Trader’s Blues

Losing in trading can bring out other-worldly anger and frustration. Anyone who has taken a huge loss can identify in some small way, if only for a moment, with the despairing jumpers of the 1929 crash. All the cliches come into stark focus as you stare blankly at your P&L: pride before the fall, putting all your eggs in one basket, look before you leap, shoulda-coulda-woulda, etc. Losses have a way of humbling you and pointing you to self-reflection, critical inspection or just plain dejection.

They also can push some of us to a scotch bottle, fine cigar, and great music; especially music made by people who have earned the songs they have written; those blues musicians whose pain drips from every note. You can tell they’ve been there at the bottom of the barrel and climbed back up to talk about it. They have a way of reaching out and connecting with us, reassuring us there is life beyond ourselves and our problems.

We sometimes need that assurance we’re not alone in our experience. That there’s not something fundamentally wrong with us. That our losses in trading represent, in microcosm, the inescapable human condition: a denial of hopes, a thwarting of desires, and a final end, at least on the physical plane of this planet.

Even the wise trader (who if you are not, you should become) who has a sound money management plan in place so he won’t be destroyed by any one event, still has the sting of not getting every trade just right or having events overtake them outside of their control.

That being said, I was digging around in an old trading computer today and re-discovered a musical gem that brought a smile to my face so I posted it for you below. It’s short, only a minute long. It’s not BB King, or Robert Johnson, or Stevie Ray Vaughn, but it captures to zeitgeist of the modern trader. It’s dedicated to anyone who’s ever been underwater, far from the shore.:-)

Trader’s Blues – by Mike Shannon.

Cheers!

Fulcrum Focus

What am I not seeing?

My one-time mentor Keith Cunningham has run numerous businesses and has partnered with and shared the stage with some well known coaches and trainers in the public eye, people such as Robert Kiyosaki, Anthony Robbins, and Donald Trump, among others. Keith knew Robert Kiyosaki personally, well before his success with the Rich Dad/Poor Dad series, and has taught at Tony Robbins’ Financial Mastery events several times. Keith’s as sharp as they come, with a keen eye for B.S. in business and in people’s thought processes. It’s one of the hard-won life skills that make him such a great coach.

Here’s the point.

Even with that superior business acumen, he still has posted above his computer screen the question he asks himself everyday which is: “What am I not seeing?”

It’s a question all serious market participants should ask themselves.

There’s a misconception in the trading community-at-large that “cracking the trading nut” requires a huge mental expenditure, akin to earning a PhD. in electrical engineering, or that one must experience an exquisite, spiritual satori experience and see a vision before achieving success in trading. Some trading novitiates act as though there is a reward for being King Sisyphus, continually rolling their trading angst and baggage uphill only to watch it roll back down to the bottom of the hill.

To begin, I am fully aware of the exceptions to the rule. I understand and have lived in the trenches long enough to experience how excruciatingly challenging trading can be, so I fully comprehend the necessity and usefulness of discipline, mental and emotional well-being, and a daily success ritual of tracking trades and monitoring performance.

That being said, I’d like to pull back the wizard’s curtain for a moment and say that journaling, poring over books on trading psychology and discipline, devoting hours to reading every forum post, back-testing to the millionth degree, mentally kicking oneself over poor performance, doing penance by listening to self-help programs after a big loss can all become ingenious ways of fooling yourself into thinking you’re being productive, or “on the path” to trading success!

Anyone who vigorously leaps to defend these potential “red herrings” should examine themselves carefully to ensure that they are not caught in one of these potentially life-stealing delusions. As Richard Feynman, the Nobel-prize winning physicist, said, “The first principle is that you must not fool yourself, and you are the easiest person to fool.”

Here’s a lesson from history to illustrate:

Did you know the D-Day invasion of France in WWII actually began the night before? The 101st and 82nd Airborne divisions made their combat jumps far inland from the beachhead to cut off German communications and reinforcements and generally cause trouble where they could. It was a time of supreme bravery….and rank cowardice. For not every soldier played the hero that night. Sure, they jumped, but afterward, many hid. One group of them took cowardice to a new level:

“Too many had hunkered down in hedgerows to await the dawn; a few had even gone to sleep. Pvt. Francis Palys of the 506th saw what was perhaps the worst dereliction of duty. He had gathered a squad near Vierville. Hearing ‘all kinds of noise and singing from a distance,’ he and his men sneaked up on a farmhouse. In it was a mixed group from both American divisions. The paratroopers had found liquor in the cellar …and they were drunker than Hillbillies on a Saturday night wingding. Unbelievable.” (D-Day, Stephen Ambrose)

Unbelievable is right. These troopers knew they were at war and they refused to act like it. They lived in a dangerous denial – a denial that not only endangered them, but numerous others who were depending on them to do their part.

So the questions for our self examination: What are we denying? What are we not seeing? Who is depending on us?

Ok…so how do I propose one stay on “the straight and narrow” and avoid such denial??

The first step to success is learning to perceive the market in a way that allows you to make decisions that are profitable and repeatable, and offers you a sufficient number of trading opportunities to make the endeavor worthwhile.

Everything else is ancillary…not unimportant…but every other activity supports this.

Certainly we like to believe we have a superior way of perceiving the markets. It may not be perfect, or the “best” way, but it is demonstrable and easily examined. We invite you to watch our videos here or on youtube. Join the chat-room. Watch the daily alerts yourself and judge the efficacy of our approach. Then, as you find value there, immerse yourself in the full course. Which is, by design, not a static DVD.

The Delta Volume Analysis course is flexible to ensure we can meet the needs of various learning styles and also to respond to those who would like more in-depth explanations of certain topics such as cumulative delta, delta zones, delta divergences, etc. We’ve already added updates and new lessons to make sure those that have trusted us receive our best efforts in conveying the concepts presented. Whatever you choose….

All the best in life and trading!

Fulcrum Focus

Trading Fundamentals – High Quality Datafeed

Experienced traders and investors know that data reliability can be one of the biggest problems you have. We’ve had data-feeds from some brokers give marginal volume data, even though the price data-feed was adequate. When you’re observing a Delta Divergence or tracking the Cumulative Delta, the quality of your data-feed is paramount.

Let’s look at some basics.

Originally, market technicians noticed that once prices fell to a certain area on the chart, they seemed to bounce back. That area was then assumed to be an area “buyers” would support the price. Unfortunately, many have not had a way to dig into the concepts of real “support” and “resistance,” a la Delta Volume Analysis, and repeatedly trade these levels like a boxer closing his eyes as he leaves the corner: He wants to fight but he doesn’t want to see the haymaker coming. You need to be rigorous in terms of what support and resistance means or you’re simply judging them by what they “look like” as opposed to what their probability rate is.

Don’t even get me started on using math formulas for determining levels…

So be sure not to skimp on your data-feed service! We’re planning on having a couple of vendors at some point come in and discuss the details of how they parse their data and package it. For the curious, The ONLY data feeds that we feel offer proper clean bid/ask data at this time are DTN.IQ, Zenfire, and CQG.
Cheers,

Fulcrum Focus

Why I am not afraid to trade the highs and lows

Looking around on the web, I found a video explaining why a trader shouldn’t trade the highs or lows and it gave me pause. Since the market is consolidating 70-80% of the time, I actually prefer to trade the highs and lows. Why wouldn’t you look for opportunities at the highs and lows?

The short answer is you don’t have a solid method for determining whether it’s a breakout of consolidation or a return to the mean setting up. If you don’t have a way to counter-trend trade as well as trend follow, you’re leaving money on the table.

When a person first learns to trade actively in the market, they’re bombarded with indicators of various stripes that seem to make sense and end up being accepted because of a lack of understanding of what drives the market. A new trader doesn’t know that he doesn’t know and adds studies, stochastic oscillators, moving averages, and other convoluted derivations of past price action.

***NEWSFLASH*** Price is only half of the information.

I’d be afraid to trade the highs and lows too, if all I had to work with was price information. I’m not dismissing price action or its uses in trending markets, but I’ve sat through numerous days of low volatility getting useless price signals. You need an exceptional tool to make good use of those kinds of days.

As far as the highs or lows are concerned, the frustration of waiting for a price-based indicator to cross or “domino” before you take a long or short is amplified by the common occurrences of the move being over, or worse yet, a false breakout of consolidation leaving you as the chump who bought the high or sold the low.

My trading partners and I frequently step in front of moves and capture a good profit before trend followers hop in and boost it further. How? We can see resting inventories of supply or demand at certain price levels and thus have a huge advantage in gauging the strength of the move which allows us to join the auction in the right direction with much more confidence. That’s the power of Delta Volume Analysis.

I personally believe that understanding Delta Divergence combined with appropriate risk management can take a person from “novice” to “quite adequate” in a very short time.

Are we always right? No, of course not. We do not have predictive tools, we have probability tools. However combined with astute risk management, we are close enough to “right” to make it worthwhile and to judge the odds of various entries. We’re proud of what we have to offer. Certainly we’re a bit biased, but we’re biased from experience. These ideas have a lot of real-world miles on them. Maybe they can help you. Take a look at some of our videos, see what you think, and feel free to email us with questions.

Final note: If you want to see the math behind the more popular indicators, you can google Welles Wilder’s numerous works or Chuck Lebeau and David Lucas’ “Computer Analysis of the Futures Market” and gain a deeper understanding of how to use them to effect. Just understand their place and don’t expect them to deliver what they cannot.

Cheers,

Fulcrum Focus