Registered: Dec 2006
12-18-11 12:16 PM
Quote from NoDoji:
This is easy to recognize after the fact, often again and again, yet sometimes seems near impossible to break through.
It took me months to fill the deep groove worn in the road by my bad habits with good habits so that I could take profitable trips on the smooth highway of my trading plan.
I still get enticed by bias and opinion, but one thing that helped immensely was to say out loud reasons for not trading a valid setup and decide whether those reasons were part of my rules/filters or whether they were my opinion/bias.
Here are some examples -
Reasons that fit my rules:
Major news release due in a few minutes.
Survivable stop exceeds my max allowable loss per trade.
Price is in a range/channel and the S/R level to be tested offers a negative R:R ratio.
Reasons based on bias/opinion:
Price has run up (or fallen) too far and is due to reverse at any time.
Long CL won't get very far, look at the ES taking a dump.
That news was really bearish, I'm not buying into this fake rally.
* * * * * * *
So...I see a valid setup and I now have a choice of whether to place my limit or stop order at the price trigger point.
I either place the order immediately or I do not place the order.
If I do not place the order I have to say out loud why I'm not placing the order. If the reason isn't a rule/filter out of my playbook, I have to hold my nose and place the order.
Now, if I'm tempted to trade against my plan based on bias/ opinion, I remind myself out loud: "The net result of trading my opinion instead of my plan is negative. Trade the plan or take a break."
I can have a very strong opinion and still trade the plan. It's uncomfortable because the ego works very hard to convince you your opinion (ego) is more important than what price is actually doing.
Last week I had a trade setup appear where I was absolutely certain this was going to be that end-of-leg or end-of-trend trade that's the loser (an experienced trend follower will keep trading/adding in the direction of the trend until finally taking a loss on a leg that fizzles). But my plan says to start with a buy stop above the high of the day. The buy stop triggered with almost no pullback (meaning it's a really strong trend) and the result was the best trade of the entire week on a move that took barely over a minute .
Now after that impossible push up to a ridiculous new high, my opinion was that price was absolutely positively due to put in a deep pullback, maybe even a reversal. Price had run up over 3 points ($3000/contact) from the overnight low, but then another continuation setup appeared and my plan advises that I trade every continuation setup until a loss is taken or a breakout fails. So I trailed that buy stop once again, was swept into another long position and captured a profit 2 1/2 times my minimum target per trade.
There was a time when I would've fought that trend and shorted. Then I learned hard lessons and graduated to simply not trading when I had a bias that ran counter to the price action. Finally, I learned to trade the price action according to my well-researched plan and the rewards are huge.
Once you see the consistent profitable results of this exercise of talking to yourself out loud, it eventually becomes second nature to do the right thing, even though it may continue to feel very counter-intuitive to your ego-driven opinion.
Thanks for sharing Nodoji. Have been fighting the same thought process for 4.5 years. I am slowly but surely starting to realize that the trend is your friend.