Emini Day Trading Lessons: +9.5 Points – Don’t Overthink the Trend
Trading trends has never been my forte. In fact, it's probably been my most obvious weakness since I started trading over a dozen years ago.
We all know the core concept - if there's a trend then simply trade with it until it ends. After all, "the trend is your friend"! The reality is rarely so simple however and my experience working with other traders suggests that I'm not alone with struggling to trade trends to their full potential.
The problem with trends is that they're always glaringly obvious in hindsight but during their development there's far less certainty involved. We know that one side is largely controlling the market but it's easy to see things as being oversold or overbought, or even worse to second-guess yourself once you're in a trade if the market doesn't take off into profit right away. All trends eventually come to an end so it's hard to set aside that nagging feeling that this might in fact be the top or bottom and the market is now out of steam.
Always Late for the Party
In my early years trading Forex I saw a lot of these intraday trends come and go and there were very few I truly took advantage of. I might catch a small amount early in the move but usually after that I would get fearful that the trend was slowing and possibly ending or I would be scared of giving my tiny profits back. So instead I would wait on the sidelines, looking for that perfect reversal or desperately trying to convince myself to hit the button and join the move.
Of course, as many of you can probably relate to I would often manage to overcome my hesitation just in time to latch onto something late in the move after all the red flags were popping up and I would then take a loss. Frustrating, to say the least.
Over the years I've improved my skills and mentality and my results have become much better in trends as a result, though I still rarely fully take advantage of everything that's available. That's not really the point though. As long as I take the trades when they're available and don't let emotions cloud my decision-making then I will usually consider that a successful execution of my plan and a day well traded regardless of whether I picked up every possible tick.
Letting Go and Letting The Market Decide
The biggest thing that helped me over this hurdle was taking a simplistic approach to trade management while not trying to out-think the market. When price is ranging or swinging within the highs or lows of the day I'm willing to get more active with my management as I'll look to tighten stops or take profits off the table when momentum is limited, but when we're in a trend I take more of a "set it and forget it" approach.
I keep my stops open and accept the possibility of losing a full 1.25 points as I want to give the market a bit of breathing room and a chance for the trend to re-establish itself. Because the market is moving aggressively in a trend I try to be a bit more aggressive with my targets as well which helps to keep my reward to risk balanced and my expectancy high.
The takeaway here is that I try to just ride the waves of the market and not fight it. It's like surfing - if I see the waves coming then I get on the board and try to catch it. Not all of them will work out but some will and the ones that do will be more than worth it. If I sit there all day waiting for the "big one" then I'm probably going to miss out on most of the action or might not do anything at all. What's the point of that? I'm here, I might as well play along.
This all probably sounds obvious to many of you but to me it was a major paradigm shift. Suddenly I went from trying to predict everything in advance (including trying to catch tops and bottoms) to simply letting the market show me the way. Price is king, as they say.
Taking this approach and shifting my mentality in this way took a lot of the pressure off and allowed me to simply focus on following my plan and hitting the button to execute valid trades. Trading trends became simple, effective, and profitable.
There's Always Room for Further Growth
Again, it didn't mean that I instantly began to take out 10+ points from every single trend but it did mean I was able to trade them far more actively than before and to not second-guess myself on the early moves. This is something that I consider a work in progress even after all these years and there's still some trending days where I over-think things a bit and miss out but I'm at least aware of my weaknesses and I continue to work to improve.
I think a lot of people get the false impression that once a trader has become consistently profitable then they have "made it" and there's not much else to do at that point but for any professional I've ever met the learning never stops. They are constantly striving to improve, to work on the weaknesses and to reinforce their strengths.
If that part of trading doesn't really appeal to you and you're looking for the easy way to consistent profits then you're still more than welcome to try, but you can probably expect your complacency to be met with a dose of painful reality from the market sooner or later. My bet's on the former.
- Strike While The Iron is Hot - March 1, 2021
- The Path to Becoming a Full Time Trader - February 22, 2021
- Looking to 2021 and Beyond - January 20, 2021
