Execute Plan

BarroMetrics Views: Execute Plan

John dropped me a line asking: “I have problems entering according to my plan. I pull the trigger either too late or too early!”.

Interestingly, the problem is not an uncommon one. I am seeing it repeated in the current crop of Ultimate students.

My advice:

Firstly, make sure you do have a problem and are not merely falling prey to hindsight bias i.e. ‘too late or too early’ is defined by what the market did after you entered.

Secondly, if you are not executing as planned, take steps to define clearly what has to happen to enter a trade. For example, the statement below would be inadequate. :

I’ll enter at my buy zone when I see a bullish conviction bar

Better would be:

I’ll enter after the market hits my buy zone, 1.3500 to 1.3510 at the close of a     30-minute bullish conviction bar. The maximum price I’ll pay is 1.3520. If the bullish bar closes above 1.3520, I’ll place a limit order at 1.3520.

If the market fails to hold 1.3500, I’ll stand aside for today and review my options for tomorrow. 

Let’s see why the latter statement is better:

  1. It defines the buy zone. So, no action is taken until the zone is hit. It also means you may miss a trade if the market gets to 1.3511 and bounces. Accept that you will miss trades because a market fails to get to your zone.
  2. It defines the entry timeframe.
  3. It provides a plan in the event the market bounces strongly off the buy zone.

The key is we define our entry conditions as clearly as possible. Once that is done, I recommend you spend a few minutes, visualising entering the market – include scenarios, where the market throws you a curve, e.g., hits the zone, closes above 1.3520 and never retraces. It’s important to accept the scenario ahead of time.

The reason we circumvent our plan is usually due to the fear of missing out – the 3Fs (flight, fight or freeze) raise their heads. Speaking of which, on Monday, August 11, we’ll be providing a link to a podcast with Les Meehan, trading psychology coach. Don’t miss listening to the interview (it’s only 15-mins long). Les is providing a special free offer – details Monday.

Also, he is conducting a webinar on Thursday, Aug 11 at 13:30 EST (that’s 1:30 Singapore time, Friday, August 12): Engineering Your Trading Mindset for Success.

Now 1:30 is a wee too early for me (at least normally) living in Hong Kong. But, if you register, you’ll be given access to a recording. Based on past webinars, it would be a worthwhile event.

Here’s the link to register: rightmindtrader.com webinar

Fed Rate Rise September?

BarroMetrics Views: Fed Rate Rise September?

On August 3, Jerome Powell gave some interesting comments at the Brooking Institution conference.

Powell is a member of the Federal Reserve Board of Governors. He told the Finanical Times that “he favoured a ‘very gradual path’ for any rises as US economic outlook was dogged by global risks”.

Note however, that the comment was before the better than expected Non-Farm payrolls number of August 5.

Will that cause him to change his mind?

I think not. He as been consistent is saying that the rate rise ought to be done gradually. I rate him as a ‘1 Dove’ although Bloomberg rates him as ‘neutral’ (See Fed Hawke to Dove Scoreboard)

 

A GBPUSD Short

BarroMetrics Views: A GBPUSD Short

Back home and the jet lag? Well, slowly getting better. The first day, I went to sleep at 5:00 a.m. and got up at 12:00 p.m. Hopefully today will be better.

While in New York, I took a short GBPUSD ahead of the BOE rate decision.

Figure 1 (13-week swing chart) was the basis for my decision. Brexit resulted in a downside breakout from a congestion that started on January 23, 2009.

The pair then bounced off the Linear Regression Primary Buy Zone and retraced to 1.34789. I consider that retracement to be a retest of a 5-day swing magnitude.

If I am correct, we should now see a move to the 5-d Primary Buy Zone at 1.28774 to 1.27810 (Figure 2). At time of writing, the Value Area low at 1.30186 is providing support. A daily close above 1.13253 will provide a ‘death zone’ buy signal and will suggest that the high at 1.3480 will be breached.

So, the 1.3253 level provides a basis for a ‘line in the sand’ stop for the shorts.

There you have it:

  • Entry
  • Stop
  • Profit target for the 2nd third (Rule of 3).

2016-08-08_11-43-48 GBPUSD 13-w

FIGURE 1 13-week GBPUSD

2016-08-08_11-44-19 GBPUSD 5d

FIGURE 2 5-d GBPUSD

At Last The Challenge Details

BarroMetrics Views: At Last The Challenge Details

First thanks to Paul, John, Ken, Deidre and Alice for their support. By the way, if you register for the pre-publication copy, the ebook will be free.

Thanks too to those who wrote in asking for details on how to access the publication. Details are below.

Second, my last day in New York.

I’ll be getting up tomorrow morning 4:00 am EST to catch my flight back to Hong Kong. It will take me about a week to overcome jet lag so the Blog will be back to the normal 5-days a week publication by Monday, August 15.

Finally, Derek’s challenge.

You’ll recall Derek was of the view the ebook would have a wider market with students, especially, Uni and pre-Uni scholars. I believe that traders are my natural audience.

So, he threw out this challenge which I have accepted.

On or about Aug 15, we’ll create two download links:

  • One link for traders, and
  • The other for students.

We’ll then advertise the ebook: for traders at this blog; and for students on my Facebook page. The link will remain up for two weeks. We’ll see which produces the greater response.  For those using the link, the ebook will be free. After two weeks, we’ll be marketing the volume for USD 97.00.

I expect to have the link up on or before August 22 and the ebook completed on or before September 22.

I am confident that anyone who practices the process outlined in the book will experience a parabolic improvement in their productivity. In turn that will provide the time needed for trading profitably.

 

“For Or Not For Me”

BarroMetric Views: “For Or Not For Me.”

Here I am sitting in Boston’s Public Library. It’s an amazing place! But not as incredible as Harvard’s where the library extends four floors down below ground level! Why down and not up or sideways? That’s a story for another day.

Today is more about an intriguing conversation I have been having with an Aussie friend, let’s call him Derek. Derek is a psychiatrist specialising in counselling teenagers especially those who are either at Uni or about to enter Uni.

I have great respect for Derek and usually bounce ideas off him when I am uncertain.

I sent him a copy of the ebook I am writing – well, the introductory chapter and mindmap outline of the rest of the book. Derek was very complimentary:

“You have succeeded in capturing and placing the latest research in one bundle. Anyone following the process will have solved the problems of optimising their use of time as well as some of the usual barriers like procrastination, failing to remember easily ……”

“BUT”, he added, “you are marketing to the wrong crowd. No matter how overwhelmed they may be, no matter how much they may feel there aren’t enough hours in the day, and no matter how effectively you book will solve their problems – traders won’t come at it!”

I asked: “Why?”

“Because traders won’t move their comfort zone. The book’s subject matter is too far outside ‘trading’ for its contents to be sufficiently motivating.

You are better off helping the Uni student who is more likely to be helped by the ebook.”

I told him he was wrong. So, he set up a simple challenge. What that challenge is, I’ll tell you the next time I write the blog. I’m not sure when but it will be before I leave the US.

Oh, I almost forgot. I was asked what I am calling the ebook. At this stage: The 5 Stages of Self-Management, optimising the effective use of your time.

Confirmation Bias

BarrosMetrics Views: Confirmation Bias

Being on hols, I am giving the markets only an overview, FOMC on Wednesday 14:00 EST is unlikely to produce any rate increase. What I’ll be looking to note is whether the FED will give any indication of a Sept rise.  Failure to provide some clue is likely to send to the USD down; conversely, an indication of a Sept rise will send the USD up.

In the US the news has been and is dominated by the Republican National Congress and the Democratic National Congress. I found more than enough confirmation bias examples in the US media.

The liberal TV and print gloss over the Sanders’ groups dissents; the conservative TV and print gloss over Trump’s difficulties in winning the general election unless he wants over some of the Bernie group, and/or improves his standing among women and Hispanics.

Confirmation bias is a heuristic we traders have to overcome. Until now, there has been an output of material on the effects of heuristics, but little in the way of practical advice.

In my research for my ebook, I came across, ‘How to Have a Good Day‘ by Caroline Webb. This is a very well written book with the latest research and loads of practical suggestions. Be warned though it is s hefty volume.

View from NY – An Important Insight

BarroMetrics Views: View from NY – An Important Insight

I am sitting in the Club Room of the Grand Hyatt, New York, watching Trump on the Republican National Convention. Nothing in the past weeks has changed my mind: the US candidates amount to choosing Tweedle- Dee or Tweedle-Dumb at a time when the world needs a leader.

That’s a depressing thought.

On the positive side, in the 19-hour flight to the US, I had loads of time to reflect on what UIII students are teaching me.

One of the most important insights is that many don’t know how to create an integrated achievement plan. By that I mean, they focus on what I call low-level actions so that they run out of time to take the action to achieve the objectives they desire.

So while I am on hols (till Aug 5), I’ll be laying a plan for the contents of an e-book on Goal Achievement. There has been much research on this  subject in recent times, and much of it counter-intuitive.

My plan is to present the research results and illustrate the ideas with the system I use. No idea how I’ll distribute the e-book – think about the after I have written it.

No One Reason

BarroMetrics Views: No One Reason

Let me start by saying l was dead wrong about the BOE decision. We should see a spate of choppy action till the FOMC decision announcement at 2:00 PM EST on July 27.

Today, I want to turn my attention to what I am learning about passing on a trading education.

The Ultimate III program is now into its practical phase. The attendees have written their trading rules (well, all except two – not sure if they won’t drop out), and most have placed their first trades.

When I first started lecturing, I assumed that all traders would follow the path I took:

  • Find the methods that fit our personality.
  • Take action to make the methods our own until we attained our trading objectives.

With more experience, I found that most attendees failed. And, it was not a question of the course cost – whether $500 or $5000 – the resulting failure rate was relatively uniform.

Ultimate has thrown light on the ’causes’.  I say ’causes’ because there is no ‘one size fits all’. In short, there is ‘no one reason’ for the high failure rate.

Take the current registrants – the webinars these past two weeks have shown interesting patterns:

  • Some discretionary traders need practice at effectively combining the elements of their trading tools. Interestingly, the discretionary group is showing a greater willingness to apply the course material.
  • Some mechanical traders had issues of time. To me, the ‘time’ reason was more an excuse; the real barrier to action was a fear of having to move out of their comfort zone. I sought to solve their problem with fear as the foundation, Let’s see if they have been able to start trading.
  • Other traders, because of their lack of experience, had genuine problems in the understanding and application of the material. Their problems were relatively easy to solve.

We’re taking a month off because the mechanical system we use produces consistently poor results in August. I am keen to see the results at the end of September. The great thing about trading is the equity and psych journals lay bare whether or not long-term success is on the cards for each trader.

Up or Down? II

BarroMetrics Views: Up or Down? II

Yesterday, I provided the technical context. Today, let’s consider a possible trade.

Figure 1 shows the 290-min GBPUSD. We see a possible running correction. If this view is correct, we’ll see the lows at 1.27912 established on July 6 taken out.

Figure 2 shows the alternate view: the move to 1.3102 was a correction to form a measured move up.

The BOE decision tonight will determine which view is correct:

  • A rate cut will lead to Figure 1;
  • A decision not to do anything will lead to Figure 2.

I rate the chance of at least a .25 cut at 67% and have made plans to short the GBPUSD should that come about. A ‘no-cut’ decision, means I stand aside.

2016-07-14 GBPUSD 290-min 5-p (1)

FIGURE 1

2016-07-14 GBPUSD 290-min 5-p (2)

FIGURE 2

Up or Down?

BarroMetrics Views: Up or Down?

324 pips in one day! That was the GBPUSD range yesterday.

I have to say I was surprised – given we have a rate decision on Thursday at 9::30 UK time.

The rally was expected: the GBPUSD had shown a lack of selling follow-through and that, together with the BOE announcement, suggested a rally was on the cards. What surprised me was the extent of the rally in a 24-period. It looked like we were not only seeing short covering but also fresh buying.

Given the change I believed Brexit had brought to the GBP value structure and the long-term chart picture, I see the GBP as being in a sustained bear market.

Figure 1 shows the Spot Monthly chart (from TheChartStore) from 1900. The pattern I am focusing on is:

  • The Nov 80 high
  • Feb 1985 low, and
  • The Value Area sandwiched between the two extremes.

We normally would have seen an upside breakout to test the Nov 80 high. Instead, we have seen acceptance below the Value Area Low (June 2001).

The downside breakout usually means one of two things:

  1. The Value Area is still in the process of completion. In this case, we’ll see a test of the Value Area Highs (Nov 2007 and Sept 1980); or
  2. The Value Area is complete, the breakdown is genuine, and we’ll see a test of the Feb 1985 lows.

More tomorrow……..

2016-07-13 GBPUSD 12m

FIGURE 1 GBPUSD