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Trading: Oh what a tangled web I weave, When I want to take profits in trading
Frequency: Several times daily
Duration: Years
Posts: 1,774 since Nov 2014
Thanks Given: 3,528
Thanks Received: 3,142
Thanks
#3 describes the first 30 mins of price action. Open, Drive higher type price action, commonly seen in Trend UP days (FT71's language).
Then comes #2, the classic textbook pullback. Though I took it, I was suspicious because of the HEAVY Distribution between 3940 & 50. When we came back all the way to the Open print, It smelt of Bull trap. So I didn't hang around with my long.
This one refers to yesterday's compressed range and chop. I tried shorting Breakouts 3 times and failed. That memory or recency bias persisted, sub-consciously, and prevented me from taking the breakout of today's ONL which would have been a 40+ pts winner.
Yes, I day trade MES on 3 min charts, so I know exactly what you meant with each of your points.
My point is - we take the lessons from today... and then try to apply them tomorrow. Well, that sounds great, but that's recency bias.
There is a wider question here, and it is a deep one - how do we consistently trade the market that behaves differently every day? (Especially without falling into all kinds of biases and fallacies.)
I don't expect an answer. It's more of something to think about.
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
Trading: Oh what a tangled web I weave, When I want to take profits in trading
Frequency: Several times daily
Duration: Years
Posts: 1,774 since Nov 2014
Thanks Given: 3,528
Thanks Received: 3,142
Great question. I don't know the answer.
However, I do know that I'm more prone to certain biases than others, I think. It may be related to our individual personality traits & background.
Recency bias is a big one for me. I'm becoming more mindful of that now and slowly coming up with ways to deal with it. For instance, I know that I am more likely to expect a trend day tomorrow and hence more likely to trade breakouts hoping for big winners. Scaling out systematically is 1 way of dealing with it and I'm working on it.
The other one is confirmation bias. I try to counteract that by assuming I'm holding the opposite side of my trade. Then I start to look for evidence. Sort of like devil's advocate.
Finally, I had the tendency to trade the same direction (long/short) the following day if I made some big money. Not sure of the name for the bias. My stats homework has been instrumental in fixing this bias. My direction ALWAYS depends on pre-open stats and not my previous day execution.
Conscious perspective and an externalized point of view is the most we can do. (That, and sharing with others, and being open to their feedback, as by definition, we are unable to see our own blind spots.)
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.