Challenges and Difficulties
Table of Contents
Challenges and Difficulties
There are potentially an infinite number of challenges and difficulties which you will encounter on your trading journey. It’s not possible to list them all. Although it is my intention that as many as possible will be addressed through the free articles (Posts). Please check the site map or category.
The greatest tool you have for identifying and overcoming any personal challenges will be your review process. If you can identify it, you can overcome it. Set process goals for the upcoming trading sessions, or draft amendments to your trading plan or procedures manual.
In time, through trial and error, all challenges can be overcome.
In this section though, I wish to provide some guidance regarding a couple of methods which I personally found useful in overcoming challenges and difficulties.
Reduce Size
- Always the best option – cut size to a level which is almost meaningless.
- Cut to the minimum allowed position size if necessary.
- If problems still persist, return to the sim environment.
Simplification
- This is an idea that I believe is the best way to advance along the path towards consistent profitability – simplification.
- Through effective record keeping and an effective review process, identify what is working well and what is not working well.
- Find ways to do more of what is working, and completely disregard (if possible) what is not working.
- Sometimes this will solve the problem. More often it will simply bypass it, leaving it for another day (if ever).
- In other words, through trial and error and an effective review process, find your strongest setups and market environments, and specialize just in them. Find the weakest and drop them for now.
- Adapt as required.
- Do whatever is required to achieve consistent profitability.
- Examples…
- If your best results come from with-trend trades, limit yourself to ONLY with-trend trades.
- If breakout failure setups provide your best results, consider limiting your trading to breakout
- failure setups only.
- Advancement through most stages of our plan require only four consecutive weeks of profitability. Do whatever is required to advance.
- Hopefully when you discover that you’re achieving greater levels of consistency, and better levels of profitability, maybe you’ll accept that you don’t need to trade those setups which cause you challenges. Stick to what works, and maximize that opportunity.
Two Timeframes; Simpler Entries
- Along similar lines (simplification), if you’re having trouble with the lower timeframe entries, then just get rid of this timeframe for a while.
- Just trade the trading timeframe within the higher timeframe structure. If the R:R is appropriate, then take your entry at the LWP based on a breakout of the trading timeframe price action.
- Forget about trying to time better entries through the lower timeframe, until you’re more comfortable with the whole process.
Right Focus
In trading the YSTC Trading with Price Action Volume methodology, the temptation can be to focus too much on the lower timeframe chart. After all, that’s where the most price action happens. If you find yourself taking too many lower probability trades, it’s likely that this is where you’re searching for them. You’re excluding the big picture.
This was a great challenge for me.
The strategy is designed around the trading timeframe movement within the higher timeframe structure. The lower timeframe should only be used for fine-tuning your trading timeframe analysis and for timing entry and exit.
Improve focus on the trading timeframe chart, simply by making it larger and more central to your field of view.
A simple solution… but it works.
One Good Trade
I’ll borrow this heading from the excellent book by Mike Bellafiore, “One Good Trade”.
Success doesn’t require a magical strategy. Simply that you ensure the next trade is a good trade. Then the next trade after that is a good trade. And then the next trade is a good trade.
Avoid the lower probability, speculative or impulsive trades. Just make “good trades”.
It may as simple as confirming that the trade is in the direction of recent strength and against recent weakness. Or it may be more detailed than that. Set up your own checklist criteria for a “good trade” and ONLY trade those setups which match your criteria list.
Affirmation Action Statements
We’ve mentioned them before. Create affirmation action statements for any areas causing you problems, to keep your mind focused on correct actions, rather than being influenced by fear and doubt.
Let’s look at an example.
One of the most common challenges in early stages of our career is just getting a limit order onto the system. Price is in the setup area. The stop area is identified. The target is identified. The entry zone is identified. But you sit there waiting, paralyzed by fear and doubt thinking, “what if it goes further?”
Recognizing the fact that adjusting an existing order is easier than putting one on to start with, we might adopt the following affirmation action statements.
- Confirm – setup, stop, target
- Confirm – R:R
- Trust
- Confidence
- Place Order
- Work Order
On (5), we place the order on the platform, well away from price. Beyond the proper stop area if you need to. This should be much easier. Price should NOT get there. Now work the order closer as price action increases your confidence.
It’s simple. It’s short. It can be memorized, or placed within sight on the wall at your trading desk.
Treat the statements as an order – if you decide to verbalize the statements, then you must carry out any actions dictated by the statements. Place the order, and then work it closer.
Employ a Team of Traders
Ok, not actually a team of traders! But you may benefit from separating the functions of your trading business and taking on the persona of a particular employee with a particular role and job description.
Have your market analysis conducted by an Analyst. Their role is simply to identify likely future price action and trade opportunity.
Have your pre-trade preparation in the setup area, and your decision to trade, monitored by your Risk Manager. Someone who will never allow you to enter a trade which does not offer acceptable R:R parameters. And someone who will never allow you to exceed your session drawdown limits.
Have the trade entry carried out by an Order Entry Clerk. While you’re adopting this persona, you are NOT allowed to second guess any trades. The Risk Manager approved it. Your job is to simply execute, and then hand over to the Operations Manager who will manage the trade in accordance with the procedures manual.
Trade and session reviews are conducted by the Compliance Manager. Would you be happy with the performance of your trading team today, or will you be demanding improved performance in the next section, and achievement of some new process-based goals?
Review your performance assuming the role of your Trading Coach, as if you’re providing a review of another person’s performance. Typically we are less critical of other trader’s decisions, than we are of our own.
Sounds stupid? It helps. Give it a try.
The Target
How do you know when you’ve made it?
One day you will have achieved sufficient consistency in your results to have met your Reasons Why, which you established back in article 075.
Celebrate! You deserve it.
However this is not the time to let down your guard.
The reality is that this game will never be completely mastered. You will never achieve perfection –just improved ability.
Continue with your Trade-Record-Review-Improve cycle.
Keep moving forward.
Additional Study
This Course has covered many topics which could be expanded upon to fill a whole series of articles. I encourage you to consider this material as an introduction to these concepts and become a student of them through further research and education.
In particular, Learning Theory should be considered essential study for all traders. You can find further study material here at our bookstore.