My views on trading the E-Mini S&P 500 Futures utilizing Price Action, Market Structure, Volume/Market Profile and the Auction Market Process. Visit www.EMiniPlayer.net for Daily Key Support/Resistance Zones, Trade Plan and Educational Recaps.
Monday, September 14, 2009
Evolving through the hourglass
A reader made a comment about my “holy grail” post and I began to type a reply. But as is so common with me the length got longer and longer so I decided to just post my reply as a regular post.
Picture in your mind the process of learning to become a trader as moving through an hourglass that is “V” shaped and wide at the very top, becomes narrower and narrower as it reaches the middle, and then opens up to become an inverted “V” and widest again at the bottom. As a new trader we are a pebble of sand dropped into the top of the upper part. The hourglass is wide at this point, representing the wide-open opportunity we see ourselves having. We've just latched onto a trading plan and we see unlimited opportunity in our future. Our trading plan, we are told by its creator, is a relatively painless, quick path to success. It is backed by many great sounding testimonials.
But after awhile we see it’s not quite so easy. We get some losses sprinkled in with some winners. The signals that looked so sharp in all the tutorials seem to be downright “fuzzy” at times. We are dropping a bit lower in the hourglass and the walls seem to be getting narrower. We continue on with learning and struggling but we seem to not get that breakthrough we hoped for. Others encourage us to keep plugging away. It's like this for everybody we're told. We take some more trades but end up bailing out too soon because we don’t want to violate that rule we’ve been warned about and let a winner turn into a loser (sound familiar for readers of this blog?). But then we hold a few trades too long because we’re sure they would reverse. They didn’t. We had a correct trade entry signal just like the plan called for, didn’t we? We fall a little deeper into the hourglass and the walls are converging on us. Our optimism is still there but getting dampened. But we fight on.
We have a few successes, but greater losses. We begin to doubt that our trading plan is as great as we thought. Should we create or buy another one? We see missed opportunities that worked out just great....if we had taken them. But it seems the ones we take turn out to be the rare losers. We're confused, and angry. It seems to work so great for everybody else, why not us? In the chat rooms and blogs we see all these people making good money. Hardly ever a loser it seems. Again, why them and not us? We continue to sink further into the hourglass and the walls are getting uncomfortably tight. We feel the pressure.
After another round of more losses than winners our minds are spinning. Is the market out to get us? We see ghosts at ever corner. What should we do? Quit? We scour the internet for a better plan …and better indicators. If we have an outside job we have other income and thus quitting becomes a viable choice here. If we don't have outside income we are in trouble. Can we afford to lose even more money? Quitting, before it’s too late, is an option here too.
We rack our brains searching for answers. I'll work 12 hours a day instead of 8. I'll switch markets to an "easier" one. I'll change timeframes. Will that do it? What am I missing? But we've come this far and it seems like we may as well give it one more try. We are at the narrowest point of the hourglass now. We can literally stretch our arms out and touch both sides of the hourglass. The pressure to “put up or shut up” is intense. Our account balance has been on a steady decline ever since we first got this great dream to be a trader. Very few pebbles of sand representing the other traders who started out the journey at the same time we did are still with us. The majority have left the business and gone on to other things.
Having gone this far our knowledge level is at its highest, but our account balances are at their lowest. It’s about the opposite of where we started at the top of the hourglass where we had our full account balance, but hardly any knowledge. It seems we are the bottom of a "V" shaped cone that is coming to a closed off point. Is this the end? All this struggle, all this time and now it is destined to end? We take a minute to regroup, to assess our choices.
Our heads are still full of ideas but now it seems these ideas seem to make more sense having watched the market in operation for a thousand hours it seems. Have all those painful losses over such a seemingly long period of time finally made us smarter all of a sudden? Maybe this isn't the bottom of a cone. We muster all our resources and push onward yet again.
And then it happens. We get an "ahaa" moment. One of those moments we’ve heard about where all of a sudden the lightbulb goes on in our head, and where a chart that was once seen as a collection of chaotic lines and bars is now a clearer, more easily understood thing. But we get not just one, but two or three “ahaa” moments. Why didn’t this happen a year or two ago we wonder? Why did it take me so long to finally see what I see now? The "secrets" of trading are becoming clearer. But we didn't know earlier. We were just naive beginners so long ago.
A light appears. It’s not really a cone were in. There is no closed off bottom at the apex. We take some more trades based on our newfound knowledge. A couple winners and a loser. But the winners were both bigger than the loser. A little confidence returns. The walls of the hourglass are getting wider as the pressure on us lessens a bit. More trades and more winners. An occasional loser but it doesn’t seem to bother us too much. The walls of the hourglass, representing that wide-open opportunity we dreamed of long ago are getting wider and wider after fighting our way through the choke point in the middle. We’re smart enough now to not get cocky, but also to not get too conservative. Trades are running longer. We just had our biggest winner of all. And it came from the same old pattern we’ve seen a hundred times before. Amazing.
We’ve arrived. No, we’re not one of the “Pro’s” yet. But we’ve cracked the code. We outlasted the pain, the doubt, the fear. We come to realize that our key to success wasn’t even in that plan we bought so long ago. Oh, it helped with some basic structure. But it was in our own determination to understand what was happening in our minds and how we could make the adjustments needed that made the real difference.
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Great post Chuck! I guess the tricky part for most is finding that "aha" moment.ReplyDelete
great post! I can relate..especially being at the 'choke' point when doubts and losses are mountingReplyDelete
Wonderful post. Sometimes the neck of that hour glass can be very long. :)ReplyDelete
Wow, wonderful post. Thanks.ReplyDelete
One small correction..AGGA(in Russian) moment is not a singular event....one must have multiple AGGA moments in order to finally get to the main AGGAReplyDelete
I must not forget discipline after the aha moments, and keeping that in mind at all times.ReplyDelete
I believe greed will also start creeping in, after the aha moments and after a little confidence. I try to keep all those things in check every minute in trading!!
Thank you for your post.
Nice post, Chuck. I’ve probably had at least 100 aha moments, each one of them mean nothing in isolation but together make a wonderful puzzle. Keep the posts coming.ReplyDelete