was 1.8380.  If price did retrace back to 1.8375, there was a great chance it could stop me out and I really didn't want to end up with a zero or 5 pips.  Thanks to both Shane and Wade's teachings, I am constantly asking myself, "At what price will I know that I was wrong about the trade?"  In this situation, I would not have confirmation about being wrong until price would have gone north of the original average price of 1.8389.  This means I would have been forced to have my stop up over 1.8390 in order to truly know that I was wrong about the move.  There was no way I was willing to see a +30 in the trade and take a negative 10-15 pips.  

So in my mind, it didn't make sense to risk letting the trade back up to 1.8375 because I wouldn't even know that I was wrong yet.  I also wasn't about to set my stop up over 1.8390 and take a big negative.  As I look back now, this tells me that the best option for that trade would have been to take the 30 pips.  Now, if I would have had truly pristine entry up around 1.8388, then I would have had the ability to let it breathe back to find out if I was wrong without taking more than a 5 pip negative. 

I hope and expect it will soon be a common situation where I am up a significant amount of pips and then have to decide whether to stay in a trade or get out.  Right now, it's tough to imagine being up 20-40 pips and being OK with giving it all back.  As such, I believe I may err on the side of caution and book those profits (hopefully without giving back 10+ like today).  While I definitely want to pull bigger trades, I am also highly fearful of losing those pips because it is not yet commonplace for me to be up 30+ pips in a trade.   As I gain more experience with SMP, I believe I will start encountering this situation more frequently.  As such, I hope over time it will become easier to stay in the trade because I will have the confidence that I will be up 30 again soon.  

Well, it sure is awesome to have made my goal, made 56 pips, AND learned a valuable lesson all in one morning session.  What a great day!  I'm planning to watch the market tomorrow, but I'm not pulling up my rate indicator.  Heck, if I'm tired enough, I might just sleep in like a wild man until 6am (welcome to the west coast student trader's lifestyle!).  On a serious note, I hope your trading is going well.  If you are struggling, please reach out to one of the instructors.  These guys know their stuff, but they can only help you if you are open and honest with them.   Also, please feel free to connect with me any time at pipaddict73@gmail.com.

All the best!

10/8/14: PM Session, Pulled the Trigger... but Made a Very Costly Error in Execution.... Another Lesson to Learn

There was extremely high news this afternoon at 5:30 pacific time when the Aussie unemployment figures came out for the month.  I wasn't sure if I'd find something to trade, but I sure did!

Take a look at the 5 Minute Chart.  The first thing to notice is that in the roughly 45 minutes preceding the news, the market makers created a long belief.  In fact, they took price just north of 1.8300 to open up what had to be a ton of long trades sitting at the double zeros.  Their next move was to challenge that belief.  Although it doesn't look like much on the chart, in the last 6-8 minutes before the news, they actually moved the market down by 17 pips.  So, very subtly, they opened up a ton of trades and also stopped out a ton of those traders out with a nice little liquidity swap.

Then at 5:30, it was time for the fireworks!  With absolutely no fake short, the market spiked up 71 pips within the first 2 or 3 minutes of the 5 Minute Candle (maybe even quicker).  This was very difficult to interpret.  Except for one thing.  Take a look at the Hour Chart and notice that the amazing SMP software had thrown up both a dot, and more importantly, a blue buy-liquidity line.  Incredibly, during this wild push up, SMP's brand new liquidity line was spot on.  In fact, price only crossed the line by 4 pips before price started pushing down.

I was still a little unsure about what was going on, but price fell pretty far short.  It came back up and was pretty whippy - all during that first 5 Minute Candle.  I remember looking at the clock and laughing because it was only 5:32 - let me tell you, the adrenaline was flowing!  After a little while, I realized that the since price wasn't pushing back past the blue line, we had already received a pretty strong clue that the market might push extremely hard to the short side.  I was hoping it would breathe back and give me a decent entry.

Luckily, price did breathe back up and I finally got in a short trade at 1.8339. The trade never went against me and I was soon up roughly 15, maybe 20 pips.  I had some phenomenal potential profit targets as indicated by the arrows I have drawn that are pointing at the yellow liquidity lines.  I knew that if the market makers manipulated the market that hard, it was a great opportunity for a HUGE run.  For risk management,  I had moved my stop so that the worst thing that would happen was I would break even.  So far... great job Cy!  But then, at the first sign of adversity, I fell apart.

The market breathed back.  I got out of the market with an 8.8 pip trade.  I have to tip my hat to the market makers because they are damn good at scaring woosy little traders like me. The amazing thing about this is that I literally got out at the exact very tip top of the breath.  How exact?  Within 0.1 pips.  Yes, if I would have had one tenth of a pip more guts, I would have pulled at least a 60 pip trade... in 15 minutes.  I honestly don't really fell like I pulled an 8.8, I feel like I left 50-110 pips on the table.  

The Trade Exit section of Wade's Trading Questions asks, "Do I have a sound reason to get out, or am I just feeling uncomfortable due to the current price action?"  It also asks, "Am I exiting this trade based upon emotion or based upon a sound reason looking at the current chart content?"  It is amply clear that I got out of the trade because I felt uncomfortable and WOOSED OUT!  

So once again, the SMP software showed us an amazing entry into a trade.  The lesson I must take from this is if I have excellent reason to believe there is a possibility to pull a monster trade and the worst thing that can happen is I'm going to take a zero... STAY IN THE TRADE!!!!!  I hope anyone reading this can learn the same lesson without making the same dumb mistake.  I must say I am glad to be reading the software reasonably well, but I clearly need to work on my execution.

As always, I'd love to hear your comments.  You can comment on the blog, or reach me at pipaddict73@gmail.com.

10/8/14: Arrgh, Missed My Entry On a 40 Pip Trade... Lesson Learned

Well, I sure blew it this morning  The one good thing about the morning session is that I read the market correctly.  The bad thing was I tried to be too exact with my entry.  I think anyone trading SMP can benefit from reading today's post in order to avoid making the same mistake.  In fact anyone trading the WealthSmart suite can apply the same concept to a pullback getting close to trend break.  Here's what happened...

We started watching the market on the Smart Money Profile (SMP) Webinar at 6:00 am (as represented by the purple line on both the Hour and the 5 Minute charts).  As you can see from the hour, we were clearly only looking for long trades.  When the market pushed short and then showed us the green dot followed by the yellow sell liquidity line (shown by the arrow on the 5 Minute), I was looking for the classic 1,2,3 market maker move of creating belief to the long side, challenge of that belief, and then the real move in the original direction.

In the screen capture below, you can see that all three of the phases happened very quickly (please forgive my rudimentary numbering).  This should have been a really easy trade for me to get into.  1: Price pushed up to create the long belief, 2: it snapped short exactly to the yellow liquidity line, and then 3: BOOM! It took off long.   

My problem was that I was looking for price to snap short about 5 pips below the yellow liquidity line before I was going to enter.  As you can see, price never went much more than a pip (if that) below the line.  Now, there is nothing wrong with waiting to see if price goes a little further through the liquidity line in order to get the best entry possible.  However, my real mistake was that as soon as it started to go my way, I should have recognized that my entry was right then and there.  Instead, I kept waiting to see it back up again and go 5 pips below the line.   

By the time I finally admitted to myself that I was wrong, I was waaaay late to the party. I foolishly jumped in super late.  At that point, I had no tolerance for any type of a breath back, so once I saw my stupid little +3, I decided to take my profit.

So, the good news is that I did read the market correctly.  The bad news is that despite seeing the market almost perfectly, I failed to see that it was going my way and didn't get out of my own way fast enough to pull the trigger.  As LaCurtis and Ira have preached many times, you don't want to get married to a trade if it's going against you.  In this case, I shouldn't have been married to a certain spot in a pull back just because I thought it was going there.  The trade showed that it had turned in my desired direction and I absolutely should have entered.  As Wade likes to say, it's not my business, it's the market makers' business - what a great reminder of this fact!   I strive to learn from these mistakes and continue to do better moving forward.

As always, comments are appreciated and I can also be reached at pipaddict73@gmail.com.  Have a great day out there!

A Challenging Weekend... Emotional Intelligence Crucial Now... Goal for the Week

I'm going to keep this post very quick and to the point.  I did some extremely dumb things this weekend.  I am sorely disappointed in my actions and especially angry that I let down the person closest to me in this world.  I'm not going to get into specifics, but let's just say I had a vicious hangover yesterday and found out out that I both said and did some extremely hurtful things (for the record, there was no physical violence - just mass levels of stupidity).  My actions represent the exact opposite types of behaviors from who I strive to be and how I want to act.  So... where do I go from here?

Well, I am telling myself that it's not how many times you get knocked down (or knock myself down as the case may be), but how many times you get up.  So, rather than get up and jump right into trading this morning, I took the time to watch a new training video that Wade created on liquidity lines.  I think this was very important because I needed to get back in sync with trading and positive behaviors.  Since my thoughts are still drifting back to my actions from the weekend, it's difficult to have the laser focus needed to properly analyze the market in order to have a chance of pulling positive trades.  Anyone who has been at the institute for any length of time knows the importance we place on exhibiting emotional intelligence in our trading (and our daily lives).  While I am far from proud of my actions on Saturday night, I am at least glad to say that I am trying to bounce back in a positive manner.  I'm not going anywhere and the Forex market is not going anywhere, so there's no point in rushing back into the market when my focus is not where it needs to be.

There is high Aussie news tonight at 8:30pm PST, so I'm going to try and be here to possibly trade it.  I must have my mind right and be ready to behave intelligently if I'm going to gain positive pips tonight (and every trading session).  My mantra: I must only trade if and when I see something I understand.  I must not over-trade.  It would not surprise me if I don't trade during tonight's session, but we'll see how it goes.

By the way, my pip goal for the week is to be up 35-50 pips.

Thanks for reading.  Here's to hoping I bounce back quickly and effectively... and never make the same moronic mistakes again.

10/2/14: No Trades, Protecting my Pips... Commitment to Excellence

Coming into today, I was basically at my goal for the week.  The goal for this week was to be up 25 to 35 pips.  After yesterday, I was up 33.6 pips.  My debate coming for today and tomorrow was whether to continue trading.  The more conservative members of the Fx365i senior leadership would argue against trading and the more aggressive members would say to trade when you see good opportunity.  I told myself I would only trade if I saw something I felt extremely strongly about.

I did see a couple of trade set ups I felt good about today, but I chose to be conservative and did not trade.  This is proving to be both good and bad.  The good news is that I am still at my goal for the week.  As you may know, this is the first time in a month I have not been down dozens of pips, so this is a great thing!  So, what is the bad side of it?

The bad side is that I'm wondering if I'm still spinning from the severe emotional beatings I took over the past month (self-inflicted as they may have been).  If I'm seeing good setups, why am I not taking the trades?  On Tuesday, I didn't take a trade that set up perfectly and I regretted it.  On Wednesday, I took a similar trade and it paid me 22.9 pips.  The two trade setups I saw today both went very strongly in the direction I expected.  I could potentially have pulled around 80 pips on them.  So how do I continue to grow as a trader at this moment?

In order to keep my mind right and keep improving, my take on all of this is:

1. I am really happy with how I am seeing the market and beginning to understand the amazing new Smart Money Profile (SMP) software.
2. There is nothing wrong with being extremely conservative once I have reached my goal for the week.  If I was up 50 for the week, maybe then I would feel like I was playing with house money and could afford to take a potential 10-12 pip loss and still be very happy with the week.  However, if I took that loss now, I would not meet my target for the week.
3. I have decided I am absolutely not going to trade tomorrow.  I know it is going to be maddening if I see an easy entry and it runs for a monster trade, but we all know the GBP/AUD runs all the time and there will be more trades next week and beyond.  I will be watching closely in order to stay in tune with the market, but I will not have my rate indicator up.

Speaking of continuing to improve, I made the time last night to read Chapter 4 of The Forex Mindset, aka "The Book."  The commitment to excellence (no, not a Raiders reference) is such a phenomenal concept.  The habits we create on a daily basis and the small decisions to do the right thing on the little tiny stuff in our lives make a huge difference.  The chapter starts with quote by Aristotle.  I don't have it in front of me, but the gist is that you don't do the right thing because you have virtue, but rather you have virtue because you consistently do the right thing.  Continually striving for excellence and continual improvement, in all facets of our lives is not only a noble goal, but will also make us indefinitely better traders.

To everyone who is planning to trade non-farm payroll tomorrow, be careful.  It's a great day to lose a boatload of pips - especially if you start getting emotional or are trading a higher lot size than you are ready for.  Ask me how I know.  Good luck tomorrow and I can't wait to start trading again next week.

10/1/14: Improvement from Yesterday's Missed Opportunity... Up 22.9 Pips

If you happened to catch yesterday's post, you know I was frustrated because I saw a trade that I completely understood... and didn't pull the trigger.  The trade would have paid me close to 50 pips.  Well, I'm happy to say that I didn't make that same mistake again today.  More about that in a minute. 

First, let me tell you, I was in a pissy little mood this morning.  One of the great things about the Fx365i Institute is just the camaraderie that exists at the school.  Also, one of our room rules is to always be uptone.  So between simply showing up to class and being around like-minded traders, I slowly dragged myself into an emotional state where I was able to start analyzing the market.

Unfortunately, by the time we started today's SMP webinar, the market was in a pretty tight accumulation.  It had already moved up 135, down 90, and then back up 45 (hello market maker 45's!).  The market kept futzing around and I really couldn't form a strong directional bias.  

Head trader Wade Guth suggested that we were overall likely to be in a short market.  I more or less agreed with this, but I still didn't see any type of set up that I understood.  Then, all of a sudden, BOOM, it happened.  Unlike yesterday, I acted with conviction and took advantage of another great setup that was shown by the SMP software.  Let's walk through what I saw on this trade.

Classic maniuplation.  Short belief created.  Hardcore news manipulation spike with quick rotation going back short.

If you look at the hour chart, you can see that we were really ranging pretty tightly back and forth.  However, on the 5 minute chart, look at the candle just to the left of the the candles where I drew the yellow circle.  Notice how that was roughly the fifth 5 minute candle in a row that was going short.  Also, notice how it went just a little bit lower than the previous low (as shown by the dotted horizontal line).  When price did not continue to push down, I was very suspicious of what was going on.  The market makers had enticed the masses to go short.

Then, as you can see by the next candle, price shot up.  This happened right at the very end of the candle.  Notice how the blue buy-liquidity line had formed on the SMP software (man this software is awesome!).  As soon as price started dropping on the orange candle, it became apparent to me that we had just witnessed absolutely classic manipulation.  I got in going short just a couple of pips after price crossed back down below the blue line.  I had low risk on this trade because if price would have suddenly backed up above the blue line, I would have dumped the trade.

I did experience a pretty good amount of slippage as I only got in at about 1.8597.  However, the trade continued to go strong my way.  There was debate in the room about whether or not I should stay in the trade when I was up about 15-18 pips in the trade.  I was tempted to get out, but figured I had a good chance of price continuing to push down.  I moved my stop down so that even if it suddenly reversed, I would have got out with a small positive.  If this would have been "the move," I could have potentially seen something close to a triple digit trade.

Fortunately, price pushed down and I saw about a +25 in the trade.  When it stalled again, I no longer had as much confidence that it was going to continue to push down.  I also realized I was basically at my goal for the week.  The market backed up just a touch and I got out with a +22.9.  I'm very happy with that result.

So my next debate is to decide whether or not I should trade the rest of the week.  The more conservative members of Fx365i's leadership group would tell me not to trade the rest of the week because I'm at my goal.  The more aggressive thinkers would say that I'm seeing the market well and to take advantage.  So what am I planning to do?  I believe I may trade again this week, but only if I see something I think I really understand and STRONGLY believe in.  European rate decision and Non-Farm payroll are coming up the next two days and I am damn well determined not to give the market makers my pips back.

Thanks for the support.  Let me know what you think of this trade and how your trading is going.  You can comment on the post or email me at pipaddict73@gmail.com.