Some generally good observations made by Ziad in a reproduced comment which can found here:
E-Mini Player: EMini S&P 500 Futures Trading Journal: Learning to Become a Successful Trader
Before I give my 2c on it, it sounds like Ziad is trading index futures. I don’t trade them (yet), I trade stocks. So maybe that accounts for some differences in approach. Also I have no idea who Michael is (no link to the original comment) nor what sort of trading issues he’s facing.
Anyway, the slightly different perspective I wanted to add is that it seems that Ziad is confusing simplicity with “clear cut”. Trading can be simple and ambiguous at the same time. I don’t see a contradiction in that. Anything related to taking on risk with expectations for a future outcome is going to be ambiguous by definition, on any single occurence basis.
As for setup, in my experience locking in on a decent risk:reward “setup” (i.e. pattern) and then building on top of it is a very valid approach. The problems start with people’s expectations, i.e. when people expect the setup to be “it” and all that’s required. This sort of expectation leads to ignoring other important aspects that Ziad mentions and also to frustrations as things don’t work out immediately even when the ‘setup’ is executed correctly. This in turn usually leads to changing the setup or replacing it and then repeating this ad infinitum (or ad going bust financially or as is more common, emotionally).
So what would I advise? I would advise someone to just pick a setup, preferrably one you know is traded by someone who is already successful. This is a natural starting point, you can’t trade completely without some definition of a pattern to look for. Then trade it day in and day out . Don’t expect it to work in some magical way like an on/off switched system, instead consider it a starting point, an over-simplification. And then over time, practice, observation of self and market gel it into a trading style that works for you. When does the ‘setup’ work, under what conditions, when does it do really well, when should you filter signals out and ignore the setup, etc. etc.
Overall I think every trader can benefit from Ziad’s observations and advice, especially on the learning process of observation, journal keeping, mental state etc. But one just needs to be aware that what works for one person doesn’t always mean is The best/only way to go about things. And yes that covers my advice above as well :-)
- via Andrew.