Yesterday, while trading NQ and some others, I found that an interesting and useful concept is "ambush":
ambush - definition of ambush by the Free Online Dictionary, Thesaurus and Encyclopedia.
I was... ambushed by the markets.
Having decided that I'll trade, because overall I can be profitable - if I am willing to exit at a loss sometimes - these metaphors, such as watching out for "ambushes" by the markets, can be useful.
It is useful, when you're trading, to know that something can go wrong and you have to be ready to retreat. Other than that, other than those ambushes, with all the things I know now, trading is easy. Provided you have accepted the concept that there will be ambushes.
I mean, there's situations where you don't know where it will go, and you stay out, and that's most of the time as far as I am concerned: if I look at TWS, I usually do
not find situations where I should place a trade. Then there's situations where you feel like saying "hey, it's clear where it's going to go" and that's when you should trade, but still being aware that it could be an ambush. That's about it. Of course everything is also about that intuition of where it's going that I can't quickly describe, because it's made of so many things, including for example what time of the day it is. For example, if it's the night, Central European Time, and you're trading the US (futures) markets, then you better go back to sleep because they're unpredictable. There's no way you can predict **** during the European night. Good times instead are 8 CET, 9 CET (opening of European markets), 14.30 (news release), 15.30 (opening of US markets), 16, 22.
Then there's the day of the week. That's important, too. Then there's the news release, then there's the holidays to consider... so many things, that you know, but I could not translate them into a formula.
Basically though your intuition is capable of considering the most important things, as an efficient formula would, but some of us have flaws in their character that keep them from being profitable. Such as wanting the market to go
exactly where you expect it to go and not being flexible. And that's when things start going wrong. But if you're ready for ambushes, then you can trade profitably - I think. Not proven yet, because the more I am right, the less I am ready for ambushes. Well, we'll see. So far in the last 2 and a half months I did make 100% each month (on the original capital of 4000), which doesn't seem like a lot, because of the past experience of losing it all over again, but it is profit. I mean, it is still there right now, so I must have been doing something right.
...
but let's try to narrow it down a bit further
I can only do top and bottom picking, maybe because I am anticonformist. I cannot stand to be in a herd, so if I see a movie that's popular, by definition I think it sucks, and so on for all fads. This way, maybe, when i see the markets going somewhere in a trend, I immediately try to look for reasons why all these people are wrong. I guess both in social and financial terms we could say that i am "anti-trend".
Getting back to the comparison to what I do with movies, if I see a movie that no one told me anything about, because I don't listen to people, and I don't watch sneak previews, then I can watch it objectively, and sometimes find it a masterpiece. And then i don't mind if I find out that later people say it's a masterpiece, or even if they said it before me, but I didn't know about it. If instead, I hear the movie is a masterpiece, then I can't watch it, or I am very biased against it. In the same way, if I am one of the first people to hop on the new trend, then I don't mind other people getting on it after me. But if the new trend is already established and underway, even if it started an hour ago and presumably it will last days, then I still cannot trade along with it. There's other chart formations and it's really more complex than this, but this is a good summary. In other words, I have to catch the first part of the trend, and, just as i am repelled by people, I am repelled by trends that are underway.
So ok, this is the way I am and therefore I cannot trade otherwise, or rather: let's see if I can be profitable without changing this one thing about my character. We then notice that basically the market is either in a trend or range most of the time and it's rare to see those big reversals I need. BUT.
But if you look at 16 markets like I do, things are different. You're going to find, 16 times more frequently, situations that are overbought or oversold, which is what I need.
Still, most of the time, you look at the markets, and they're not right for trading.
Then, when I see a good situation, I am usually right, because even if it doesn't turn for days, it does turn around for at least 30 minutes, which is kind of my timeframe and duration of trades, at least the discretionary ones.
So, what could go wrong?
That i am wrong and it keeps on going down, while I am long, and then the big problem I have is denial: I don't recognize what i called the "ambush" and I double up, triple up... and pretty soon I have blown out my account.
That's the only trap for me. It's like being a bunch of japanese soldiers and their "banzai attack", it's called, which means they don't retreat, don't surrender, but keep fighting to the death. But the thing is that i engage in this banzai attack without even acknowledging that I am going to blow out my account.
When it comes to trading i need some more copping out, which I am really good at doing in real life. I only pick fights that are worth fighting and where I know I have chances of winning.
Yep. I remember i was running a bicycle race in highschool and it was all uphill and I was one of the last people in it, and I said to myself "what the ****" and i turned around and went back home. Then on the school newspaper the next day they wrote that i "quit". That's right. If it's not worth it, especially with trading, you should quit, instead of fighting to the death like I do. I gotta work on this concept and become a quitter, financially speaking.
Quitter: "a person who gives up easily". You must give up on your beloved positions easily, unless you want to blow out your account. As they say, "don't fall in love with your position". You must not
commit to your position. You have to be on your toes, because what looks like an easy trade, might be an easy trade, but it could also be an ambush.
For example, entering long where the two green arrows point (without knowing what would have happened afterwards), would have appeared to me as an "easy" trade, but it could have also been an ambush:
Had it fallen lower, through the so-called "support", I would have, usually, persisted, doubled up, tripled up, without acknowledging that I had been ambushed. You see, my type of setup is such a high-probability trade (by being very overbought/oversold), that 1) I usually get it right, at least for the first 30 minutes since entering, and 2) I am in denial when I get it wrong. If I can solve this problem of being in denial, then I am definitely a profitable discretionary trader. Once you're open to the concept of "ambushes", It's not hard to identify an ambush and see when the trade isn't working. What is very hard is to acknowledge you were wrong and are going to lose money instead of making it. It has to do with pride and not wanting to be wrong. Here at the office, too, I am very bothered if I am accused of mistakes, because it's rarely the case, and usually it's someone else's mistake. I am a perfectionist, and it bothers me so much to be accused of making a mistake, even if by the almighty markets, that I have a hard time exiting a losing trade and escaping an ambush. It is as if I told the markets: "look, I am right about this trade - it's someone else who's making mistakes". The problem is that even a mistake by someone who's investing money in the wrong direction becomes the market, it becomes fact, it becomes reality, it becomes the truth. And whereas in real life I would rather be right alone, than wrong with everyone else, in the markets this doesn't make any sense. Because if you are alone in your position, then you're wrong by definition. Unless of course everyone else follows you in the same position, which is what I am trying to do with top and bottom picking. So, basically, if after a few minutes, no one follows me, then it's time to get out, whether at break-even or at a loss.
...
There. It was definitely an ambush, which means I was wrong in my prediction of a long-term reversal:
But I would have made a few dollars by getting out early after realizing it had failed. At the same time, if instead I had expected the reversal to be a certainty, which is always the case with me, I would have risked blowing out, because I would have stayed in the trade as it fell, and would have doubled up endlessly, in complete denial. In some cases of course it works, because it eventually reverses, and that is why I don't blow out my account each time I am wrong. But it's the right way to trade. No doubts about it.
