ICT Forex 20 Trade Psychology & Effective Journaling - newsqlguru/ict-index GitHub Wiki

ICT Forex - Trade Psychology & Effective Journaling

Key Terms

Psychological Barriers
Trade Journal

Content

Major Psychological Barriers
Solutions for Overcoming Them.
- Fear of Missing Moves or Fear of Missing Out (FOMO)
  - Comes from not fully understanding what your setup is.
  - It is rooted in your unique setup.
  - Trust your setup, when understood.
  - Define your setups in a trading plan.
    - Once understood FOMO is reduced.
  - A setup should be based on time and price.
  - We wait for it too form in the market at some time and at some price level.
  - The setup should be consistent and repeatable, not something we are trying too force.
    - If the setup/pattern is ambiguous or untimely and happening at random times, the setup is probably not valid.
    - This would manifest as hit and miss trades with no real consistency.
  - Knowing your setup intimately will reduce anxiety.
    - ICT uses Kill Zones for the time aspect of setups.
      - We know when we are looking of high probability trades
        
        Time of day and day of week.
        
        We also understand the bias bullish or bearish and anticipate moves in the direction of the bias.
        
        This reduces anxiety.
        
        Even if we do miss a trade we know another will come along.
        
        Without this we are anxious neophyte traders on the edge all the time waiting for something to happen.
- Fear of Losing
  - Comes from looking for systems that need high accuracy.
  - This feeling comes from not having a plan.
  - Not understanding your trading plan consistency in back testing and forward testing with paper trading.
    - We don't trust the system because we have not seen it working and overcoming momentary lack of consistency.
  - Without this proven performance and trust in the system we will not have the wherewithal to be a trader.
    - A trader must embrace uncertainty, the ability to do this is an individual decision.
  - If you are going to trade you can not fear taking a loss.
    - Fear of taking a loss leads to over leveraging and over trading.
      - Both of these conditions are easily fixed.
        
        Lower your leverage, you won't fear taking a loss if you have a loosing streak.
        
        Slow the trade frequency down, and the high trade frequency won't erode your equity.
- Impatience Between Setups
  - Infancy of trader, new to trading, just have to get in to the trade.
    - This takes time in trading to develop.
    - When you find success, you want to go back in to trade, and take setups that are not your setups.
    - Your trying to force the setup.
    - With any trade there is a measure of uncertainty, the waiting side of trading is like water torture.
    - You want to feel that dopamine rush of trading.
    - Instead of jumping into the next trade, focus on the next move of price, wait for your setup.
    - Don't accept a wider risk range.
    - Demand your price, wait for your price.
- Fear of Not Being Good Enough
  - Comes from Social Media
    - Everyone is the best on Social Media.
      - Most are lying, pretending, and trying to fake it until they make it.
    - If you are not handling social media well, don't engage in this type of media.
      - The only opinion that matters for trading is yours. We track our progress in our journal.
    - Social media is not ideal for new traders as it creates anxiety.
      - Many times on social media the discussion becomes the preverbal measuring contest.
        
        Trading is not about measuring contests, it is about surviving long enough to become a good trader.
- Fear of Losing Streaks & Draw Down
  - This is related to money management
    - We have no process or protocol to reach for should we have a loss or loosing streak develop.
  - Use risk management concepts and cut risk if there is a loss, continue to cut risk if on a loosing streak.
    - Flatten the draw down curve.
- Lack of Discipline & Following Rules
  - We are human, we tend to do things we shouldn't do.
  - We must find a way to build self discipline.
    - Once we have rules made for trading stick to them, do not deviate from your trading rules.
    - We will have draw down and losses, our rules are what protect us and must be followed.
    - Following our rules builds discipline, leads to longevity in trading.
  - Trading rules must be well defined
    - Concise
    - Ridged
    - Not Ambiguous
    - Binary in that we do this or that or nothing at all.
      - Three conditions fore every decision making process.
        
        It's a go
        
        It's a no
        
        It's a do nothing right now.
- Searching For The Next Best Thing
  - Constantly looking for something else.
  - Whoever has the most attention is where everyone will gravitate towards.
    - Doesn't mean the concepts are better, just that everyone is talking about it.
  - We can see how folks will change constantly looking for some edge.
  - ICT concepts are based on OHLC Price Action, providing everything needed for trading.
    - Even if it's not perfect we don't need perfect.
    - ICT concepts have a statistical edge, they are accurate and precise.
    - The concepts are time based, we know when they are going to perform.
    - Most traders can not say when thing will happen, and attribute this to uncertainty.
    - We are not anxious about when moves will happen, we know they will repeat.
    - Take time away from the market, focus on your development.
      - Especially if you're on a hot streak.
      - Take a week off.
      - Don't look at the market.
      - By doing this we strengthen our self discipline, and prove to ourselves there is nothing better than the thing we are doing right now.
      - Understand that everyone has loosing trades.
        
        Traders go through a loosing streak.
        
        Experience draw down.
        
        Then show lack of discipline in following rules.
        
        Think there is something better out there.
        
        Something without loosing streaks, this wrong.
        
        Every thing has loosing streaks.
        
        No one is on top forever.
        
        There will always be some measure of draw down in any system.
        
        The best thing we can do is find something works for enough time to warrant investigation and stick with it.
        
        Use sound money management.
        
        Turn it into something really impressive and you may even surprise yourself.
Effective Journaling
How journaling can assist our development.
- Daily Entry Logs & Weekly Log Review
  - Note aspects of the primary asset you trade.
  - Spend time observing and planning.
- Develop a routine
  - Crate a daily log entry even if you don't trade.
- Weekly review the logs from last week.
  - Review from the trader perspective.
  - Review from the analyst perspective.
  - Give voice to these personality traits within yourself.
  - There are always thee personalities within a trader, the analyst, the trader, and the gambler.
    - We have to understand which one is in control when trading.
    - Many times we don't know which one is in control before the trade we know after the trade is opened.
    - The analyst enters trades that pan out well, where we are not excited, and the numbers of the trade are well known.
    - The trader enters trades were we are excited about the results, the gain outcome vs the inverse loss outcome.
    - The gambler enters trades in an undisciplined way and over leverages.
    - The gambler will get you in trouble.
    - The trader will listen to the analyst.
    - We want to reside or focus on the analyst.
      - Stick to what you see in the chart, stick to your model.
      - The analyst will keep you on the right path.
    - The analyst, is the most sober minded.
    - The trader, wants the opportunity and right or wrong measurement.
    - The gambler, wants the thrill of it all, and will take a loss the hardest.
      - The gambler, will manifest as toxic thinking, over rewarding you for wins and punishing you for losses.
      - Keep the gambler on a short leash.
    - How you feel going into the trading day is very important.
      - Don't use trading to keep you distracted from things going on in your personal life.
      - Index trades based on mental and physical health.
        
        One of three states can be recorded in your journal for each.
        
        Mental wellbeing
        
        Happy, Sad, Neutral
        
        Physical wellbeing
        
        Well, Unwell, Neutral
        
        Don't force trades with a negative mindset or feeling physically unwell.
        
        These will generally lead to losses.
        
        How you feel will control your trading
        
        We want to feel relaxed with a neutral mindset going into trading.
        
        Well rested, structured sleep at regular times is important.
        
        Physically healthy, a regular exercise program, and healthy diet.
        
        Activities outside of trading to take your mind off of it for awhile.
        
        A fresh perspective, alert mind, healthy rested well fed body is needed for trading.
        
        Don't try to replace bad feelings with good feelings from trading, it will not work out well.
        
        At the end of the day we need know how we are feeling.
        
        Journaling allows us to write it down and release it.
        
        If we don't release these bad feeling it will have an adverse affect on our trading, and become toxic in our thinking.
        
        Record any fears or concerns we had in Price Action.
        
        These are the times we need to screen capture, make a notation, and log how we are feeling at that exact time.
        
        Each time we do this it will help to desensitize us and we will have less emotional attachment.
        
        We will see that yes there is a opportunity for the trade to fail, but if we stick with it how many times does the trade actually fail?
        
        Journaling gives us the full picture of our trading.
        
        If we are not journaling we are going to remember the good trades and actively try too forget the bad trades. Creating a skewed understanding of our trading and stunting our progress.
        
        Journaling is critical to trading, if we want to be organized, collective and calm, don't rely on your memory.
        
        Keep a record of what you've said and done.
        
        This will aid you later when you go through something similar you can go back to your journal and see how you got through the period or overcame the issue.
- Contrast your personal expectations vs actual result
  - This is where we can be a score keeper.
  - We can soberly with balance give an opinion of what our analysis of what we thougth was going to happen on the week/day vs what actually happened.
  - Don't be negative, with your thought processes or log entries. Don't beat yourself up.
  - Highlight the things you missed, find your weaknesses that you can improve.
  - Be positive with how you can change the things you've identified.
  - Clear your conscience.
  - Just state the facts
  - Don't add emotional aspects to this part of your log. Stick to the facts when comparing what you logged vs what happened.
  - Detail where you felt uncertainty & how you coped with it.
- Coping skills
  - We may find many of our coping skills are actually creating more stress.
  - Log how we cope with stress at the time we are stressed, during daily and weekly review compare to how the coping skill helped or didn't help.
  - Keep the healthy coping skills and 86 the others.
  - Use positive words for those things you did well.
    - Use adjectives like happy, pleased, or proud.
    - Your mind will maintain these
    - Don't use mundane terms.
    - Be honest and comforting but don't sugar coat.
  - Avoid negatively charged words when you struggle.
    - When you make errors or mistakes, don't use negativity.
    - Your subconscious will associate the activity with negativity and will avoid the activity (trading) or make it hard for you to see setups, or maintain focus during trading. We want to avoid this and use positive comforting terms when logging our mistakes and errors.
  - The journal you create is the best trading book your going to write in your journal.
  - Directly related to your experiences
  - It is your secret weapon.
  - Winning traders do this.
  - You will know yourself.
- Adding charts to our journal
  - Screen capture and build a context of what you're thinking is going to happen.
  - When the event or level is hit happens or doesn't screen capture and log it.
  - Reference what you are seeing, what you expect to happen, and what you think will happen if your expectation doesn't happen.
  - Do this from the top down.
    - Daily, 4h, 60m, 15m ....
  - Time of day, how long we think it will take to happen.
  - Add details that you notice on the chart, points of interest.
  - Add draw on price, what levels are we reaching for.
  - Use range projections to target levels.
  - Project PO3, using measured moves to project both directions.
    - Can use swings and or Judas Swing for this.
  - Projections and overlaps with POIs (BSL/SSL) give us targets.
- Log every day, review on weekly basis.
- Extra credit review weekly review on a monthly basis.
- PO3 Projections
  - Apply to weekly range.
  - Annotate the Sunday opening
    - Vertical line
  - Add small horizontal line at Open
  - If bearish, focus on what the high is going to be and how low we can go, so we can get some of the move.
  - If bullish, focus on what the low is going to be and how high we can go, so we can get some of the move.
  - Forecast where Close will be for fun, primary focus is listed above, with the goal of understanding the move to be captured.
  - Note Accumulation, Manipulation, Distribution.

Notes

Develop your trade journal and schedule your weekly review sessions.
Develop a habit of logging before trading, review and update during and after a trade.
Find 10 occurrences in past price action and log them in your trade journal.
Extra credit if found on multiple time frames.