Anyone who has been studying the markets for some time has heard this sage advice:
“Find a market you like, a way of trading that feels right for you and stick with it”
For a long time this annoyed me, I’ve written a bit about this side of the trading journey below, if you are interested take a look, if not no worries, here’s the (not so) short answer!
Recently I found Order Flow, more specifically I found Tape Reading. This came about around the same time as I made the shift from UK Spread Betting a lot of different markets to trading Futures, principally for the benefits of a transparent, centralised market with volume and data that was shall we say a little more legit than the consumer FX market.
Initially I was trading Crude Oil which felt pretty wild, It’s a cool market and I’m not giving it a hard time but I felt it was something that was a bit too volatile for me. I did a bit of looking into why this might be and this was when I finally made a good stab at understanding exactly what liquidity was and how it related to volatility. This was a huge eye opener. Previously I understood liquidity in the sense that “I could rattle off a one liner so I don’t sound dumb” as Ryan Gosling would say in The Big Short (ace film by the way but much better book), but once I studied liquidity properly it changed the whole way I viewed markets and trading. Incidentally liquidity isn’t a difficult concept I just think it means different things depending on which type of market participant you are.
This was all literally happening about the same time, about a year ago actually and it felt like I was having an awakening. The final piece in me finding a method I was happy moving forward with was being recommended John Grady’s course No BS Day Trading. This was when I adopted the US Treasuries market, trading futures short term by reading Order Flow via tape. This is where I am now as a student.
Here’s the longer answer from a recent post.
I make no bones that I’m a long term patron of a terrible establishment, I call it The Waiting Room. The Waiting Room is a place where people come to read all they can, study up and prepare for that elusive day when they feel ready to get into the market, to take part safe in the knowledge they are prepared and qualified to commence their trading careers.
Directly across the street from The Waiting Room is The Dive In Tavern, a place where the other type of trader goes, it looks like a nice place but I’ve never been, far too scary for me. I hear tales of people there blowing up accounts in their first week and ignoring any advice that comes their way. Here in The Waiting Room we have the other problem, we all take everyone’s advice, get fat on trading demos and free trials and daydream about how when we do come to trade it won’t be scary because we will be prepared! We will be learned and ready in all respects!
As you walk down Trader Lane you want to keep looking straight ahead. Patrons of The Dive In Tavern will attempt to coax you in with tales of quick easy cash, excitement and trading from the sofa, while those of The Waiting Room will whisper cautiously of the perils of undercapitalisation and the importance of trading plans, checklists and documentation. Of course what you need to do is keep walking, past these two distraction and onward to the Shangri-La of measured risk.
It is obvious that either extreme is undesirable, we no more want to dive straight in to the markets unprepared than we want to get lost in the comfort of endless education and a lack of action, convincing ourselves we are preparing when in fact we are procrastinating. This I feel is the crux of the amateur traders journey, or at least it was mine for a long time. Having spent a long time trying to learn, being part of educational groups, opening accounts, closing accounts I’ve gotten really tired of being a wannabee trader and am pretty motivated to make the jump to live trading. That being said, I don’t think I would be in this position if it wasn’t for that opening statement – finding a market and a way of trading that speaks to me.
This was a concept that eluded me up until very recently and always annoyed me when suggested. I always thought, I’m not a Trader, how do I know what speaks to me? How do I know what type of trading will fit my personality? As Cliché as it is I only thought that because what would eventually speak to me hadn’t crossed my path yet, I’d tried a lot of different things, been guilty of strategy hopping like the best of ’em, it must be hard for my wife to have heard so many exclamations of “this is it, this is what I’m doing now, nothing else”. Some of these things made sense but I always felt there was something missing, something that was inherently tied to the way the market moved, how it functioned and the behaviours of it’s participants. For me that thing would turn out to be Order Flow and a centralised market.
I must be clear, the key to profitable trading it is not, or at least is not yet because I’m not profitable, but it was the key for me finding something I could have confidence in going forward, to apply all the things I’d learned in my time in The Waiting Room. Do I understand Order Flow fully? Not yet. Is reading the tape easy? No. Am I a tape reading multi market ninja, definitely not. Am I someone with a way ahead, with confidence what they are paying money to learn has merit, longevity and a basis in sound reasoning? Finally, yes.
I’m not saying that I won’t do anything else ever. Any story I’ve heard of successful traders involves growth and an organic migration of strategy in order to keep up with the markets. Aside from that, turning this corner of feeling like I have a strategy to work with has given me a real thirst for knowledge, far greater than before. Learning about the markets in general has become a real passion, understanding market behaviour, the industry itself and all its different avenues has become what I do with my spare time, oh which I don’t have much. I have an aspiration to understand Options at some point, I’d like to have a long term investment portfolio too, but the key distinction for me now is that I’m content for all that to wait, to focus on what I’ve chosen, to ignore distraction (and I get distracted easily) because I believe in the method going forward and that is a huge relief.
Is this any help to those who are right at the start? Maybe not and maybe it shouldn’t be, you have to go on your own journey, you have to discover things in your own time at your own pace at a natural point. If I were to give any advice it would this: You will spend time, effort, capital and emotional energy exploring strategies, markets and products in the early days that will not bring you success. You will most likely force yourself to understand one or many trading strategies that do not make sense, that you didn’t partake in designing and that will at a core level irk your sense of confidence in understanding them. Know this, it is fine. It is acceptable. It is ok. Do not force it, let them go, do not feel committed to them and take comfort in the knowledge that when you find something that does eventually fit your personality, that makes sense to you, that speaks to you, you will absolutely 100% know that that is the case, it will be obvious.
truly, I hope that’s at least some comfort to those feeling condemned to the backlit watering holes of Trader Lane.