“Is it important to be creative in your trading?”
I’m not sure I can describe it in terms of importance. The creative process is somewhat of a mystery, even to scientists who study it. There are a few common characteristics that all creative persons possess (such as an openness to a variety of internal and external experiences and a driving need to express one’s sense of individualism), but for the most part, exactly how the creative mind makes earthshaking discoveries is unknown.
A few prerequisites are necessary, though. The mind must be focused, for example.
New ideas must flow through the mind freely, and there must be a wide range of ideas, so that they can be combined and re-combined in new ways. New and creative trading ideas are necessary to stay ahead of the crowd, so doing whatever you can to prepare your mind to brainstorm new ideas will help you develop creative trading strategies that are the foundation of profitable trading.
Many great scientific discoveries were made almost by accident, through a serendipitous observation. Had an untrained eye made the observation, it would have been missed. But because the scientist’s mind was continuously running through a wealth of ideas, he or she saw a new discovery in a seemingly ordinary event. Discovering new trading ideas is also a creative, intellectual endeavor.
You must get your creative juices flowing in order to see the next new idea. It’s essential that you “prime” your thinking processes, get your mind ready to make a creative observation.
In some ways, your mind is like a well. You prime a well to get the water flowing, and once it’s started, it flows continuously. You must similarly prime your mind to get ideas flowing.
Various ideas in your mind are stored in a hierarchical structure. Information is stored together in a clump, depending on its meaning. When you aren’t thinking of a particular topic, it’s hard to bring information about that topic into consciousness; it lies their stagnant and hidden.
However, when you make a concerted effort to think carefully about a specific topic, or a closely related topic, and start running through a bunch of possibilities, all kinds of new possibilities become apparent. Your mind quickly scans various concepts and ideas, almost unconsciously. Suddenly this wealth of information combines and you see something new.
For example, suppose you develop a vague trading idea about how a set of indicators may forecast the price of a particular stock. Once you get the basic idea in your mind, you can prime your mind to get the creative juices flowing.
For example, you can scan a set of charts to back test and find support for your hypothesis. As you look through the charts, the information you see will prime other related information. Soon idea after idea will coalesce, and you’ll make a new discovery that will serve as a basis for a new trading strategy.
The main point is that you must set your thinking processes in motion to come up with a creative new idea. Some traders even suggest putting on a small trade based on a hunch in order to set your creative processes in motion.
When you put on a trade, your adrenalin starts to rush, your attention starts to focus, your senses are heightened, and you suddenly change your perspective until you see new ideas. The more your mind is active, the more likely you’ll make creative new discoveries. Knowing about the creative process and how to set it in motion gives you power.
Some people are down on themselves because they can’t seem to think creatively. But they can. They just need to know how to do it. It’s vital to be relaxed and free of anxiety. But it’s also essential to prime your mind in order to start the process.
So when it’s time to think of a new trading idea, think creatively. Set your creative processes in motion. You may come up with a big idea that will make you huge profits.
Showing posts with label market maker. Show all posts
Showing posts with label market maker. Show all posts
Creativity in Forex Trading
Advanced Forex Trader In 10 Steps | SigmaForex
Everyone trades a little differently. The trading method outlined below is MY personal approach to trading. This method has worked for me for the last 20 years, and has helped me to avoid big draw downs since the mid 1980’s. My trading strategy has helped me to make a good living trading.
It takes some time to learn my method of trading because it’s based on tape reading and getting a “feel” for the market. This is *not* about a fast,easy formula to “get rich quick” while you sweat out every trade. Instead, this is about developing confidence and trading consistently without fear and without big draw downs.
Here is my 10 Step Approach to Learning My Style of Trading:
1. Practice exiting trades at break-even, using a one-tick target, a two or three tick soft stop (mental stop) and a 1.5 point hard stop. Never *allow* the market hit your hard stop. Exit by moving your target toward your hard stop, not by moving your hard stop towards your target. With time, all of this must become a reflex. You won’t always be able to keep your losses down to 2 ticks, but only on rare occasions should you find yourself letting the market hit your hard stop. (”Rarely” means only about once every 50-100 trades after you get the hang of it.)
Even though your entries won’t be good enough in the beginning to make a profit trading these tight soft stops, your entries will gradually improve until you turn the corner and become profitable.
Learn exits and entries separately. Don’t let the one influence the other.
Taking losses this way takes dedication and discipline, so stick with it. It’s the key to confident trading. If you never take large losses (and rarely medium size ones), the fear of loss pretty much goes away, and your confidence grows. Especially after your entries improve enough to support a “scalping” type exit strategy.
2. Every trade *in all market conditions* begins as a scalp. Let me clarify this: if you’re in a choppy market and you’re looking to get small gains, like a point or so, manage your initial hard and soft stops *exactly* the same way you would in a quick trend or any other type of market. That means keeping losses as close to 2 ticks as possible, taking lots of break even trades and exiting every time the market doesn’t give you *instant gratification* (within a minute or so).
No matter what the market is doing, you must demand that it moves in your favor right after you enter, otherwise you get out as close to break even as possible. This means you’ll be closing a lot of trades near break-even within the first minute. This is the foundation of learning to trade for consistent gains.
3. Don’t worry about the commissions on break-even trades. If you do, you’ll hold on to losing positions, begging them to turn around for you. This is called *hoping.* In this business, this type of *hoping* is the kiss of death. Your money-making trades must move your way in the first minute or less. When trades don’t act right in the first minute, most of them will hit your hard stops.
So don’t get hung up on the fact that your broker loves you. Who cares if he/she makes a living?
Your concern is *limiting losses*. I care more about this than anything else in trading.
(Well-timed entries make my tight soft stops possible, so they’re almost as important as the exits.)
4. Practice your entries until your timing is so good that you can *reasonably expect* the market to go your way immediately, before it goes more than 2 ticks against you. This is not easy at first, but if you stick with it, you’ll get it.
5. Practice fading the emotional extremes on your entries. (Fading means entering in the opposite direction of the market’s last move.) When an extreme NYSE-Tick (often above 1000 or below -1000) occurs at the same time the market accelerates into a support or resistance area, look for a price stall or reversal and fade the move. Fade the emotion.
6. Rarely, if ever, *chase* the market on your entries. Wait for a pullback to get onboard a trend.
I favor shorts over longs… I can get out of a short position quicker than I can get out of a long position. I don’t know why. I like to say that I “see gravity better than helium.” In the rare strong-trending markets where I may chase an entry, it’s going to be a down trend, not an uptrend. I don’t trust up trends enough to chase them. Maybe it’s just a personal quirk and maybe not. I honestly don’t know.
But it’s interesting to note that most (not all) professional traders I’ve met are Bears and prefer short positions over longs. You should give it some thought and find out which direction works better for you. Are your losses bigger on shorts or longs? Specialize in one direction and trade the other direction only when things are looking real good.
7. Never let a gain turn into a loss. This will mean getting out of most trades a little (or a lot) too soon. You just have to live with it. Swing for home runs (greed) will ruin your trading. There is no mechanical formula that I know of, (such as, “move your stop to break even after you get 3 ticks gain”) that will work. You have to develop a feel for how the market is acting at the moment, and use your feel to reduce your target or advance your hard stop. This comes with experience.
8. Develop a feel for the big picture movements of the market, not just the intraday action. Use the end-of-day market internals to analyze the market’s mood and develop a daily bias.
9. Practice does *not* make perfect. Only *perfect practice* makes perfect. I learned this in my younger years, pursuing a professional baseball career. Perfect practice will keep your losses smaller than your gains in the trading business.
There are a lot of things involved in perfect practice. When you get tired, or when the phone rings, or whatnot, *don’t trade*. Always, *always* exit trades exactly the way I’ve outlined above on every trade in every market condition. Always *wait* for your pitch, the well-timed setup for entering. Don’t practice sloppy entries just because you’re bored. Only perfect practice will help you. Anything else just amounts to practicing bad habits.
10. Get a mentor. I traded for 6 years before I learned to keep my losses small. My trading turned around immediately after I met my mentor and talked to him on the phone for one week. Is there any serious profession that you can learn without a mentor? Maybe there is, but I don’t know of any. It’s certainly not trading.
Mike Reed is author of SigmaForex LTD Trader’s Updates. He has been trading the Market for 23 years. His support and resistance numbers have been published on the internet since 1996. Mike’s nightly support and resistance zones are specific and incredibly accurate. He offers an unlimited free trial of his nightly SigmaForex LTD Trader’s Updates. He will be offering “live” training online as well. http://www.SigmaForex.com
Copyright 2008 Mike Reed
It takes some time to learn my method of trading because it’s based on tape reading and getting a “feel” for the market. This is *not* about a fast,easy formula to “get rich quick” while you sweat out every trade. Instead, this is about developing confidence and trading consistently without fear and without big draw downs.
Here is my 10 Step Approach to Learning My Style of Trading:
1. Practice exiting trades at break-even, using a one-tick target, a two or three tick soft stop (mental stop) and a 1.5 point hard stop. Never *allow* the market hit your hard stop. Exit by moving your target toward your hard stop, not by moving your hard stop towards your target. With time, all of this must become a reflex. You won’t always be able to keep your losses down to 2 ticks, but only on rare occasions should you find yourself letting the market hit your hard stop. (”Rarely” means only about once every 50-100 trades after you get the hang of it.)
Even though your entries won’t be good enough in the beginning to make a profit trading these tight soft stops, your entries will gradually improve until you turn the corner and become profitable.
Learn exits and entries separately. Don’t let the one influence the other.
Taking losses this way takes dedication and discipline, so stick with it. It’s the key to confident trading. If you never take large losses (and rarely medium size ones), the fear of loss pretty much goes away, and your confidence grows. Especially after your entries improve enough to support a “scalping” type exit strategy.
2. Every trade *in all market conditions* begins as a scalp. Let me clarify this: if you’re in a choppy market and you’re looking to get small gains, like a point or so, manage your initial hard and soft stops *exactly* the same way you would in a quick trend or any other type of market. That means keeping losses as close to 2 ticks as possible, taking lots of break even trades and exiting every time the market doesn’t give you *instant gratification* (within a minute or so).
No matter what the market is doing, you must demand that it moves in your favor right after you enter, otherwise you get out as close to break even as possible. This means you’ll be closing a lot of trades near break-even within the first minute. This is the foundation of learning to trade for consistent gains.
3. Don’t worry about the commissions on break-even trades. If you do, you’ll hold on to losing positions, begging them to turn around for you. This is called *hoping.* In this business, this type of *hoping* is the kiss of death. Your money-making trades must move your way in the first minute or less. When trades don’t act right in the first minute, most of them will hit your hard stops.
So don’t get hung up on the fact that your broker loves you. Who cares if he/she makes a living?
Your concern is *limiting losses*. I care more about this than anything else in trading.
(Well-timed entries make my tight soft stops possible, so they’re almost as important as the exits.)
4. Practice your entries until your timing is so good that you can *reasonably expect* the market to go your way immediately, before it goes more than 2 ticks against you. This is not easy at first, but if you stick with it, you’ll get it.
5. Practice fading the emotional extremes on your entries. (Fading means entering in the opposite direction of the market’s last move.) When an extreme NYSE-Tick (often above 1000 or below -1000) occurs at the same time the market accelerates into a support or resistance area, look for a price stall or reversal and fade the move. Fade the emotion.
6. Rarely, if ever, *chase* the market on your entries. Wait for a pullback to get onboard a trend.
I favor shorts over longs… I can get out of a short position quicker than I can get out of a long position. I don’t know why. I like to say that I “see gravity better than helium.” In the rare strong-trending markets where I may chase an entry, it’s going to be a down trend, not an uptrend. I don’t trust up trends enough to chase them. Maybe it’s just a personal quirk and maybe not. I honestly don’t know.
But it’s interesting to note that most (not all) professional traders I’ve met are Bears and prefer short positions over longs. You should give it some thought and find out which direction works better for you. Are your losses bigger on shorts or longs? Specialize in one direction and trade the other direction only when things are looking real good.
7. Never let a gain turn into a loss. This will mean getting out of most trades a little (or a lot) too soon. You just have to live with it. Swing for home runs (greed) will ruin your trading. There is no mechanical formula that I know of, (such as, “move your stop to break even after you get 3 ticks gain”) that will work. You have to develop a feel for how the market is acting at the moment, and use your feel to reduce your target or advance your hard stop. This comes with experience.
8. Develop a feel for the big picture movements of the market, not just the intraday action. Use the end-of-day market internals to analyze the market’s mood and develop a daily bias.
9. Practice does *not* make perfect. Only *perfect practice* makes perfect. I learned this in my younger years, pursuing a professional baseball career. Perfect practice will keep your losses smaller than your gains in the trading business.
There are a lot of things involved in perfect practice. When you get tired, or when the phone rings, or whatnot, *don’t trade*. Always, *always* exit trades exactly the way I’ve outlined above on every trade in every market condition. Always *wait* for your pitch, the well-timed setup for entering. Don’t practice sloppy entries just because you’re bored. Only perfect practice will help you. Anything else just amounts to practicing bad habits.
10. Get a mentor. I traded for 6 years before I learned to keep my losses small. My trading turned around immediately after I met my mentor and talked to him on the phone for one week. Is there any serious profession that you can learn without a mentor? Maybe there is, but I don’t know of any. It’s certainly not trading.
Mike Reed is author of SigmaForex LTD Trader’s Updates. He has been trading the Market for 23 years. His support and resistance numbers have been published on the internet since 1996. Mike’s nightly support and resistance zones are specific and incredibly accurate. He offers an unlimited free trial of his nightly SigmaForex LTD Trader’s Updates. He will be offering “live” training online as well. http://www.SigmaForex.com
Copyright 2008 Mike Reed
Labels: forex, forex advanced trader, market maker, sigmaforex
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