Trading Can Be Hard. These Steps Help You Navigate the Challenge.

Is what you're doing unique? And why ask?

Because your success hinges on your ability to uncover unique opportunities hidden from the crowd.

Why?

Trading is a competitive endeavour.

So you only succeed in trading by beating the competition. And you can't do that if you join them. Make sense?

How do you do that?

One way is to focus on a single instrument.

Even though you might feel the need to scan the market far and wide for opportunities - it's the wrong approach and here's why:

Looking at many markets is surface-deep. Agree? You're only identifying the same opportunities as the crowd.

On the other hand

Focusing solely on a single instrument is your ticket to diving deep and uncovering those hidden opportunities the crowd overlooks.

According to Brent Donnelly - a respected seasoned institutional trader and interbank FX market maker:

"Dabbling in 14 different products won't give you an edge... Successful traders possess specialized knowledge that's deep and narrow, not shallow and wide."

What is deep and narrow?

A universe of information is available beyond price charts, support and resistance and the common indicators available freely on trading platforms.

What information exactly?

In this highly competitive realm where gaining an edge is paramount, you won't stumble upon the answer in a YouTube video, short course, or trading book.

If edges were simple to uncover more folks would be successful traders.

Truth is
It comes back on you to find out. Whether going alone or via professional mentorship/internship if you seek certainty (and the fastest path).

What happens next?

Imagine you've accomplished the expertise to spot what eludes the majority of traders.

The feeling of unlocking unique opportunities consistently is incredibly satisfying and one you deserve to take pride in. Congratulations if you've reached this stage.

Yet it only represents part of the success formula.

Transforming your unique idea into a low-risk, high-odds trade demands a distinct skill set.

What skills?

When you understand how the market works you know price has predefined boundaries telling you in advance:

Where price reverses.
Where price rotates (think 'choppy markets').
Where price moves at a slow grinding pace (challenging to trade).
Where price makes strong directional moves (best trading conditions and ideal for adding).

Think of these boundaries as the equivalent of sports fields or playing courts, dictating when your trades are 'in-bounds' or 'out-of-bounds'

Understanding the distinction between 'in-bounds' and 'out-of-bounds' solves 3 problems plaguing traders:

Taking profits too soon or leaving too much profit on the table.
Entering into the market only to experience a lack of price movement and your trade ends moving against you.
Adding to your trade only to see the market immediately reverse - turning your winning trade into an overall loser.

These boundaries are called 'trading playing fields,' where your trade moves from one side to another within the 'in-bounds' zone. You exit as the price approaches the 'out-of-bounds' area.

Yet not all playing fields are equal in size (price range) or market behaviour. Adding to trades for example only occurs in the playing field conducive to aggressive trading.

FYI:
The playing field concept owes its development to systematic thinking. This mode of thought reaches full potential when your brain typically reaches 50 years of age.

To better understand the benefits of mature-age trading skills and the concept of trading playing fields - check out this real-life trading case study in the following video:

🔗 https://youtu.be/cnbymnVdDao

Where you can trade versus when you trade

Understanding where you can and can't open a trade is crucial, and trading playing fields help with that. However, they won't guide you on when it's the right time to enter.

Equally challenging is timing your entry. Agree?

You try to use tight risk management (stop losses close to your entry).

But when you do - you find the market 'stops you out' and then the price moves without you. Or worse - you're stopped out many times in a row eating up any profits should the market move your way.

Frustrated, you widen your stops. Right?

What happens next?
Widening stops is a curse. Issues you now face include:

You need a much higher win rate because now your winners are equal to or less than your losing trades. Yet statistically successful trading only wins about half the time. So over time, you win some but lose more.
You increase your profit targets to compensate for wider stops only to discover most of the time - the price never reaches your larger profit targets. Now you are giving back any profits that do come your way.
Price spends much of the time trading at a far worse price than you entered. Not only does it feel uncomfortable - there's the opportunity cost of missing other trades you can't take because you committed to the one you're trapped in.

Much like your unique trade idea, timing your trades effectively hinges on having access to information that eludes the majority of traders.

The good news is that when you concentrate on a single instrument, you can spot recurring themes and behaviours. These observations become valuable evidence points for your future trades.

As long as you're leveraging data that remains hidden from the crowd, you'll be in the company of professional traders who possess specialised knowledge setting them apart from the trading majority.

Hint to underscore the point:
Trading View, a popular platform provider, boasts an impressive 50 million users. The question is, what unique insights do these 50 million users not have access to through Trading View?

Combining a repeating sequence of 8-12 unique points of evidence becomes one of the strategies to time trading your unique idea.

Looking at Tuesday's execution chart below you see short selling (pink arrows) and profit taking (blue arrows).

Yet, what's missing is the critical foundation for these buying and selling decisions including:

A unique idea the crowd isn't aware of.
A current theme in play the crowd isn't aware of.
A playing field which is ideally suited to adding to your position.
A playing field with a clear price boundary where you can no longer hold your short trade (at 0.6353).
Multiple points of evidence to time your entry almost perfectly.

You can bet on it.
A poor trade entry and/or poor trade exit will come down to a lack of evidence.
Or worse, a mounting case of evidence against the trade.

To sum it up, as Dr. Brett Steenbarger aptly puts it:

"'Success in markets necessitates both deep idea generation and swift trading execution".

Lastly:
It's worth noting the principles discussed here are the very same steps you'd follow when trading at a professional firm.

So if you're considering external training, it should be firmly grounded in these fundamental principles.

Adam Fiske16 October 2023