My biggest loss in 4 years

So, let's not beat around the bush. This morning I suffered my largest loss on a single trade since the summer of 2013.

As of yesterday's close, the position was +1.13R in profit. Within a few seconds of the market open, I was stopped out for a -1.95R loss.

S*@t happens. Let's look at the chart:

A couple of messy charts

If you are inclined to trade the indices, you may be familiar with the charts of the UK FTSE and the Australian ASX, which show a distinct lack of direction in recent months:

Playing dumb in the markets

When trading I play dumb. What I mean by this is that I avoid pretending to be 'smart' by predicting what may or may not happen. The people who draw squiggly lines on a chart outlining future price action - how do they know? The future doesn't exist.

So, by playing dumb, I am letting the markets show me the way - I simply react to what is happening.

Choosing not to play - how one trader approached the EU referendum

"Systems trading is ultimately discretionary. The manager still has to decide how much to risk to accept, which markets to play, and how aggressively to increase and decrease the trading base as a function of equity change. These decisions are quite important - often more important than trade timing." - Ed Seykota

Two weeks have past since the result of the EU referendum here in the UK was announced.

Larry Hite and the EU referendum

"When I was a kid and got my first motorcycle, I had an older friend who would always get into fights. He told me, "Larry, when you are on a motorcycle, never argue with a car."" - Larry Hite, from his Market Wizards interview

This week I have been reminded of the above analogy when thinking about the EU referendum here in the UK. This is a classic example of a major 'event' which may (or may not) cause significant volatility and movement in the markets.

An example of how emotions can affect your risk to reward performance

A couple of years back I had a meeting with a trader who wanted to improve. He had taken a break from the markets, and came to me for help in putting together a clear plan in place with good risk management and having the right mindset at the top of his list of priorities.
I've talked in the past about how closely your attitude to risk can affect your level of emotional control, and ultimately your discipline, as a trader.

With this in mind, we talked at length about his previous trading experiences and in particular his most profitable trade, which was this set up on the a UK stock. Here is the chart:

Looking backwards to go forwards

The last few weeks have been a total washout for me. The volatility in the market (and in individual stocks) meant that I was getting hardly any setups to consider, let alone take - in either direction. As someone who follows price trends, this was a concern. The majority of stocks, as well as the general market averages have been trending downwards, so why was this?

What I learned from two Market Wizards about volatility

Given that the markets have taken off to the downside so far in 2016, readers may be wondering why I have not taken any positions so far this year.

The mathematical side of trading

When most people talk about how they approach the market, they refer solely to their style of trading.

In my own case, I follow price trends - I wait for a potential new trend to be signalled, and I will then 'hop on' for the ride.

However, there is another important factor you should consider, which is all to do with the mathematical side of trading.

Trading or gambling?

Every so often you stumble across a trader who has made a significant amount of money on a single trade, in a short period of time.

But then when you read a bit more, you actually find out that, to generate this profit, they risked an amount equal to the profit - or even more.

How my trading approach suits my personality

We as individuals all have our own personality traits and characteristics. Sometimes you have to learn and overcome some of the issues these can create. However, sometimes a way forward can be shaped which embraces these traits.

New testimonial

I recently had the pleasure of meeting Fisayo, who was kind enough to forward the following:

"I am not based in the UK but was in the country recently for a vacation. I am a trader/portfolio manager based in Africa but still love to network with traders all over the world - as they say - you never grow old if you keep learning!

A summary of what trend following can't do (and what it can)

A good trend following approach will include the following factors:

• What market are you looking to buy or sell (what markets are in your trading portfolio?);
• When do you buy and sell a position (what are your entry rules?);
• How much to buy or sell (what are you risk per trade levels and your overall account risk levels?);
• When to exit a losing position (where is your initial stop placed?); and
• When to exit a winning position (what are your exit rules?)

These are the basic parameters of any trend following system, and are set at the discretion of the trader.

Do you get what you want from the market?

The most famous (and thought provoking) comment from Ed Seykota's interview in Market Wizards was his assertion that 'everybody gets what they want' from the markets. What was the point behind this oft-repeated quote?