Bias

Strange how damaging a bias can be, even when you recognise you have one.
This morning I had a long bias for the Euro having read some report from the IMF, that the USD may be undervalued for 10%-15%. It seems that put the $-Signs on my inner eyes. Can't explain, how I could remain otherwise in a trade which clearly was not working.
At 7:57am CEST the trade was taken long 1.2805. A 500+contract offer appeared and the Euro ticked down. I stayed, seeing that order as something which would disappear within 10 ticks and around 9am the uptrend would latest resume. It did, but stalled again at the 1.2803 level.

Instead of taking a small loss as warranted by the Price action I remain in the trade, seeing my account down for the day (small but still down).

 I took a HSI short instead which paid 35 ticks in a nice breakdown, bringing me on balance up for the day.

Only then, seeing Euro now again down 13 I moved the Stop to -15 and was taken out a few seconds later.
The account is green, but good trading would have been exiting the euro the moment it was not able to go above 1.2805. There was sure no reason at all to give it room down the the 1.2790 level.
The problem with the way I traded, is that I'm left doubtful of my own trading decisions, as I wasn't able to pull the plug the moment I knew the tradesetup was no longer valid.

Oscillators

Any oscillator will show you the pricechart in a kind of distorted way. If you just once switch to a Line on close chart and compare what you see with your Oscillator of choice (CCI, STO, RSI to name the most common) you will notice the similarities. Any oscillator is a derivative of price, it is based on pricedata, so that behaviour is to be expected. Price itself is the most important information you have in trading. The oscillator is secondary, the oscillator is giving you the Go ahead, the green light, when price has already told you, that something is about to happen.

Yesterday 1280 was major resistance in the ES. Price going up to 1279.0 1279.25 .. 1280.50 1281.00 .. 1280.50 1279.75 and suddenly you see a signal forming in your oscillator of choice and you take the Short. Why? Because price tells you, hey I'm at major resistance maybe it's a good idea to go short somewhere here. But you wait, as 1280 was broken to the upside and then the oscillator tells you, hey dude, now is the time to short.

Do you need the oscillator to tell you that there was resistance in the ES. Sure not. It was selfevident. Do you need the oscillator to short the rebreak of 1280? No. But it helps to see the signal in the oscillator, to get a clear go ahead.

Problems start, if you look first at the oscillator and see price as secondary information. You get a green light on the oscillator and you look at price and say, hey yes, that looks good, let's take it, but it fails. Now you blame the oscillator for giving wrong signals and you start finetuning. And you have success with eliminating bad signals the oscillator gives you. Unfortunatly that finetuning also eliminates good signals. Everyone trading for some time has been down that road and knows what I'm talking about. Finetuning isn't the solution. Changing perspective is!

Price comes first, then comes the oscillator. If you know how far an average trendmove goes in the ES, in the YM, in the Russel, in the contract you trade, then we can start talking business. Take the ER2. A trendmove usually goes for 10 to 12 full points. (see the second chart example from yesterday) Sometimes it stops at 8 sometimes it goes 14 but that's really extended and only to be expected with very bleak news. So Russel is down 6 points and you think, that might be a bottom, let's try a long, and you'r not the only one thinking that way, so your oscillator will take notice of the prices stalling and give you a long signal. But Russel goes 1 or 1.5 points stalls again and the downtrend resumes. We all know that. The long signal failed and it's one of these signals we try to eliminate from our tradesetups.

But if the Russel is down 12 and your countertrend long signal forms then it might be worth taking, maybe you wait for confirmation of a double bottom, maybe you see we already did 3 legs down and somewhere we remember there are usually 3 thrusts to a top or bottom.
And you can as well anticipate the signal forming on the oscillator! Why? Because you know the contract you trade, you know it's behaviour and you know, it's a better than 85% chance that a countertrend signal will work, if you see price up or down at least the average trend move range.

Linechart vs Candlesticks

For about 4 months I’m now trading exclusively with Linecharts (Line on Close), while previously I have used Candlesticks, Heikin-Ashi or Bar-Charts.

It took quite some while to convince myself, that I’m not missing information when trading Linecharts as there is no High, Low or Open marked on a Linechart. And only when I was on some cheap Forexsites, showing simple Linecharts with nothing else on the chart I understood, that you don’t need Candles or Bars for trading, that the Linechart gives you all the information you need to trade:

Go Long, if prices go up

Go Short, if prices go down

Can it be easier than that?
How do you determine if prices go up? That’s not really difficult, but in trading we not only look at prices going from 698 to 699 to 700 but we look at movements in a certain timeframe, saying that any movement within this timeframe is just prices oscillating up and down.

10:00am ER2 Open 697 High 700 Low 696 Close 698
10:05am ER2 Open 698 High 700 Low 696 Close 699
10:10am ER2 Open 699 High 700 Low 697 Close 700

Candles are green in the above example, but won’t tell you at first glance to go long, A Linechart shows a nice straight line up. Look at these 2 charts below:

A candlestick chart and here the same Chart using a Linechart (the black Line is the Line on Close)

For me the Long entry marked was a lot easier to see on the Linechart than on the Candlesticks, but every trader has to find his/her own Chartsetup, which fits your personality. For me seeing a Line going up or down makes it very clear what direction a contract is currently trading, at least a lot easier than looking at Candlesticks.

No system works forever

Ever thought about, what this statement means?

First it means, that as long as your system works, you don't change it. Very simple. And you don't change it, just because you have had a few losses in a row. That is to be expected. It's how you handle them, which decides your overall performance. And it's not the system's fault, if you add to your losing trades, if you blow your stop and move it further down and further down, because you switch timeframes from 3min to 10min to 60min to daily.
Learn to recognise a failed trade and move on.

But it also means, you need to recognise, when your system no longer works.
How do you differentiate between a losing streak and a major shift in market currents causing your system to lose it's edge.
By doing some homework!

If your system is applicable to different markets, not just the one you are mainly trading, it's easier.
Take the time and identify your trading setups on different markets. See, if they work or not. If your signals start failing in multiple markets it might be time to reduce size or start trading Demo for a week or two to see, if it's just a temporary occurrence or if your system is starting to go through a drawdown period, where it just no longer has the edge you rely on.

The earlier you recognise this, the better for your overall performance.

We all have to go to the drawing board again and again, as the markets change and we have to change with them or we will perish.

Do you care about commissions

You should! They can make the difference between a losing and a breakeven trader during the long learning curve.
Looking back, a few years ago I realized, that switching to a different broker will save me about 10k$ in commissions a year. But there is something in addition: For me a breakeven trade is a trade, where I get paid for commissions and not a trade, where I cover at the same price which I paid, when I opened the trade.
But if you have a broker, does it make a difference if you pay 4.95$ or 4.60$ or 4.00$ / Roundtrip trading ES, the Russel or currency futures? No, it does not!
Sure the slight difference might add up, but the only thing important here is, that 1 Tick in your favor pays for commissions and gives you a softdrink.
So as long as 1 Tick pays your commissions for the Roundtrip, you don't need to think about commissions. Only if it's more, you might start looking to switch brokers.