Combine these three skills to trade rapid moves that otherwise overwhelm you [Video]

Do you like the idea of trading intraday, but you're worried it gets too fast? Are you concerned you'll suffer wild swings in profits but also losses as a consequence?

Listen: I'm not fast thinking. And I'm not someone who can problem-solve quickly. So, how do I trade rapid price moves? You'll see how with examples shortly.

Three transferrable skills to enable you to trade rapid price movement

First: The playing field

Think of a playing field in sports. When the price is within the field of play, you can trade; out-of-bounds is when you don't. And determining the playing field "dimensions" makes up the lion's share of your trading 'game plan'.

Imagine for a moment you are watching the live market trading. At times, it appears like a wild roller coaster of movements up and down in price, right? But the playing field brings order to the chaos. It tells you, "hey don't trade between these prices," or "If you are in a long trade, and the price reaches XYZ, exit the trade".

Your playing field tells you the price ranges you can trade (within the playing field) and the ranges you can't trade (out of bounds). Not only does this framework bring order and structure to your trading day, it massively reduces the mental overload of trying to keep focused on every "wiggle" in price as if hanging on every word of a compelling speech.

Second: The specialist's catalyst

Markets don't move because you identified a "pattern" or "set-up". Price responds to events like employment data, retail sales, central bank announcements etc. These are examples of catalysts for moves in price.

In the days of the trading pits, specialists were traders focusing on a single instrument. It's still the common practice amongst professional traders in today's screen-based trading.

You can liken a specialist to reading each chapter in a novel. As you read through a book, you are "getting to know" each character. In the same way, this happens with specializing. Because you know the background story, you see the story unfolding as you had intuitively expected. When you hear or read professional traders talking about trading using "feel" or "intuition", they are referring to this.

In the example coming shortly, the "feel" for the market moving down is the observation and subsequent documentation two days earlier. 

Third: The playbook

A playbook is a catalogue of trades that:

1. Have a proven edge - i.e. they produce positive results (without harsh drawdowns) over any meaningful sample size.

2. They are based on multiple evidence characteristics, making them unique and easily distinguishable. A feature of the playbook trades I share with clients is the tiny movement in price to suggest the trade is not working, and therefore a paper-cut loss or scratch trade is the extent of the worst-case outcome. 

Time for the example

The brief video is from live trading mentoring featuring the concepts in a practical setting so clients can replicate what I'm doing.

You'll notice that at one point, the fast movement reaches a pace I can't compete in.

But isn't the point here to demonstrate rapid trading moves?!!

Have you ever driven your car at 200 miles or kilometres per hour? 140km an hour is the fastest I have driven for any reasonable period. Any quicker, I was sure I couldn't control the car. Yet 140 is still fast, right? And it's the same with trading - there is fast, and there is faster! But the skills above make it obvious when you stand aside. 

 

PS: I mentioned knowing where to 'no longer hold a long trade' based on the playing field. The different 'boundaries' align with where professionals and market makers trade/don't trade. Remember the playing field from the video?

Below are screenshots featuring the same playing field levels 17 hours after the trade was recorded. Colour-coded boundaries notify you of the differing approach to exiting a position.  In this instance, "green" signals the weakest of the boundaries. They can be pushed "out" a little further. 

See the professional trader who tested this out? A 500-lot trade (50 million face value) is exited only after waiting to see if the market can push the boundaries. When it's clear it won't, the professional sells the position.