Mind over arbitrage
"A dollar might just fuck your main bitch
That's just how I feel, nah
A dollar might say fuck them niggas that you came with
That's just how I feel, nah, nah
A dollar might just make that lane switch
That's just how I feel, nah
A dollar might turn to a million and we all rich
That's just how I feel"
-Kendrick Lamar, Money Trees
Money changes people whether you admit it or not. Close your eyes and ask this question... why do you want to become a trader? Be honest with yourself and you'll make a lot of money in this industry. "Trade To Trade Well, Not To Make Money!"
Shower thoughts from a day trader
When I was a kid I went on a lot of road trips. Drawing was one of my favorite activities because my mother was great at it. She use to draw faces so perfectly and I was always jealous because I could never achieve symmetry. She told me that going to school helped her finally learn to draw eyes the same on both sides. I think about this when I design my trading strategy. Can I use the same system I use to enter potential trades to also exit trades? If you don't have your trading strategy written down how will you ever know? More or less... can I achieve entry and exit trading symmetry using the same system?
I recently noticed that the trades I open are successful, but I've been closing them way too early. In my previous article Foreign Exchange Market Trading 102 I successfully made 2.33% profit with 105.8 pips... but had I held my trade open I couldn't reach 10% growth easy. I placed a trade on gold this morning and by the time I got back from class I had 0.38% gain. I was successful but had I held my trade open I could've had 5% gain. My trades since December 22nd has gained over 30% growth which is amazing. I fully understand that not many traders can achieve these statistics, but am I arbitraging the market to my fullest potential? Most traders are in constant doubt and that's why it's important to include psychological mastery as a part of trading strategy.
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Let's look at this from another perspective. If I hold my trades open more will I reach higher profits or will I face a higher chance of getting stopped out by a sudden correction? Obvious the choice I want to make is the route that will end up making me more profit. There are a couple different methods of tracking my trades, but the easiest method if write down each trade and assign them chances of success. Call your shot before you take them and try to gauge what your chance of success will be. This is something I struggle with a lot. If I want to reach success I need to reach for that extra mile and hold myself accountable.
My friend Nick from Duomo Initiative has an entire playlist free on YouTube here. If you're serious about trading he is the man with the plan.
The first thing I am going to change is nothing. It is irrational for me to change my trading strategy before I have recorded the full outcomes of trades I placed. I have 2 trades that I mentioned earlier that I know I missed out on full profits, but 2 isn't enough.I want to watch my trades and liquidate them when I feel it's appropriate. By liquidating my trade, I assume that I have reached 100% chance of success. Out of let's say 25 trades 50% of trades I thought were 100% chance of success were only 60% chance of success then I might want to think about holding my trades open for longer. After I have changed my strategy I want to remeasure myself over another 25 trades. By the way 25 is an arbitrary number that I'm using for now. The more trades you track the more accurate you'll be, but you don't want to wait forever because that's more profit your missing.
You may find that you are missing out on a lot of extra profit. You may find that you should be closing your trades sooner. You may find that you are doing everything perfectly.
Second, I'm going to see if my strategy for entering trades can work similar for exiting my trades. Let's say you wait for volume to spike nearby your confirmed 0.618 Fibonacci level. (Again, this is completely arbitrary and just used as an example). You know that your strategy has 75%-win ratio so it should theoretically work backwards right? Try waiting for volume to spike again to exit your trade. If you want you can try this on a demo account that way you have 0% chance of losing money.
Third I want to think about what kind of trader I am. I am a swing trader so I expect on average to hold trades less than a week. According to my statistics I am holding trades for 10 hours and I typically place my trades in the afternoon. London session for me is 7am till 10am. I place my trades during Asian session and wait till after London session to determine if I was accurate with my prediction. What would happen if I placed my trades during London session and close them during Asian session? I constantly think about possible ways that I could trade better by making micro changes to my strategy.
Last if I want to make sure I'm not closing positions because of my emotions. This is the hardest obstacle to master because it's so anti-human. We are very emotional creatures, and we hate losing money. This becomes especially true when we have thousands and sometimes millions at stake. It's very hard not to feel some type of way when you watch a trade you just opened move more than the average American's annual salary in less than 10 minutes. You have to start becoming numb to money. It's just a number.
I hope I gave you some ideas on how you can improve your trading strategy. If you liked this blog and have any topics you feel would be important please let me know in the comment section. Please make sure to follow my blog if you want to hear more thoughts on trading and investing.
I began trading a couple days ago. It is nothing like the videos I have studied. I believe I have an understanding of the Bollinger bands and RSI, however it seems the most any of the crypto currencies I watch are lucky to ever rise close to .002 before the market begins selling off quickly driving the prices down. I am unsure how people in the videos are getting all of these 4-20% swings, because they sure don't seem normal.
I will definitely continue following you to broaden my knowledge on these ideas. Meanwhile, I will reread this post again and try to incorporate it with the little I think I understand. Thanks for sharing your strategies.
Thanks for the comment. When it comes to crypto I don't pay attention to temporary swings because I'm more invested in the long-term growth. The market is just not ready to be traded on steadily and what profits that are being made by traders are really just siphoning the market's explosive growth. I don't beleive it is any attribute to the traders skill or talent. There is also the issue of not being able to accurately see your trading statistics. You can't see what works and what doesn't until you break it down into segments.
I edited the beginning. I'm still experiencing wild swings, but I'm not follish enough to think I can accurately trade on them.
Yeah, so far it doesn't seem to add up with the observations of many of the online gurus. I saved your friends link for later perusal. I spend a couple hours every day watching videos so I can try to learn, as no one in my small circle invest/trade.
Yeah, the temporary swings could drive one nuts. I got out of my first trade due to fear, and am hanging in on the second, so maybe swing trading will make more sense to me. To much energy watching to escape with a fraction of one percent in profit. Would have to do that a lot daily to make it worth ones while. I think my heart would give out first.
Forex is much easier to swing trade. The market is easy once you get used to it although I feel that definitely is a biased opinion haha with crypto I think contrary to Warren Buffet's current stance on crypto his method of investing is the most efficient right now. Wait for a dip and throw your money into the horse you think has the best chance of winning the race.