A Process for Achieving Goals (Success Series)

BarroMetrics Views: A Process for Achieving Goals (Success Series)

We’ve completed the left-hand side of the ACT HEXAFLEX. Now let’s turn to the right. Loosely speaking, the right is the left-brain activities: the domain of success and mastery. There have been significant advances in this field; we have come a long way since Napoleon Hill wrote ‘Think and Grow Rich.”

There are two critical areas beyond the scope of this series:

  1. How we learn theoretical material – reading and memory; and
  2. How we turn theoretical knowledge into a skill – deliberative practice. 

I’d urge readers to Google both topics – there is a wealth of material out there. Here I want to address the nature of goals and what need to do to attain them. In particular, there is a recent book “Deep Work” that I heartily recommend.

The first step for consistent goal achievement is to ensure our desired outcomes are framed in a way consistent with our core values. Goals aligned with our core values are more likely to be achieved. So, how do we unearth our core values?

An easy way is to engage in a values elicitation exercise. I have attached one example from Robert Brain. A better way would be to read Brownson’s Äligning with Our Core Values” (including doing the exercises).

With core values in hand, we are now set to take the first step to creating our goals…

More tomorrow.

Volume Clues Direction II

BarroMetrics Views: Volume Clues Direction

Let’s take yesterday’s info and apply it to the trade I made on the S&P.

Figure 1 shows the classic Market Delta footprint. On Feb 22, the E-mini made a new high. Note the buying volume (9687) which is below normal and raises a red flag that the upmove may be stalling. When this volume configuration occurs, I want to see strong upside continuation, and I take steps to protect my long position. As a result, I raised my initial stop to 1924.

On Feb 23, my longs are stopped out

The 2/23 Footprint shows strong selling volume, but the range is below normal (this suggests there is buying support). After considering the Profile and intraday charts, I took the view that the ES would most likely break. But, the strong selling volume and below normal range caused me to stand aside.

On 2/24,  the ES breaks to 1886 and then rallies to close on its highs. Buying volume is normal as is the range suggesting continuation. However, for me, the ES has to clear 1946 before I’d be willing to buy.  The issue is whether demand is being absorbed by supply (if so, move down to follow), or whether supply is being absorbed by demand (if so, up move to follow).

What’s important here, is the Footprint allowed me to exit my longs for a small profit. Had I not raised my stop, I would have been stopped out, only to see the ES reverse.


FIGURE 1 ES MarketDelta Classic Footprint


FIGURE 2 ES 18-day Swing

Volume Clues Direction

BarroMetrics Views: Volume Clues Direction

I received a request to explain how I use Market Delta charts.

OK. First some context.

My strategy is mainly based on the ideas of Richard Wyckoff and Pete Steidlmayer (Market Profile) with support from the Ray Wave (my version of the Elliott Wave – I like to call RW and objective EW).

One of the ideas propounded by Wyckoff and Steidlmayer is the relationship between volume and range provide reliable guides to the future direction of the markets.

Here’s a summary:

  1. Normal Range and volume accompanied by the appropriate bar, suggest continuation. For example, normal range and volume where a bar opens at or below the bottom 25% of its range and closes at or above the top 25% of the day’s range suggests continuation. Or
  2. Below Normal Range with above normal volume suggests a reversal in the making especially if the bar shows a directional bias. For example, a bar that exhibits the open and close characteristics suggest a reversal rather than a continuation of the upmove. 

Market Delta adds a dimension to the range-volume analysis.

Market Delta provides a DNA of a bar. Let me explain. Wyckoff and Steidlmayer, if they saw a directional bar, that the total volume can be attributed according to the direction of the bar. The Market Delta footprint indicates whether the volume was bullish or bearish; and the amount of volume that was bullish or bearish.

My rules for interpreting Delta bars to signal change of direction:

  1. If the bar shows bullish conviction, especially if it moves to new highs, and the volume for the period is bearish, expect a reversal.  
  2. If the bar shows bullish conviction, especially if it moves to new highs, and the volume for the period shows below average buying volume, watch for a reversal signal in the next three periods.
  3. A conviction bar that shows excessive range and excessive supporting volume may signal a buying climax – a Buying climax suggests the start of a congestion range. So, if the trader has been using trending strategies, he knows to change them. 

More tomorrow.

Why So Many Fail As Traders II (Success Series)

BarroMetrics Views: Why So Many Fail As Traders II

Continuing from yesterday…..

‘Being in the Moment’ affects Self As Context and Defusion. Self As Context is the skill to observe our behaviour from a third party viewpoint. The stance allows us to view ourselves dispassionately and objectively. Defusion means detaching ourselves from unhelpful thoughts. We treat thoughts as products of our mind rather than take them as reality and thus become immersed in their fiction.

Finally, ‘Acceptance’ means we make room for painful feelings. We learn to be comfortable with discomfort. The idea is to let feelings come and go without an investment on our part to fight, fly or freeze.

That’s the theory; below is a link to a video showing ACT in Action.


Why So Many Fail As Traders (Success Series)

BarroMetrics Views: Why So Many Fail As Traders (Success Series)

Most newbies come to trading with a belief that all they need to be winners is  ‘the system’; some come to trading with not even that belief – they confuse being lucky with being competent. Not long ago I was at a conference when I overheard a trader expounding the idea that ‘all educators know nuts. To succeed, you must find the information for yourself’.

I thought to myself: ‘does that mean he’ll only learn from his losses?’

Imagine how the human race would have stagnated if we had to keep reinventing the wheel. So, if successful traders can and are willing to share, why is it so many fail? Why is it despite the available winning methods and excellent risk management ideas , newbies just don’t make the grade?

The answer lies in the ACT Hexaflex. The four elements on the left side:

  • In the moment
  • Self as Context
  • Acceptance and 
  • Diffusion

can be labelled ‘winning psychology’. They share a connection, though each is an individual practice in its own right.

  • ‘In the moment’ can be described as being or living in the now. We humans, tend to spend much of our time randomly thinking of the future or thinking of the past. ‘In the moment’ calls for paying attention to the info and sensory perceptions as they are occurring now. We can attain this state through the REPS exercise or through meditation. Research on meditation, especially mindfulness meditation, has shown that meditators  make better decisions for a number of reasons (see What Are the Benefits of Mindfulness)

More tomorrow



Insanity: Doing the Same Thing……

BarroMetrics Views: Insanity: Doing the Same Thing……

I attended a ‘preview’ for a new trading method – a new indicator actually. And it struck me how many attendees fell within Einstein’s quote. We could see it in the questions: we all would like ‘certainty of outcome’ (i.e. have some way of knowing our trading will be profitable), start with as little capital as possible and grow into a humungous sum in the shortest possible time. Unfortunately, what we would like and what reality will deliver are two very different things. Reality dictates that successful trading requires work: to acquire the self-awareness and market knowledge that is needed for success

We underestimate the need for work because of the random nature of the market. On a trade by trade basis, the outcome of any trade is purely random. Sure, we can look to put the probabilities in our favour, but no amount of work will guarantee a profit for a trade. This means that on a trade by trade basis, a trader with no knowledge and no experience will take the opposite side to an experienced, long-term successful trader and win. As a result, newbies confuse being lucky with being good.

The randomness has another unfortunate result. The newbie picks up habits that he associates with success – habits whose results are more due to luck than knowledge and skill. It is these habits that are newbies have to change but find it most difficult to give up.

In my current coaching class, we have a couple of day traders who insist on trading on the first fifteen minutes of the day. There is nothing wrong in that per se; but in their case, their stats show that the first trades lose money; the stats show that by eliminating this first trade, their win rate and expectancy return would improve. And yet, they refuse to wait. Why?

Because occasionally, that first trade captures the start of a strong directional move. And, it is the memory of this move that cements the habit. Never mind that the stats show that over their trading history, eliminating the first fifteen trade improves the overall result. Because the chance of this ‘big’ win is eliminated, the newbie comes up with ingenious reasons to keep the habit.

So, how about you? Do you have any trading habits that are not serving you? Are you even keeping the necessary journals (equity and psych) to be able to answer the question?

The Disciplined Trader

BarroMetrics Views: The Disciplined Trader

Nial Fuller published “The Disciplined Trader” in April 2015.

I found the article informative – one question he did not address was how does a newbie acquire the discipline need for success. That’s what the Success Series is addressing. I am keen to see if just writing about the principles and tools will achieve the same results that the coaching (using the same principles and results) is attaining.

 BTW: A disclaimer: The article carries an ad for Nial’s course. Please do not take my reference to his article as a recommendation to the course.  Thanks

Reality- An Example

BarroMetrics Views: Reality- An Example


The price action in the currencies yesterday provided an excellent companion to the Reality blog. Let me show you what I mean.

When I look at Figure 1, I see:

  1. Since the breakdown on 01/08, the GBPUSD has continued to head south. We are now nine (9) days into the break. I take the view that if there is to be a retest of the breakdown zone (1.4698 to 1.4564), it ought to occur within six (6) to sixteen (16) days of the breakout. Hence, a 5-day swing rally0 now, would not surprise. 
  2. Statistically, the 5-day impulse swing is statistically massively oversold, making a rally a high probability event. 
  3. If a rally should occur, the minimum target would be the 5-day swing line-change price presently at 1.4513; but after today, the line change price will drop down to around 1.4400 to 1.4334.
  4. Statistically, a 5-day correction will be around 312 pips – this suggests the correction should take the pair to at least 1.4396.

But what is important to remember is that all of the above, suggesting a possible line change is in the works, are a construct of my beliefs – the scenario may or may not reflect external reality.

To the extent I am correct that a rally is to occur will be the extent by which my beliefs have accorded with external reality. To the extent I am incorrect, is the extent to which my beliefs are a reflection of my internal state rather reality.

It’s, therefore, important to consider the question: if I am wrong, what do I have to see to tell me that.


FIGURE 1 GBPUSD 5-day Swing


BarroMetrics Views: Reality

This has been an age-old question:  is there an external reality or do we create our own reality? The issue has been around since at least Plato’s time and is ongoing today.

For me, the best resolution I read and heard was from Ayn Rand:

“it’s the ‘out there’ as seen by the ‘in here'”.

In other words, there is an external world that we make our own by our interpretations.  As a result, the ‘reality’ we interact is as much a reflection of our beliefs as it is of the external world. The closer our interpretation reflects that our the external world, and assuming our actions reflect our interpretation, the higher the probability our actions will lead to our desired results.

I hold this idea as being critical to our trading success and goes a long way to explaining why so many fail.

  1. Many fail to acquire the necessary knowledge for their craft; 
  2. Those that acquire the knowledge fail to implement them in a way that accords with external reality; 
  3. Those that do translate knowledge into a Method and Money guidelines fail consistently to execute their own guidelines (what I call ‘Mind)’.

Long time readers will know that my formula for trading success is:

Method x Money x Mind.

Because the elements are interdependent, each element MUST be present; and our results will be limited by the weakest element. For example, even if we have a Method with a positive expectancy coupled with perfect execution, if our Money is sub-optimal, we’ll probably not succeed – either we’ll not maximise our profitability or at some point, we’ll overtrade and blow up.

This view is my belief – does it reflect external reality? I can’t know for sure. But, given my success, and what I see as the foundation of the success of other traders, I believe so.  So, for me, the statement is true.

But here is the key: you don’t have to take my word for it. The beauty of trading is we have a final arbiter: our trading account.

To the extent our account is positive is the extent to which our views and executions have accorded with external reality. If our account is negative, then for the period of the account, our internal belief structure has not accorded with the external.

Coaching Paul

BarroMetrics Views: Coaching Paul

Let’s say you were coaching Paul, what would you say? What would you be your processes?

Well, the first principle, is you would avoid negative judgments. For example, ‘you were lazy’, ‘you lacked discipline’, etc. The reason is a judgment, negative or positive, fails to advance a trader’s goals. Much better is to describe the disempowering behaviour and elicit empowering alternatives. For example, ‘your entry’ timeframe is the hourly, given your lifestyle, is the hourly the best entry timeframe for you?

The next thing is to identify what we know and what we don’t now about the behaviour.

In Paul’s case, we know that he has some sort of trading plan. We know that he failed to execute the hourly entry, We know that he shared that he experienced negative emotions about the entry. That done, we look at what is behaviour is under Paul’s control and what was beyond his control.

The failure to execute the hourly entry was within his control. What the market did after entry was beyond his control.

Finally, we look at the behviour under his control within the overall context of his goals and steps he has undertaken to attain his goals.

Once the diagnosis stage is complete, we turn to the prescription phase.

It’s most important that solutions come from Paul rather than you, the coach.  When coaching ourselves, this is not an issue. What is an issue, is most traders do not follow an effective review process. Hopefully, the series of blogs will have given you some ideas on how to do this.