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Why are we always trading the wrong side?


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Why are we always trading the wrong side?

  #1 (permalink)
 
arnie's Avatar
 arnie 
Europe
 
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Not sure if anyone has discussed this here (did not find any similar topic), but why most of us seems to be trading, the majority of the time, the wrong side of the market?

We buy, the market goes down, we sell, the market goes up.
Usually we tend to say, when this start to happen on a daily basis, the trade we are initially thinking doing, we do the opposite.

But then the unthinkable happens, an example: we are looking to sell, but we, as smart human beings as we are, we think - wait, this time I'm going to do the opposite, I'm going to buy, and we buy, and again the ******* market goes the other way, and move lower.

So, we think - why didn't we go with our initial idea which was to sell? Why this time, doing the opposite of what we were thinking didn't work when in prior days, that would have worked?

One can go mad trying to understand this.
Something within our psychology put us on this path which can be difficult to get out of it.
Why do we have the tendency to read the market the wrong way?

I don't believe this has anything to do with what type of trading we're doing, scalping, order flow, charts, Gann, Elliot Waves, Fibonacci. We can see this across all of them, so it's safe to say, I think, the problem is phycological. How to deal with it, no idea!

Anyone?

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  #2 (permalink)
 
WoodyFox's Avatar
 WoodyFox 
Columbus, Ohio
 
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arnie View Post
Not sure if anyone has discussed this here (did not find any similar topic), but why most of us seems to be trading, the majority of the time, the wrong side of the market?

We buy, the market goes down, we sell, the market goes up.
Usually we tend to say, when this start to happen on a daily basis, the trade we are initially thinking doing, we do the opposite.

But then the unthinkable happens, an example: we are looking to sell, but we, as smart human beings as we are, we think - wait, this time I'm going to do the opposite, I'm going to buy, and we buy, and again the ******* market goes the other way, and move lower.

So, we think - why didn't we go with our initial idea which was to sell? Why this time, doing the opposite of what we were thinking didn't work when in prior days, that would have worked?

One can go mad trying to understand this.
Something within our psychology put us on this path which can be difficult to get out of it.
Why do we have the tendency to read the market the wrong way?

I don't believe this has anything to do with what type of trading we're doing, scalping, order flow, charts, Gann, Elliot Waves, Fibonacci. We can see this across all of them, so it's safe to say, I think, the problem is phycological. How to deal with it, no idea!

Anyone?

Being a systematic trader...the wrong side of the market is only relevant to my edge and psychologically I find comfort in that.

Having the confidence to know it doesn't matter over time.

Not saying I become completely numb, but I worry very little about it.


This is exactly why I do not use any discretionary decisions.

No confidence and I sucked at it.

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  #3 (permalink)
 
MrMojoRisin's Avatar
 MrMojoRisin 
Graz/Austria
 
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You basically project what you think onto the market.
You want to buy a new car. Everywhere you look you suddenly see this car, whereas before, you just didn't notice that specific type of car in the midst of hundreds of others you see every day.

You are in front of your charts and you think "Why the hell is this thing always doing the opposite" and so that's exactly what you're seeing on your charts and experiencing in your trades.
You need some very specific rules you can follow and as time goes on that concept of the market that does the opposite will start to diminish in your brain.
It will still do it at times, but you just don't realize it that intense anymore.

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  #4 (permalink)
 
MNSTrading's Avatar
 MNSTrading 
Grand Rapids, Michigan
 
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Traders who are trading an actual edge, that I talk to don't seem to feel they are trading the wrong side of the market. Why? Because they take trades that fit the definition of their edge. Lets keep it simple and say your edge is big candles. If there is a big candle then by gum you're gonna fade it, like its your religion.

Now you may find that 7 times in a row, that trade goes against you BUT you are cool with it because over a LARGE number of trades you win (even if by a small margin) Look, when you go to a casino, they dont cry every time a customer wins right? They know they will lose 45% of the time and they dont care WHICH 45%

I've said before and will say again, simpler is better.

So if you have an edge, trade your edge and when the drawdown comes...


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  #5 (permalink)
FuturesDayTrading
Columbia, MO
 
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Trading psychology is often overlooked by new traders. I know I didn't even think about it when I started trading. Four years later, I'm realizing that it's the most important part of trading. 100%.

There is a guy on YouTube, Trader Tom, who focuses on psychology. Nothing mind blowing, something we all probably know, but we all need a good pep talk sometimes to refocus our mind right.

Holding the winners and cutting the losers. I still can't manage to master that.

I've blown many accounts holding and adding on to losers. I still have a hard time taking a loss, but I'm getting better at it.

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  #6 (permalink)
lightsun47
Toronto, Canada
 
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Trade with your proven edge. You'll be amazed (with experience) when the market finally turns into your favor, majority of times. There will be stops, but you won't feel them as much as you are feeling them right now.

To accelerate your progress positively, check Mark Douglas (a legendary trader) on YouTube and don't place any trades until you have seen all the four parts of his series: How to think like a professional trader. Thank me later.

Sent using the NexusFi mobile app

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  #7 (permalink)
 Cutloss 
Midway florida
 
Posts: 243 since May 2021

Not sure that we are always on the wrong side. How can that be? In order to understand your statements it's important for you to lay context with a couple examples including the amount of time in the trade and how or why u entered and how long u let it work? Typically we are on the wrong side based on time

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  #8 (permalink)
 shokunin 
Manchester, United Kingdom
 
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It can seem that way, but if you journal your trades, you may be surprised it may not actually be the case.

Sometimes, being 3 ticks offside for an hour in a very slow moving market can be very painful. Whereas being offside for 12 ticks for a few seconds in a fast moving and wildly swinging market can be barely noticeable.

As you become more confident as a trader and your ability to read the market, you may find that you will be right (and the market will slowly react in your favour), or you will be wrong and the market will wildly swing against you. The reason for this is every other trader is seeing what you are seeing and trading the same way as you, so if everybody is wrong it leads to a mass exodus and that adds to the price move against you.

So being 'wrong' may actually be a sign the you're reading the market well and entering at the right places - but you just need to adjust the execution part of your strategy.

For anybody interested in journaling and how I use it to analyse things like this, I've just started a new post here.

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  #9 (permalink)
 Cutloss 
Midway florida
 
Posts: 243 since May 2021

Journaling has nothing to do with being on the wrong side. Again it is based on time and if anyone stays on the wrong side of a trade for an hour for 3 ticks then Shane on them. What a waste of time and capital for what? To be proven right for a few ticks! It is all time based as far as I'm concerned when on the wrong side of the mkt. You shouldn't be on the wrong side for long if you truly are cutting loss.

That's the thing about losses and being on the wrong side everyone equates it to price levels when the reality is it's about time. The machines time volume to levels so they know when people are holding losers aka wrong side.

If you spike the mkt up with a 500 lot for a customer you tend to see the reaction knowing 500 of those were yours..based on the counter reaction stops triggered iceberg orders found and potential order cancels then its obvious for the synthetic MMS or hft to see who is holding and where they can find more liquidity and reduce slippage. I need stops busted I want to shake loose peoples contracts to take them over as my own or offset them to close out and I'm doing this 1000s of times a day for my customers. Slippage is not a real cause for concern for the average trader. However
When moving 5000 lots on the day..in and out on 1 tick in the es..is 125,000 in slippage round trip for a hedge. That's very expensive and being on the wrong side is where you should find yourself for a little bit of time in the beginning of every trade because of the counter party trading against you.

When you puke out determines your loss and it being wrong or on the wrong side.
Long term stock holders are on the wrong side for years sometimes but over time they should make money. As a day trader your option expires at the close of the mkt everyday or when you decide enough is enough.

for me being on the wrong side is where most of my trades start and I'm good with that so long as I end up flat after being on the right side for awhile. Which is also time based.
Cutloss fast hold winners long is also time based. So for me being on the wrong side
Is time based.

Lastly..risk is. Being on the wrong side. Your 1 lot buy in the es that dumps on you immediately to say 1 full point or 50 dollars...is your risk. No one gets a free lunch or a free entry in the mkts. Unless u trade demo. If trading demo you wont typically see lots of the games the ultra short term algo participants use in the mkts.

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  #10 (permalink)
 
arnie's Avatar
 arnie 
Europe
 
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Great replies so far, great food for thought.

Entering the wrong side would be buy at 50, immediately prices drop 4 ticks to 49, you get a reaction with prices retest that 50 area and start pressing down again to 49, 48.50, 48, might go back up, testing 49.50, and again drop back down to 48s again. We have bought precisely at the price where it seems is now an area where prices are having some sort of resistance moving above, hence the wrong side. We got in at a price that seems to be used to "limit" direction.

So on the example above, where we bought 50s, yes, I guess we could say we got in at the right place, but at the wrong side, instead of selling, we bought, because that was the reading we were having. Maybe a support area we were looking at, where prices did react higher from there and we were looking for another reaction.

Maybe the edge we are looking at doesn't really exist, maybe we need to work more on that edge.

There's always an initial risk, but when reading the market properly, one would say that that initial risk is always very small.

Time is definitely key, but when measure together with price I guess.
If we buy at 50 and in 10 sec it's trading at 48, and in 2 min is trading at 40, we are definitely in the wrong side, or not? We are negative 10 points, and 2 min into the trade.
If we buy at 50 and in 10 sec is at 40, are we in the wrong side? Only 10sec passed, which might be nothing for a swing trader, and an eternity for a scalper. And we are negative 10 points.

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Last Updated on March 20, 2023


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