Don’t forget our next Montreal Active Traders (MAT) Meetup is scheduled for this Wednesday June 10, 2015 from 7-9pm.
RSVP now – it promises to be a fun event with ample opportunity to meet traders of all skill levels.
Look forward to seeing you all there!
Weekly Commentary –
This week we saw price action retrace slightly on the major market indices.
Each week we’re seeing more and more voices calling for a market top, so is this the beginning of the big selloff?
Keep your eyes open to how the sector rotation is currently playing out.
History shows that most corrections usually comes in the form of a sector rotation.
So if you look at the major sectors, none of them are showing major signs of breaking down.
In fact the Financials are near the highs of the past 5 years.
I’ve posted the major sectors on Finviz for your viewing pleasure –
Lastly take a look at the monthly chart on the Dow. It’s hard to argue with that chart – we’re in an uptrend – the trend is your friend till it ends – stay biased long.
For active traders who are pining for more volatility, this week’s intraday action would have seemed like a welcome relief. However the reality of the matter is that the intraday price action has been spastic and inconsistent.
So what do you do if you’re looking for more setups and opportunity?
If you’re a stock picker then this is your market. We’re at a time in the current cycle of the market where good stock pickers can be amply rewarded. Be choosy and look for only the best setups (see below).
If you’re trading the indices or commodities then dropping down a timeframe would seem to offer more opportunity but this also increases the risk and necessity for strong discipline.
Another option is to opt to remain on side lines, keep your powder dry until price action picks up, and that is a perfectly acceptable course of action.
As for intermediate or longer timeframe traders, continue to overweight your longs. If you feel compelled to short, keep your stops tight and don’t look for home runs. There will be plenty of opportunities to get short if and when the markets break down.
Lesson of the Week – The 3 Steps Towards Developing a Successful Trader’s Mindset
For those of you who haven’t heard my story I will be honest with you and admit that I struggled for years before becoming a consistent trader.
Let me share with you a story which I think may serve many of you.
After a particularly terrible session where I seemed to be doing exactly the opposite of what I had laid out in my trade plan I slammed down my keyboard and stormed away from my trading desk in search of some fresh air and a clear head.
Later that night after a lengthy cool down period, I re-opened my charts and with a cooler and more detached set of eyes I reviewed all of the day’s trades.
Upon reflection I saw that had I followed my trade plan and taken the setups I was supposed to have taken, the day should have ended in a positive and profitable endeavour. However in the heat of the moment all of my plans and intentions had flown out the door.
Then came all the negative thoughts and beliefs –
What’s wrong with me? Why can’t I follow my system and trade plan? Why am I such a bad trader? Maybe I’m just not cut out for this? Why don’t I have any discipline? Yes it must be the discipline, what can I do to make myself more disciplined?
Unfortunately for me and for many other traders, conventional and mainstream trading education emphasizes discipline to try to resolve these types of trading woes.
In actuality counter to what most of us have heard or read, what I needed wasn’t more discipline. In fact no amount of discipline will untangle this web once a trader has gone down this slippery path.
What I needed was a new mindset – that is a new set of empowered thoughts and beliefs congruent with being a winning trader.
It took me many more losing sessions before I started the journey of research, seeking coaching, and doing the inner work to come up with the following framework you need to develop a winning trading mindset.
I’ve distilled these lessons into a 3 step framework which I will summarize here –
The 3 Steps Towards Developing a Successful Trader’s Mindset
- Create a new set of beliefs/Mindset
If you are trading from a place of fear or some other negative emotion then the first step is to disrupt and reboot this emotional program.
One of the most effective methods is to build a practice of mindfulness (which I wrote about last week) or to use Heart Rate Variability (HRV) to begin to more effectively regulate your emotions.
2. Create space
Once your emotions are in check then begin to build “space” in your trading. Trading should not feel like there’s a lion chasing after you. Begin the practice of creating emotional detachment, whether that’s through the ability to call up a calm and collected memory or through a practice I call “Following your robot trader“.
3. Develop a new set of beliefs / Mindset
Core to building a winning mindset is the hard work of examining all your core beliefs, some of which may have become limiting beliefs. Actions or beliefs that may have served you in previous jobs and relationships may have been appropriate for those spheres in life but you may find they have no place in trading.
For example if you’ve used avoidance as a coping strategy to deal with a bad relationship or health issues, you may find yourself using that same strategy in your trading. Unfortunately in trading, avoiding pain is not a trait that pays.
In “Mindful Trading”, Rande Howell’s describes how all of us (whether we’re conscious of this or not) have a committee in our minds exerting control over our trading decisions.
One powerful exercise involves designing your own Trading Archetypes to recreate our internal trading dialogue.
However you do it, calming the inner critic and gaining control over the monkey chatter in your mind is key.
In closing if you’ve read my blog then you know that the journey towards mastery is never over.
I won’t pretend that I know all the answers nor presume that I’m perfect however if my story resonates with you and you’ve struggled with your trading then I hope you’ve found some inspiration to begin to do the hard inner work that most traders ignore or are too scared to confront.
Spotlight Trade of the Week –
This week’s Spotlight lesson is an intraday setup on RUSS.
Below is a 15 min. chart on RUSS.
- This has been my bread and butter setup this quarter.
- RUSS (3x Bear ETF) was identified on the scan as having gapped up on high volume after continued volatility in Russia.
- Setup is a narrow range bar consolidating above 30 min. opening range.
- Bought on break above opening range @ 34.99
- Stop 2 ticks below low of candle @ 34.76
- Closed out 1/2 at 35.69 at the 127.2% pre-measure fibonacci target for a ~+3R trade.
- Held 2nd half for the 161.8% fib target at 36.67 for a +7.3R.
- Blended profit of +5.15R.
- So if one would have risked $500, trade would have netted $2,575 (500×5.15).