Good, consistent trading is first and foremost about developing a feel for the markets you are trading. Most traders believe that they understand their trading set ups well and that they can trade purely mechanically off their signals. I can promise you that this attitude will sooner rather than later lead to trading disaster and wreak havoc with your trading psychology. Trading from this belief also goes against our deepest human nature.
Market context over trade set ups
Learning to master a favourite trading set up or even a number of different set ups is not that difficult. By far your biggest challenge is market context. Market context requires a deeper understanding of market forces and cycles. It is not just about knowing how a market inter reacts with another. Market context in my book is something much more obscure. It is hard to define in words and will take you quite some time to develop. It is also the thing all success traders have developed in one form or another.
So what am I talking about?
I am talking about reading the market psychology and connect what you are noticing to your own trading psychology. Feeling the pulse of the market and becoming in tune with trader psychology as it plays out on the charts is an art. If you develop it your trading will improve big time. Market context is the ability to see your trading set ups in the broader framework of overall market action. Lets look at an analogy: Imagine you are choosing a painting for your drawing room. You are focusing just on one criteria. Lets assume you are looking for a painting dominated by the colour red, Your mind will seek out only those pictures that have red as their dominant colour.
Your trading set ups are akin to the colour red which you have chosen as the number one decision point in purchasing a painting for your drawing room.
You will not notice the style, the subject matter, the frame, or the other subtleties the painter has introduced to make the painting attractive. You may not have considered how king exposure to the color red might affect your mind.
The finer subtleties translated into trading lingo are patterns.
Patterns are not fixed. They repeat, but with different nuances each time they appear on your trading charts. Since no pattern repeats in exactly they are sometimes not easy to detect in advance. Patterns are the language of trading psychology expressed in chart form. Just like identifying a preferred style, subject, color and frame to ensure that your painting fits harmoniously into your room setting, your trading will benefit from recognising specific trading patterns in learning to interpret them through the lens of trading psychology.
Any good painting is complemented by a frame to suit its style. The frame is the overall market condition in which the pattern occurs. Being able to identify these things at a glance is tantamount to trading consistency.
You can make your trading life much easier and more joyful by learning to look at the markets in this way.
The 20 million dollar question is of course how to get there quickly?
I can tell you from my own personal trading journey that lasting trading success came when I finally began to see how everything evolves in cycles. Life, existence, evolution is a process that emerges in a neat framework of ever repeating fractal patterns. Naturally, trading follows these universal laws. When you fully comprehend this is iosight your trading success wil explode.
On my path to trading success I spent by far the most time on working on the psychology of trading, undetanding crowd psychology, the foundation of behavioral finance, and on understanding universal kaws in the trading context. I have said many a time, that the charts are nothing but life and human behaviour expressed on a graph.
Understand this simple wisdom and you will trade well.
Like all traders I started my trading journey by learning to follow certain trading set ups. Not only did I find it mind numbingly boring watching for a particular set up all day long, while I was trading intra day,I was also still losing money. Some days were good. They were invariably followed by whip saw days and utter frustration when I would give back my hard earned cash.
Trading consistency for me came when I finally really grasped how cycles interact. I finally began to understand the language of the market. I recognised how the markets simply reflected a basic truth of life. The market language goes something like this:
- Market psychology and trading psychology
- Overall market condition
- Pattern second,
- set ups last
Learn how universal forces operate and create market action, You will gain valuable knowledge about yourself, the market DNA your own trading psychology and about life. This knowledge provides the clues about what to look for in the markets. Learn to go beyond the illusion of appearances and learn to read your markets’ DNA.
There is no separation between you and the markets you trade, other than the illusion of separation. The moment you can begin to see beyond this illusion and start noticing the fractal patterns repeating in different permutations where ever you choose to look, your perspective begins to shift and you are on the path of seeing the markets from a much wider understanding and an inner knowing. It is also the beginning of trading from a place of intuition and the beginning of real trading mastery..
