Do you like to wing it when it comes to trading? Many traders just like to go in based on some feel of the market and trade without having done any previous thinking, analysis, order flow research? They think they can just step in to the markets after having been away and just know what the right trade to place is.
Now if you are trading solely with technical indicators, or chart/price patterns, then following that methodology it does state that you can analyze the market strictly by what the charts are doing. Those types of traders can just unplug themselves for days, weeks, or months and come back and trade like nothing happened as long as they remembered the patterns. There is nothing wrong with those types of traders. Everyone chooses their own path. But those traders typically do not end up on the higher levels of the trading profit ladder.
By choosing not to analyzing the information outside of the charts, those traders will have a difficult time placing the truly high probability trades that can occur quite often in the forex markets. The technical indicator and chart patterns traders will never truly know what moves the markets, and thus will not know when to “go for the jugular.” It is very difficult for them to know when a trade is much more higher probability that the chart tells it. They don’t know because the information that tells you that is only found outside of the charts.
Why Do Traders Wing It?
There are many reasons why traders wing it in the markets. This cuts right to the heart of why they want to be a trader in the first place.
Many people believe that the hallmark of an order flow trader is flexibility. And this is true. Order flow traders need to be flexible and open to various scenarios and order flow generators that can move the markets.
But many years ago I took it a step further and thought that flexibility meant I had to wing it in the markets. Because if I imposed some regimen or constraints in the form of a process, well I thought that would be against the “flexibility” that I wanted. I thought that flexibility meant that I didn’t need any of those pesky constraints that a trading plan, or process imposed on you. After all I thought I was an order flow trader. I thought I could just go into the markets and just “feel the flow”, wing it and just bang out some profitable trades.
It is true that there such a thing as harmony with the order flow and information flow, but most of the time you don’t want it to happen by accident. You want to put yourself through a checklist, a process, a daily regimen in order to be in the zone with the market and in the zone with the order flow. That is the best approach and most consistent. You always want a good reason for market movements. You don’t want to base trades based on flimsy order flow evidence or wild scenarios that never materialize.
Mark Douglas said in Trading In The Zone:
One of the many contradictions of trading is that it offers a gift and a curse at the same time. The gift is that, perhaps for the first time in our lives, we’re in complete control of everything we do. The curse is that there are no external rules or boundaries to guide or structure out behavior. The unlimited characteristics of the trading environment require that we act with some degree of restraint and self-control, at least if we want to create some measure of consistent success.
– Mark Douglas
Winged It In The Past – Not Anymore
I used to be like that in my early order flow days. I used to wing it. It was very hit and miss, especially when you lack crucial knowledge on many different order flow generators and how to determine market sentiment and global macro forces.
I would have very highly leveraged killer trades, and then some abysmal leveraged failures. Pretty big wild swings. I don’t mind wild swings in the profit – so long as I can catch the winners and get rid of the losers. I would analyze the killer trades and the abysmal failures to discover new order flow generators and fine tune my order flow mindset. Eventually it occurred to me that I wanted to keep placing the killer trades while either staying out of the abysmal trades, or by perceiving when I would be on the wrong side of an abysmal trade and reversing to profit from those.
Because, generally if you have a huge loss where you had a 200 pip stop loss and the market stopped you out, well there was another trader that probably profited greatly. I wanted to be on the side of the order flow and liquidity as often as possible. And preferably the massive order flow and liquidity.
Which is why I decided that I had to break down the order flow trades into some sort of process. Some checklist, some blueprint, some way to structure the analysis so that you can always have an edge in the markets and know what it is thinking.
A lot of trading success is just finding the good trades and staying out of the bad ones / not over trading. And in order to do that consistently month after month, year after year, you generally want to break the thinking and process down into certain steps that you take. The steps should cover all the potential order flow generators and research needed. It doesn’t mean you need to be paranoid about how a world war 3 may impact the markets, but the research does need to be sufficient and rooted in order flow accurate thinking.
Can I Wing It Now -Years Later?
I can absolutely do a better job of winging it now rather than a few years ago. There is far more information juggling around in my brain about order flow generators and scenarios that can move the market. I know the best trading questions to ask. I know how to spot the potential stop loss clusters and option barriers from a chart. I can immediately assign certain potential meaning to a huge move on the charts.
For example one person may think that a huge move on the charts was caused by a head and shoulders chart pattern. But I don’t think like that. I notice the head and shoulders pattern too, but then I go deeper and immediately start running scenarios for why the move occurred. I think about a combination of news, stops, fundamental value, macro players to come together to cause the market to move.
I remember telling myself that I wanted to take trading success, trading mindset and knowledge about the markets to a higher level where you could be hibernating for 20 years, and once you get out, you can still outperform 99% of other traders – because you have knowledge of the order flow inefficiencies that are enduring. They never go away.
Even though I can wing it better today, I still do not want to. I know that potential exists for market sentiment to change, for market sensitivity to change, for the global macro forces to change, for order flow generators to potentially change. Which is why, many times you may need a ramp up period to get in harmony with the markets after an extended leave of absence.
Sometimes you just need a few days or few weeks of reading the news and feeling the markets movements in order to be ready to place trades where you can go for the jugular on. It is a small price to pay for knowing when you can go for the jugular.