Mapping Your Voyage of Discovery
Research shows even those who attend professional tuition will fail within the 1st year, but this is due to natural ability or luck. For the rest of us structure is everything. With it comes opportunity. I look for opportunity across over 90 markets, and don’t try to make a market bend to my will. After 33 years of trading without this structure, I cannot trade. I want you to think about that last sentence. “Without this structure I cannot trade”. This is the reason that the vast majority of traders never make it past the first year. They have no structure, and eventually the markets simply wear them out.
Structure is everything
Over the years, I have been involved in a small way with many arcades training programmes and a few years ago, I was involved in order to provide some input into setting up a new one. When researching I was staggered to learn that most of the traders who get through the training programme (10%), who then survive the first year (20% of the 10%), will be out of the trading altogether within 5 years. The survival rate beyond 5 years is ridiculously small. I asked why this was, and the general response was that a trader’s life changes. They get married, have children, and have responsibility beyond themselves. This last part struck a chord.
Some people are lucky enough to have a natural ability to trade and those are the ones that survive through the first year. My path through 33 years in the markets reached its nadir in 2004 when I realised that from being a trader who couldn’t analyse for the first 10 years, I’d somehow morphed into an analyst who couldn’t trade. I was scared. The reality is that, as time progresses, natural ability is no longer enough, as it gets blown off course by experience and experiences.
As the trader’s powers wane, there is always a boogieman. Today it’s the HFQ’s (High Frequency Traders). These all conquering automated programmes can trade at the speed of light, jump to the front of the queue, can cancel a bid or ask after seeing your market order (I’ve no idea how), run all the stops in a blink of an eye, and take their profit before you even realised you’ve been stopped out.
The reality is if you set yourself up to fail, then that’s what you will achieve. Ed Seykota’s excellent book “The Trading Tribe” has a startling observation on the inside cover.
In a nutshell, it confirms that without a clear desire and structure, you will feel that you have won by losing. The sentence was so profound to me I try to remind myself every day that I sit at my desk. For many, the concept of the Trading Tribe is a step too far as it involves accepting the feelings you are unwilling to experience. They're rational to get around this problem is to remove themselves from the process of trading altogether. That or embarking on an endless voyage of creating fully automated systems. It seems that the adage, “If you can’t beat them, then join them” has never been more poignant. I’m often asked why I don’t use trading systems. To me this insinuates that if I know as much as I’m supposed to regarding Technical Analysis I must have hundreds of systems or methods. Well I used to, but now I only have one, and it’s a grey box. Part of what I do is automatic and has fixed rules, but I retain an element of discretion. This revolves primarily around volume and the correct timeframe to reference, whilst covering a broad spectrum of markets, so that I am aware for what is the easiest trade. With so many years of experience it is impossible for me to throw that all away in favour of mathematics.
My own voyage of discovery reached an impasse in 2004. I had become the ultimate Candlestick pattern. I knew so much I had the answer to everything and a solution to nothing. I wasn’t losing, but I wasn’t making either. The frustration became unbearable. My own solution was to do the Van Tharp home study course. It took a month, but the revelations it revealed were invaluable.
The first conclusion was to write my first book that crystalized what was important to me and to supplement that by writing daily and weekly technical commentaries. If someone were paying me to write, it didn’t matter where I was in the world, or how busy I was, I was obligated to do it. I had created a disciplined structure. Throughout the 6 years I did this, it soon became apparent that actually, I was writing the commentaries for my own benefit. One subscriber would have been enough. Through time, I began directly teaching and mentoring traders on a consultancy basis, and I then realised that when I mentored, I traded better myself. I abandoned the commentaries as I had found a new disciplined structure that had created a personal connection that increased my sense of responsibility. Over time, it honed down my skills to a relatively simple process that meant I could analyse any market in less than a minute. This is defined as follows:
• True measures of support and resistance
• True measures of Overbought and Oversold
• True measurement of the Daily charts behaviour
• How is the crowd positioned?
• The correct timeframe chart to reference intraday
• The time of the day it is
• Risk and Expectation
• The correct volume to execute
• Relative performance between markets and asset classes
• Buy the strongest, Sell the weakest
• If time permits, Micro Analysis of the Depth of Market and volume
• Position management and movement through timeframes if a trade develops
• Chart of the day and week
• What is the easiest trade?
This may seem a huge amount to achieve in a minute, but with structure, and its consistent application it is possible. It also means that I look for an opportunity across over 90 markets, and don’t try and force a trade or make a market bend to my will. I don’t care what the name at the top of the chart says, and it has reached the point that, without this structure, I cannot trade.
I want you to think about that last sentence. “Without this structure I cannot trade”. This is the reason that the vast majority of traders never make it past 5 years. They have no structure, and eventually the markets simply wear them out.
In order to address these problems Mapping Your Voyage of Discovery covers the following:
• Basic Chart Types
• Market Profile
• TFlow and Pre-Trade Analytics
• Entry Signal Evaluator
• Crowd Following Techniques
• Trend Lines and Fibonacci
• How to interpret News
• Putting it all Together. How you create your structure
• Appendix. My suite of studies