This exercise was used by the firm that trained me when I started out as a trader. In it's original form it was used to weed out traders that were not mentally ready to trade. If you do the work, you'll know when you're ready to trade. Preparation: You'll need to print out charts in whatever timeframe you want (min., hour, day, week, etc.). If you use indicators such as adx, oscillators, pivot points, bollinger bands, etc.; add them to the chart before printing (if you can). Next, you'll need two different color markers or pens (preferably green and red). You'll use the green for the entry and red for the exit. You'll also need a coin (your default entry technique). Ok, now that you have some charts, cover them up with a piece of paper and expose only enough from the left side of the chart to make you feel comfortable (that could be 5 bars, 50 bars, or 90% of the chart...depending on you). Next, mark above the bar you're starting with the green pen. Flip the coin (heads go long, tails go short . Next reveal only the next bar on the chart. If you got heads mark the top of the bar with a line to indicate the long entry and mark B above the bar. If you got tails mark the bottom of the bar with a line in red pen and mark S below the bar. Next decide if you want to reverse or exit the position. Take all the time you need as the bar could be a day, week, or month. Reveal the next bar and if you reverse, mark the bar the opposite of what you did before. If you exit a long, use the red pen and mark the bottom of the bar with a line and draw a E underneath it. If you exit a short, use the green pen and mark the top of the bar with a line and draw a E over it. Once you've exited a position, you can buy or sell at any time, however if you're out of the market for 10 bars you'll need to flip the coin and enter on the next bar based on it. (This is done to avoid paralysis by analysis). Do this process until the entire chart is revealed. Next go back and convert your entries and exits to prices and add up the total win/loss. Next take the distance from the very first entry bar to the last close on the chart and use that as a basis of comparison. Ex. If the starting bar we marked was 1100 and the final close on the chart was 1000, then the market moved a total of 100 pts. If the total pts. you won were less than 1/3 of the total pts. available, then you need to study why you exited either early on winners or late on the losers. Like I said, this tells more about your mental state, than the markets. If you're posting a negative number, you may have a fatal flaw for trading. A fatal flaw could be something like thinking subconciously , "profits in the markets represent stealing from the hard working Joes of America". You may not even realize it, but if you're posting a losing number, then you're subconcious is telling you you're not worthy or some such drivel. I can't remember the exact words we were told. If you routinely do this exercise and are posting a negative number, then you should seriously consider doing something else besides trading. Once you find that you can routinely get at least 1/3 of the profits of the move, you'll be ready and have the confidence to trade in any market, since you'll already be cutting your losses short and letting your profits run.
Fantastic, this falls under the category: wish I'd thought of that. Do you have any more excersises? Exits, entries, anything; thanks.
yes, that is good advice. On trade station I can do that on the screen....I often go over the day one bar at a time to see where the weak spots in my trading were.
Thanks for posting that, acrary. It's a good reminder that where you enter isn't nearly as important as what you do after you're in. I bet if you were to take surveys of two groups who trade the same instrument, group 1 being a population of profitable traders and group 2 being a population of losing traders, you would probably find that the losing group took many of the same trades the winning group did. The difference most likely would be in the exits.
This is very interesting. I love this board which contains various traders who have valuable information to share with us.