No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under section 107 or 108 of the 1976 United States Act of copyright states, without the prior written permission of the Publisher, or authorization by payment of the appropriate fee per copy to the Copyright Clearance Center, Inc.,. Limitation of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in the preparation of this book, they make no representation or warranty as to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose.
Introduction
The purpose of this book is to help you better define your personal trading approach by helping you interpret and apply the rules in a way that will work for your trading style. The rules are not the problem; the problem is making the rules work for you.
Getting in the Game
Your Game Know
If you are on the wrong side of the net order flow, you will have a losing open trade until you are liquidated. You can't know for sure until later, after you've entered your position, if you're on the right side of the net order flow.
Have a
Trading Plan
When your trading system is wrong, your trading plan will help you minimize the loss. When your trading system is right, your trading plan will help you maximize the profits.
Think in Terms of Probabilities
We could start with the hypothesis, "If conditions are bullish and the trading population reacts accordingly, then prices should rise." I know that sounds overly simplistic, but let's look at the various psychological aspects of such a simple statement and how it could play out in daily price action. The longer the market does not go down, the better the potential for the actual bottom to finally be in place.
Know Your Time Frame
In addition, if the trade is profitable, he will exit the market within a very short time frame - by the weekend. To do this, you need to know what your time frame is before you start trading.
Cutting Losses
Define Your Risk
As a trader looking for the best market presence, it is wise to consider your actual education process as part of your risk mitigation strategy. Having the full support of your spouse will help you better define your risk if you are one of those traders who might lose your focus due to conflict in the home.
Always Place a Protective Stop
You would only move your stop-loss order if you are not confident that you have identified where the order flow has lost potential. The worst case is that the order flow runs out before you have a reasonable lead on the market.
Your First Loss Is Your Best Loss
Note that I said "accept the loss." The problem at this point is not within the market. Your first loss is your best loss because it opens up your information flow to the only two real problems of engagement: (1) getting on the right side; (2) if you're on the wrong side, get out.
Never Add to a Loser
Somewhere inside the trader there is a conflict, and that conflict has nothing to do with market price action or net order flow. The only difference between the two is the trader's depth of attachment to the trade.
Don’t Overtrade
It's tempting to think you can, but you may be overstretching your limited resources if you can't. The "Don't overdo it" rule is a call to get good data and then implement it into your trading plan.
Letting Profits Run
Keep Good Records and
If you are willing to accept that it is your behavior that creates a bigger loss, cuts a profit, hesitates at the best entry or exit point, then you have a choice to modify your behavior and increase your probability for success. One thing to do in the record keeping process is to document exactly what you are thinking and feeling when you run.
Add to
Your Winners
The key here is not to say that you will always add to your winners, but that you will always be ready to add to your winners when the net order flow is clearly visible to you and you already have a head start on the market. One consideration that will help you identify when it is time to add to a winning open trade is an increase in volume on days when the market is moving in the intended direction.
Use Multiple Time Frames
Your best trades occur when you have positioned yourself correctly on the net order flow as traders in each successively higher time frame choose to execute. Your initial entry on the shorter time frame is confirmed by longer time frame traders executing from the same page.
Know Your Profit Objective
The first target is the area where I think the market will have a break and where a trader needs to make a decision over a larger time frame. In this example, if the market moves further through the opening range, it would be a good time to expand the position again, as traders in the larger time frame are now also adding net order flow from the long side.
Don’t
Second-Guess Your Winners
Of the mistakes many traders make, the second-guessing mistake is the most costly. You have now placed yourself on the side of the market that has already proven to be the losing side.
Trader Maxims
Know the Limits of
The important basic understanding that you as a trader should have about technical analysis is that it is not predictive; it is historical. All of your technical analysis is best used to help discover where the loser is and what he is most likely thinking to put himself at constant risk.
Trade with the Trend
If you are not willing to go long from the bottom of the range and then go short again from the top, a range trading system may not work very well for you. In other words, once the range is established, there is very low risk of a breakout in either direction, usually after two solid tries from the buy or sell side of the range.
Use Effective Money
Management
When the hedger thinks it's time to transfer the risk to you, it's time to part with your capital and take the risk. By the time the hedger becomes active, you have a pretty good clue that it's time to part with the capital and take on the risk that the hedger doesn't want.
Your Ratios Know
To utilize the probability of ruin matrix for your personal trading, you need to know where you fall to begin with. You need to know what you actually do well and what needs to be improved.
Know When to Take a Break
While you do what works for you, remember that this may not include access to the markets either. I leave everything that has to do with the markets in the office and go to the islands to do some sailing.
Don’t Trade the News
The point is that people traded the news - or rather their perception of the news. The bullish potential created by the news is absorbed by the trader who liquidates on the news.
Don’t Take Tips
Regardless of how you choose to participate in the markets, you are ultimately responsible. If you expect your analysis to offer you trades today, you better reevaluate your analysis.
Withdraw Equity
If you have the point of view that most winning traders do, you will find that your trading improves when your trading plan includes withdrawing money on a regular basis. You really don't need a large chunk of money in your trading account to take advantage of market imbalances.
Contrarian Be a
You just need to know what the crowd behavior is likely to be at some point. Contrarian thinking is about being in the right place at the right time to exploit the mob mentality.
All Markets Are Bearish
The purpose of the corn futures market—the only reason it exists—is for this farmer to exploit a high price at which to sell his corn, often before he's even grown it. The point is – in this case – that the hedger's sell pressure is never met with a corresponding buy order.
Buy/Sell 50%
Retracements
If you can find a way to look at the total number of open trades, you will see that of the sum total of the open longs, about half of that total number of open contracts will have an open trade profit - the other will have losses. Their focus is to be positioned on the short side because "the trend is your friend."
The Only Indicator
In the case of the markets, knowing that something has changed is the better choice because there is only one option available: a price reversal. My intention is to help you understand that the first and best indicator will always be volume and open interest, as they provide a more critical component: the issue of a change in the structure of the market.
Study Winning
Traders
At the end of the day this situation will change and one of you will be dead. All books are readily available and if you read them all you will probably learn more.
Be a Student of Yourself
When the individuals form a group, the group is at the mercy of the prevailing total of the individuals' input. Once you join the ongoing group, you are also at the mercy of the group's behavior as a sum of every other trader's individual participation.
Conclusion
But almost everything we feel as internal conflict has nothing to do with the market. No matter how you want to look at it, the problem and the solution are within you – not the market.
Recommended Reading
Also, most of the psychology discussed in relation to rule making, trading approaches, money management and so on continues to support the view that the individual should be in full control of his actions when he trades. . Some of the books are not market related at all, but I included them because I feel they expose the crowd thinking/behavior connection well.
About the Author
