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Written by Lance Beggs   

Your Trading Coach - latest newsletter

Trading Newsletter (26 Feb 2010)

 

  • My Favorite Indicator

  • Today's Trading Quote

  • Mike Reed - TradeStalker - RBI Trading Camp

  • Must Read Blog Articles

  • My Biphasic Sleep Experiment

 

Hi traders,

 

I get lots of email asking about the pro's or con's of various indicators. Usually, much of that discussion does not make its way onto the website or newsletter. After all, my message is primarily about price action and market context.

 

However, one of the recent discussions asked me to choose a favorite indicator. And for some reason I thought this might be something worth sharing. If you are still stuck on the "search for indicators" roundabout, at least be sure to check this one out.

 

On the other hand, maybe the decision to post this article is a result of my fatigue - hence the biphasic sleep experiment.

 

Happy trading,

Lance.

 

 


My Favorite Indicator

 

Here's a recent question I received...

 

"If you had to use one indicator, and one only, which would it be?"

 

Simple... no thought required...

 

Keltner Channels.

 

Parameters set to (10,1.5) as my default, varying to (10,2) or (10,2.5) if necessary to ensure a nice snug fit around the price.

 

You'll find some basic info here: http://en.wikipedia.org/wiki/Keltner_channel, but the best way to see them is to place them on your chart.

 

The original use of Keltner Channels as part of a trading strategy, so the story goes, was to buy when price closed above the upper channel line (indicating an uptrend) and to sell when price broke below the lower channel (indicating a downtrend).

 

I don't subscribe to that theory.

 

Instead, I prefer to use a reversion to the mean concept. Depending on the context of the market, I'll be aiming to buy near the lower band looking for a bounce back upwards, or sell near the upper band looking for prices to fall.

 

Like all indicators though, please remember it's a tool. It's not a complete system by itself.

 

Market context and price action analysis will tell you the market bias. Your job is to then take trades in the direction of that bias. Keltner channels can assist at this point.

 

In an uptrending environment, trade opportunity is found in the vicinity of pullbacks to the lower channel. In a downtrending environment, opportunity is found in pullbacks to the upper channel. And in a ranging environment, both may provide opportunity. Some examples follow below; remembering that it's never as easy as it looks in hindsight.

 

Nothing magic - standard envelope or channel theory really. But if you're not familiar with Keltner Channels then have a look at them and see if they have a place in your indicator toolbox.

 

Cheers,

Lance.

 

 

 

 

 

 

 

 


Today's Trading Quote

 

"Near-term price fluctuations reflect the cacophony of collective perceptions and emotions, such as greed, fear, hope and faith. It is a live auction where the adrenaline rush is the currency of the moment. Each transaction represents a momentary consensus between a buyer and a seller. If one could know what all the other participants wanted, one could reliably predict price action. The market is a price discovery mechanism. A short-term trader is essentially playing a guessing game, trying to decipher what all the other guessers are guessing."

 

... Dr. Alexander Elder, "Entries & Exits"

 


Mike Reed - TradeStalker - RBI Trading Camp

 

For all Mike Reed / TradeStalker fans...

 

In case you haven't seen the emails...

 

Mike is running another RBI Trading Camp from March 7th to 13th. This intensive training session is run via Hotcomm (an online webinar system), so you can attend from the comfort of your own home.

 

Numbers are strictly limited to eight attendees in order to ensure maximum learning value.

 

For more details or to register, see the RBI Trading Camp webpage here.

 

If you've finally realized that you won't achieve trading success through buying more ebooks or trading robots from internet marketers, maybe it's time to learn from someone who's actually been trading for 27 years!!!

 


Must Read Blog Articles

 

A new entry has been made to the 'Must Read Blog Articles' webpage.

 

Learning Process

 

Or go here to see the whole list so far (with more to come in the following weeks): http://www.yourtradingcoach.com/Articles-General/Must-Read-Blog-Articles.html

 

 


My Biphasic Sleep Experiment

 

Life... the stuff that gets in the way of your trading!

 

I know that everyone has difficulty at times fitting their trading in and around the rest of their life. Especially if you're still working a full-time job and raising kids at the same time.

 

But seriously, I can't imagine a much worse time-zone for daytraders than the east coast of Australia.

 

With the best choice and opportunity available during the UK and US market hours, that means either trading in our evening or overnight.

 

The UK forex hours (8am-5pm GMT) are equivalent to my 6pm - 3am, the best part conflicting with family time (dinner, kids homework and never-ending trips to and from soccer training, keyboard lessons, guitar lessons etc etc etc).

 

The US emini hours (9:30am-4:15pm ET) are equivalent to my 12:30am - 7:15am. That's a killer.

 

Not complaining, mind you. I wouldn't ever trade this problem for a 'normal' job. And I accept their are some liquid markets in my normal daytime (SPI, HSI for example). I just haven't found them to my liking. So, I accept it's all my decision to live with this problem.

 

For a long time I just forced my trading onto my family. Trading time was my work time. They came second. This obviously was not a wise plan and I consider myself incredibly lucky to still have a family.

 

So now I place family first and select trading times that fit around other family responsibilities. Early UK market hours are only traded in small blocks of no greater than two hours, ONLY if family responsibilities allow me to trade at that time on that day, and ONLY if volatility is expected such as at the open or in the period immediately following a major news release. The bulk of my trading is therefore done once the kids are asleep, in either the forex UK/US overlap, or in the emini futures.

 

That's the best solution I've found so far for still allowing family-time. The side-effect though is that it increases the amount of 'night-shift' trading leading to even greater danger of fatigue induced error.

 

I'm well aware of the dangers of fatigue, from my previous career as a pilot and aviation safety specialist. In fact, I'm the only trader that I know of who has a fatigue management plan (see this article for an intro to the concept: http://www.yourtradingcoach.com/Articles-Personal-Development/Trader-Fatigue-Management.html)

 

The 5/12 rule discussed in the above article is designed to ensure I minimize the likelihood of trade error due to acute fatigue. If I don't meet the 5/12 rule requirements, I don't trade.

 

Great in theory...

 

When it comes to putting it into practice though, I've seriously let myself down and often do trade with less sleep. It's easy to rationalize at the time - life just doesn't allow me to get that much sleep, say for example when I trade till 3am, get to sleep by 4 and have to be up at 8 to drop the kids to school.

 

End result - one very tired trader.

 

So, here's my latest plan - a four week trial of a biphasic sleep routine.

 

A few definitions:

 

Monophasic sleep is how most people do it. One sleep phase per 24 hour period, usually a single block of around 8 hours +/- 2. Sounds awesome, but not possible for me.

 

Biphasic sleep involves two sleep phases per 24 hour period, often one longer one and a shorter one. I guess it's like having a main sleep, plus a nap, just formalizing the nap period and ensuring it happens each day. Siesta time!

 

Polyphasic sleep involves greater than two sleep phases per 24 hour period. Say for example 5 hours awake and 1 asleep, repeated four times in 24 hours. That is perhaps a bit extreme for me right now.

 

I first came across this concept a couple of days ago, after discovering a press release from a University of California study (http://www.eurekalert.org/pub_releases/2010-02/uoc--amn021110.php) in which the findings "suggest that a biphasic sleep schedule not only refreshes the mind, but can make you smarter."

 

I like that idea. I feel smarter already, just knowing what monophasic, biphasic and polyphasic mean.  :-)

 

Looking at further research on the net, and testimonies from others who have adopted this lifestyle, it appears that further benefits are an increased alertness, focus and the requirement for slightly less total sleep.

 

The downside appears to be increased feelings of fatigue for the first week or so of the trial (no different to status quo) plus the fact that sometimes life doesn't allow us the opportunity to take our second sleep (some flexibility may be necessary, to adjust the schedule as required).

 

My wife already thinks I'm strange... so there's no further downside in that department.

 

Ok, my plan...

 

Week 1 (Mar 1-7):  Catch up on sleep first. I imagine it's best that I start from as rested and relaxed a state as possible. For the next week (March 1-7) I'll be limiting trading to a maximum of a half session per day, and aiming to get 10 hours sleep per day total (through two sleep periods if necessary.)

 

Week 2 (Mar 8-14): Maintain this rested state and establish a benchmark for measuring my level of fatigue. I'm not 100% sure of how I'll do that at this stage. Possibly through taking a reaction time test at a number of fixed times through the day, in particular pre-trading, mid-trading and post-trading.  http://www.humanbenchmark.com/tests/reactiontime/index.php

 

Weeks 4-6 (Mar 15 - Apr 11): The four week biphasic sleep experiment. I'll adopt a routine of 4.5 hour sleep from 3:30am to 8am and a 1.5 hour sleep, usually from 1pm to 2:30pm. This is a total of 6 hours per day. Fatigue levels will be monitored both subjectively and objectively via the reaction testing. I'm not sure whether or not the reaction testing will show any useful data, but it can't hurt and each test takes less than a minute anyway.

 

Not totally scientific, but a bit of fun and it might just lead to better life/time management, and less worry over the long-term health impact of chronic fatigue.

 

I'll provide updates as we go through the next few weeks.

 

Cheers,

Lance.

 


Lance Beggs

 

Trading Website:           www.YourTradingCoach.com

YouTube Videos:          www.youtube.com/YourTradingCoach 

 

'Because You'd Rather Be Trading For A Living...'

 


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© Copyright 2009. Lance Beggs. www.YourTradingCoach.com. All Rights Reserved.


 

DISCLAIMER:

 

Trading the financial markets WILL expose you to risk, and the potential loss of your money. Trading is difficult, and can take many years to master. In fact most people never master trading, quitting through frustration or loss of funds well before they achieve success.

 

If you are not yet achieving consistent profits, then we encourage you to continue educating yourself on the business aspects of trading, risk management, money management and trading psychology. And NEVER RISK MONEY THAT YOU CANNOT AFFORD TO LOSE.

 

The information available on our website and any of our products is GENERAL COMMENT ONLY, for the purposes of information and education. We don't know you so any information we provide does not take into account your individual circumstances, and should NOT be considered advice. Before investing or trading on the basis of our material, we encourage you to first SEEK PROFESSIONAL ADVICE with regard to whether or not it is appropriate to your own particular financial circumstances, needs and objectives.


We believe the information we provide is correct. However we are not liable for any loss, claims, or damage incurred by any person, due to any errors or omissions, or as a consequence of the use or reliance on our website or products, or any information contained within.

 

All charting and analysis platforms referred to or used in our articles and videos have been chosen because of compatibility with our screen capture software. These charting and analysis platforms are being used to demonstrate and explain a trading concept, for the purposes of information and education only. They are not necessarily used by us in our live trading, and are in no way recommended as being suitable for your trading purposes.

 

All chart layouts (including timeframes, indicators and parameters) within our articles and videos are being used to demonstrate and explain a trading concept, for the purposes of information and education only. These chart layouts are not necessarily used by us in our live trading, and are in no way recommended as being suitable for your trading purposes.

 

Unless specifically stated otherwise, all trade setups and trades shown within our articles and videos are to be considered hypothetical, selected after the fact in order to demonstrate a trading concept for the purposes of information and education only.


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This website, blog and newsletter may contain content by guest authors. Any web links, or URLs, within any guest articles or videos are included as professional courtesy, and in many cases is a publishing requirement. However, please understand that their article or video has been included in our newsletter, website or blog, simply because we believe that article or video provides educational value for all traders. In no way are we providing an endorsement of the author's website, newsletter, courses, or any other materiel, unless specifically stated. In addition, we are not liable for any loss, claims, or damage incurred by any person, due to any errors or omissions, or as a consequence of the use or reliance on any third-party website or products, or any information contained within.

 

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U.S. Government Required Disclaimer:

 

Commodity Futures Trading and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.


CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN

 

 

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