Lessons from the Pros


Bored and Undisciplined

Hello traders! As I sit here writing this article, the weather is beautiful in Texas. It’s about 65 degrees, a mild breeze, with a cold front on the way to take us down to 55. This is December weather I can live with! I decided to take a couple of months off from classroom teaching from mid-November to mid-January, to spend more time with family and friends around the holidays. This is one of the perks of trading, to be able to set your own schedule. However, one of the bad things about sitting at home and trading for weeks at a time is the boredom, and occasionally the sloppiness/lack of discipline that often creeps into our trading.

In every Online Trading Academy class that I teach, everyone in the class introduces themselves. We talk about what they do/did for a living, any trading experience, etc. When it is my turn, I give a few reasons as to why I teach classes instead of just trading from home for the rest of my life. As most of our instructors will tell you, trading for a living is great, but EXTREMELY boring. When you have a strategy (or ten!) that you use to pull some pips out of the market, the profitable trader is often sitting around waiting for their setups to show up.  This may take hours or even days to happen.  In some instances, this waiting can cause boredom to influence our disciplined trading rules. One of my several reasons for teaching class is to get out of the house and alleviate some of this boredom, and to “refresh” my discipline. As I state in every class, I am a much better trader today than I was 7 years ago before I started teaching! The constant reinforcement of our trading rules reminds me to stay focused. (To hear the rest of my reasons for teaching, see you in class!)

Back to the point of this article. As you have probably read in many of these Lessons From the Pros newsletters, there is no technical “Holy Grail” in trading. There isn’t a combination of indicators that will give you a 100% win/loss ratio, making money on every trade. It just doesn’t exist! The Holy Grail is actually personal discipline, to follow your specific trading rules. Take your small losses, let your winners run. One problem that I and many traders have is the waiting. If you end up watching the charts for hours a day (my trading computer is on from about 5am until 9pm) you may get tempted or bored enough to take trades that do not necessarily fit into your trading plan.  There is always some excuse we use to justify such a trade! There are two ways to look at this change of plan.

  • Never do it. If it isn’t in your plan, then you must walk away from the computer. Perhaps set up your trades in advance, using some of the advanced order entry features that your brokerage firm offers you: placing your entry order, stop loss, and profit target(s) in the morning, then coming back to check on your trades later on. Another technique is to set up alerts for when price action hits the level that you would like to enter a trade.  When the alert goes off, you go to your trading computer and then set up your trades. 
  • Add more trading styles or strategies to your plan. This can be a bit on the dangerous side at first. The very basic technique is this: if you were using a 4 hour and 1 hour for your primary strategy time frames, go down to a 1 hour and a 15 minute instead. Use the same rules as with your primary strategy. The main differences are that you will be going for smaller profit targets, and also will have smaller stops when using smaller time frames. 

Always remember that our core strategy is always in play, buying in demand, selling in supply with the bigger picture trend in mind. Adding smaller time frame trades should enable you to earn smaller paychecks until the bigger trades/paychecks show up.

In this chart, you can see that the four hour downward trend broke on about 11/14, and a new upward trend has developed. Going long at the demand zones at either blue arrow marked 1 or 2 would have been nice and easy swing trades.The last really obvious entry was back on Nov 28.  If you missed these entries, check out the 15 minute chart.

In this chart, you would have used the same basic techniques, but now could have joined the bigger picture trend on this smaller time frame. There were smaller time frame entries on both Dec 3 and 4. This way you could be in a trade to make a couple of dozen pips, while the four hour trader is still waiting. Our core strategy works on every time frame, other than the size of target and stops, the only real difference is the quantity of trades you will be able to take. 

I personally don’t have the patience to wait days for a trade to set up if I see several smaller time frame trades show themselves. By employing different time frames (a different strategy, if you will) we can earn a few pips until the big trades show up. By staying focused on the core strategy on any time frame you choose to trade, you can still be disciplined, and not get bored!

Until next time,

Rick Wright


DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.