Only Take High-Percentage Shots

In basketball, you always want to take the highest-percentage shot available to you.

A 3-point shot from the logo, or forcing a shot when you are being double-teamed, is considered a low-percentage shot.

Sure, you could still make the shot. But that still doesn’t change the fact that it is a low-percentage shot, and by doing it enough times, you will see that your actual completion rate will be rather low.

A dunk or a lay-up is considered a high-percentage shot because the odds of making it are considered very high.

Sure, there have been missed dunks or missed lay-ups in the NBA, but these are few and far between. And the fact remains that dunks and lay-ups are always going to be high-percentage shots.

My point is that as traders, we always want to take the trades with the highest chance of success.

Sure, you could take a risky trade and still end up winning the trade. It happens.

But the law of large numbers will show you that by doing this often enough, you would end up failing big time.

Play it safe. Be very selective. Be very disciplined.

Don’t take trades which do not match every single criteria of your trading strategy.

At least you will know that the law of large numbers is on your side.

The Battle Is With Yourself

It’s really true what they say – that trading is essentially a battle with yourself.

The strategies are all there. The hard part is making yourself stick 100% to the strategies and staying disciplined.

It’s true that when you are day trading, you are discovering who you really are. What you’re really made of.

Some of the struggles I’m still trying to overcome while trying to trade forex

  • Learning to NOT trade during Asian session and wait till London session to open before trading.
  • Jumping into the occasional poorly-planned “quick profit” trade (and ending up losing most of the time).
  • Feeling frustrated that there aren’t enough good setups to find in a day.
  • Feeling frustrated that my trade doesn’t shoot up as quickly as I would have liked.

Still got a lot to learn.

Rinse And Repeat

  1. Discover new strategy.
  2. “This is really, really good! Better than everything I’ve been doing before.”
  3. Try out new strategy.
  4. Get some early success.
  5. Start to hit some losses.
  6. Start to hit a LOT of losses.
  7. Get really discouraged.
  8. Go back to reading/learning/discovering.
  9. Realise that there are still a lot of things I don’t know.
  10. Discover new strategy.

And the cycle keeps on repeating.

Hope I can get out of this endless cycle soon.

Trading Is Like Fishing

I don’t know a whole lot about fishing, but I’d like to think that day trading is a lot like fishing.

You have to be really patient and be prepared to wait a loooong time if you want a good catch.

If you’re the kind of angler who gets impatient and changes location every few minutes, you are unlikely to get much returns.

Find a good spot under good conditions, believe strongly in your choice, and just be patient.

Don’t actively go out and chase it. You’ve got to let it come to you.

Rewards will come to those who are the most patient.

Losing Faith In The Trade

This always happens to me.

The setup looks great, conditions look great, and I enter the trade…then after 5-10 minutes it’s still stuck in red, and then I start to say to myself:

“Maybe this doesn’t look like such a great setup after all.”

“How did I not spot that red flag before entering the trade?”

“I think I jumped into this trade a bit too early. Should have been more patient and waited awhile more.”

“Why can’t this just go up?? Why is it always stuck in red??”

“That’s it. I’m going to get out the moment I turn green so at least I don’t make a loss here.”

I guess there are two lessons to learn here:

  1. Be extremely patient and careful before entering a trade. Don’t enter a trade unless you are 100% certain this is the setup you are looking for.
  2. Have faith to see it through till the end. If this is the kind of strategy you want to trade, then have the resolve to see it through to completion. Believe in your own thesis.

By losing faith and exiting so many of my trades early in the past, I must have had left a lot of potential profits on the table.

Trading is a game of faith and patience.

Past Few Weeks

It’s been a extremely crazy past few weeks. A whirlwind of emotions.

Starting out trying to trade E-mini (ES) options, because I wanted something that traded round-the-clock. (I live in Asia so US market timings aren’t good for me at all.)

Started out pretty well, but then soon after I began to do badly, and I decided I wanted out.

I wanted to trade something that gave me much more opportunities to trade in a day.

Nothing against ES, it’s just that I didn’t want to be trading just one instrument all the time. I found it quite limiting. The other futures options didn’t have all that much liquidity in my opinion, especially during Asian hours.

Which then made me turn my attention to Forex.

I’ve never ever wanted to come near Forex in the past because I thought it i) was extremely complex, ii) was extremely difficult to be profitable in, and iii) required a huge amount of capital.

After a few weeks of intense research into Forex, I learnt that it is actually realistically possible to trade Forex provided you know exactly what you are doing.

What I like about Forex is that, apart from it being tradable almost 24 hours a day, it is extremely liquid and there are so many currency pairs to choose from.

There are so many opportunities to trade in Forex at any given moment, provided you know how to trade correctly.

Which also meant I finally had to learn price action trading strategies, something which I had never really bothered to get familiar with in the past. (I had been using trading indicators in the past.)

Price action trading really opened up a whole new world to me, and I began to see the market much more clearly, having now understood the concepts of market structure, support and resistance.

I can’t believe I had been trading all along without having understood anything about market structure.

I’m constantly learning as much as I can every day about Forex trading and how to be a consistently profitable Forex trader.

It is extremely intense, but I believe all the effort will be worth it in the end.

It is going to be a very very long road ahead.

5 Important Things I’ve Learnt

1. I must accept that I will lose trades.

Not every trade will be a winner. Nobody can win 100% of the time. A realistic win-rate is most likely between 50-60%, depending on your strategy. So therefore, I will expect to lose almost as many trades as I win.

2. I must accept that I will never be able to enter at the absolute lowest point, nor exit at the absolute highest point.

It is almost impossible to catch the “perfect” entry or exit. Just be happy with getting the profits that you had targetted (if you manage to get them).

3. I must accept that for almost every trade, there will be “red” moments (i.e. being in deficit) and there will be “green” moments (i.e. being in profit).

It is very rare to be able to jump into a trade where it just goes straight up all the way from start to end. There will almost always be agonizing moments where the trade just doesn’t go in your direction before hitting your desired profit target (if you manage to get there).

4. There will be periods of winning, and there will be periods of losing.

I must accept that wins may come in bunches, and losses may also come in bunches. Have to stay mentally strong when the bunches of losses come.

5. I must accept that I will inevitably always make mistakes.

No matter how many times I trade, I believe I will always still make mistakes and there will always be something new to learn every day.

“I Need To Trade Something”

One of the biggest temptations we fall into during day trading is when we feel the strong need to be trading something, especially during long periods of not seeing your perfect setup appear.

Especially also when you see prices shooting up, thus creating huge FOMO feelings within you.

Frustration builds up. Impatience kicks in. You feel you need to be doing something or else you’re not going to make any profits.

That’s where major discipline is needed to rein in your emotions and tell yourself you will only trade your perfect setups and nothing else.

Trust me, I’ve jumped into a lot of ill-advised trades because I was thinking “I need to be trading something!” and they have almost always turned out badly, and then I feel major remorse after that.

Learn to be patient. Practise self-control. Block out the FOMO.

This is what separates the men from the boys.

Getting Out Too Early

Backtesting is one thing, but when you’re in an actual trade and it’s going well for you, that’s when emotions start to mess with your head.

I just did a trade which went well right at the start, but instead of holding it till my intended 2x profit target, I got scared and cashed everything out midway through.

It eventually went on to hit the 2x profit target.

I got scared because I saw my real-time gains fluctuating wildly with every second.

Sometimes I’m up by a lot, sometimes I’m up by only a little.

My biggest fear is for a major reversal to take place, for the price to suddenly hit my stop-loss, and for all my theoretical gains to be completely wiped out.

I didn’t have the faith to hold it right till my intended profit target, which worked so well for me on paper in my backtesting.

In other words, I can be fairly confident that the trade I got into would more often than not hit my 2x profit target, but I just got scared midway through and decided it was better to cash out some profits than have none.

This is something I have to work on – managing my emotions during a trade.

To have faith to see it through right till the end.

To have confidence in the results of my backtesting.

It’s a long road ahead. I still have plenty to learn.

“I’m Not Too Attached To The Outcome”

Not sure if anyone caught this interview of Israel Adesanya a few days ago.

He fights Robert Whittaker at UFC 271 tomorrow, but at this particular moment in the interview (timestamped above), he was talking about his loss to Jan Błachowicz at UFC 259.

I found what he said very memorable.

He said: “Any loss I’ve ever had…I’m not too attached to the outcome.”

I think this is the exact mentality a day trader should have as well.

Win a trade? Well and good. No need to get too happy.

Lose a trade? Do not get attached to the loss.

Just move on to the next trade, because you should know that as long as your EV (Expected Value) is positive, you will become profitable over a large number of trades provided you don’t blow your account before that.