How to Spot a Bounce setup.

The Law Of Supply and Demand

learn what really drives the markets!.

Where to Spot Key Levels

Learn where to spot and look out for Key Levels.


Watch how a Breakout occures and how to spot them.

How To Read The Market

Watch the video and get an insight on how to read and judge the market.

Sunday, June 17, 2012

Market Conditions

The Surfer!:

The best explanation of a plan is "the surfer" who goes surfing. Goes down to the
sea. Checks the weather conditions. Is the surf up?. Is the breeze on-shore or off-
shore?. If the conditions are right, jumps on the board and paddles out 300 meters.And waits. Waits for the right wave. There are many waves. The key is to pick the right wave. Don't want to pick one too soon or too late.The choice of wave comesfrom seasoned experience. Not a surfing plan. A surfer does not go out surfing with a surfing plan in mind. The conditions of the moment on the day will dictate the play.Depending on the conditions, what was a good wave yesterday might well be a poor wavetoday.

So u see you need to check the market conditions first before even considering
to play that market or not!

Market conditions are important as u have to judge a market by its own action
but it aint easy to read a market condition where there are alot of gaps and
wild/crazy prints going on if it aint easy to judge the current condition of a market
it is nearly ,impossible to tell wether u have a weak or strong market infront of u

aswell as u have a to spot a market wich is in favour of your approach on trading andfits in our trading plan/approach.

if u only looking for breakout trades and the market doesent respect any of your keylevels as prints go wild all accross the ladder, then u dont have a chance to hinterpret the current action and all decisions u make are merly a gamble then
anything  else..

remember u need to get as much odds in your favour as possible!

but if the market goes crazy and u are lost in tarnslation ie. cant paint a picturthe best possible position to take.. then the following saying comes into play
as if in doubt stay out ,

remember if the market doesent tell you a story .. dont trade !, only trade theobvious!  (Even the strongest, most furious and fastest predators target only thelame, weakest and slowest prey. They preserve and maintain their edge. )


if u have a market infront of u, where the money is scattered all accross the
ladder ie.. no tight and liquid market . its much harder if not impossible to judge
the quality of supply and demand and rather hard to position urself.. ie the odds
arent in your favour. as anything can happen on such a market..
btw. anything can happen  even in a good market conditions but u cant rely on suchfreaky actions,

u want a market where there is a balanced spread accross the board of money, as only
then u can see if the layside is outnumbering backside or vice versa..

think of it as a battle beteween layers and backers who will win the battle ?

if u have equaly situations on first sight ie.. rather a balanced book situation..
but supply(backers) are loosing steam u know that u rather should lay then back..
but what if there is no crystal clear sign of that?.. due to a lack of money on ;themarket aswell as prints going off on both sides in the same wild manner ?
u cant judge a market situation based on such wild behaviour...

u need to have a both sides confronted with equalish amounts of money, then u willsee who will win the battle more likely.. who dries out on men.. or who overruns menwith more and bigersize

i mean its easy to take out 10 bucks when these are confronted with 100 bucks..
but does that really mean that u can speak of a strong market? what if the backers
just jump in a lil later? with 200?

but what if both sides are standing with 100 bucks?

what do u think the market does  when 100 bucks vs. 100 bucks fight and one side geteaten up and another 100 bucks stand its ground at previous traded price..?
u see u need to have a balanced situation in order to make assumptions
in wich favour the inbalance will take place! u need to have the perfect conditions to be met in order to make the appropriate decisions..

aswell as if u have big players or mad bombers in a market u rather should stay out..if u dont know or couldnt read their intentions..`(more on hat in an article about games played on the ladder in a later article)

but think about that if u have an average size on markets between 1K and 2K ;but allof a sudden u see someone dropping 20K...would u want to trade such a marketwhere u dont have a clue whats the purpose of;such a move ?

i tell ya ,u rather dont take any trade after u see such actions..and skip the
market! as it will hurt u big time and there is no need to be in the market in such
situations..remember there will be always a another market .

;u dont have to trade but u can.;its ;a luxury not a must to be in the markets..u can skip markets if they dont fit ur criteria.. better stay out of a market ortrade ,then beeing in a wrong/bad one! the markets will be there forever..

also u want to trade liquid markets were u can get in and out with good size withoutany problems ,not illliquid markets where it goes crazy and its would be hard toget 50 bucks matched.. well sure u could adjust your betsize . but do you
really need to trade any market?

Here are some examples of Different Types of market conditions
the good the bad and the ugly!

tight market

A tight market is when u can back @best price and lay@best price are as close
together as possible (1tick) those are the most favourable conditions
where there is alot of liquidity present most of the time, and the battle wich is foughtcan be judged quite good.

High Liquidity

Good liquid markets is the base of a good market to trade.. meaning alot of
activity=opportuity , good size on bothsides .. = no problem to get in and out of a
trade , and good to read ..

spread to Wide

on the other hand if u have wide spreads between the best back and lay price..uwillget bad fills if u need to get in or out of a market , such conditions are bad but on the otehrside.. it can represent some opportunitys aswell.. ie. market makingbut for trading as i do and show in here .. its not suitable ... as i trade with market orders ... not limit orders

Low Liquidity

poor liquidity is bad in manny ways.. u have crazy actions going on ie. the market
gets freaky/funky .. wich is hard to read , think of it of a book with missing words
or sentences! .. and ofcourse u will have a hard time getting in and out of trades..
when there is not enough size/ or traders/punters


high volatility is a twofolded sword, it can be good and bad . good if the big fast
moves occure in favour of your position and bad if they occur in the other direction
of your tarde.. however u have to be focused on size of bets.. if its small sized u
deffenetly dont want to bet bigger amounts.. or else u wont get in/out.

those conditions should only be considered in an advanced state of your trading
career.. as its pretty fast and u need alot of experience and a good psychological
background + discipline to trade such market profitable..
however there are also bad volatility markets where prints and bets go all over the
place..  dont consider trading or read something out of such markets , avoid them
like a plague.

Mad Bombers:

If u spot MadBombers and huge bets showing up on the market u should get out
immediately and skip the market for good! ..  as the markets can act pretty wild ifsuch an order hits the market.. and they can push/pulll markets quite wild arround..and if they remove such orders.. it can get wild agian.. and u dont know if theythrow in such size again! .. so better stay out if u spot such an action and skip to the next market

Saturday, June 16, 2012

Finding the Zone

Finding the Zone: New Perspectives on the Mental Game of Trading
Brett N. Steenbarger, Ph.D.

This is a draft of an article that has appeared in the December, 2002 issue of SFO Magazine. The actual article can be accessed by registering at the SFO site:
A number of recent books have emphasized trading as a performance activity, in which mental state is a key element in success or failure. So prevalent is this view that two separate books with the same title—Trading in the Zone—have appeared in the last two years. What is this “zone” and how can traders reach it with consistency? In this article, I will review ideas about the zone from a variety of sources, including new research in cognitive neuroscience, and spell out the implications for futures and options traders looking to improve their mindsets—and their profits.

Understanding the Zone

The idea of a performance-enhancing zone originated neither in athletics or trading, but in the philosophy of Zen Buddhism. In the 1930s, Eugen Herrigel traveled to Japan to learn Zen through the practice of archery. Nearly two decades later, his book, Zen in the Art of Archery, popularized the notion of achieving excellence through mental discipline. His book was the inspiration for the popular novel Zen and the Art of Motorcycle Maintenance written by Robert Pirsig. Interwoven in Pirsig’s story of a father and son rediscovering each other on a motorcycle journey is a serious exploration of the experience of “quality”. Traveling on a cycle, Pirsig explains, possesses a different “quality” from driving a car. In the latter, you are always watching reality through a frame, shut inside a compartment. On a cycle, he writes, you are “in the scene, not just watching it anymore, and the sense of presence is overwhelming.” This fusion of actor and act, performer and performance, is experienced as “the zone”.
Crucial to the philosophy of Zen—and to the accounts of Herrigel and Pirsig—is the idea that our normal state of consciousness ruins the quality of the Zen experience. As soon as we consciously think about our performance, we are no longer one with it. Trying harder at a task only compounds this separation. The discipline of the Zen archer can be found in the performer’s ability to still the mind, remove mental interference, and allow instinctively honed skills to manifest themselves naturally.
In their books Trading in the Zone, authors Mark Douglas and Ari Kiev emphasize the importance of focus and concentration in reaching a state where trading flows without seeming effort. Both authors view the zone as an outgrowth of trading discipline and a positive mindset. Once the trader lapses into patterns of fear, greed, and frustration, the zone is lost and instincts born of long hours of observing market patterns cannot emerge. For the trader, as for the Zen archer, turning off the mind is a crucial element in success.
But how valid is this notion of the zone? Do elite performers in archery, trading, and other fields of endeavor truly find their success in Pirsig’s state of “quality”? This is where research provides surprising answers.

Creativity and the Zone

Abraham Maslow was one of the first psychologists to study healthy, high-functioning individuals rather than mentally ill ones. His investigation of “self-actualizing” people—those who were unusually creative, productive, happy, and fulfilled—led to several important discoveries. Foremost among these, he found that self-actualizing people report a significantly greater number of “peak experiences” than the average individual. These peak experiences, he explained, have an almost mystical quality, in which the person feels suddenly at peace, at one with the universe. Invariably these experiences arrive during moments when the self-actualizing person is immersed in an activity of personal significance. Interestingly, they emerge naturally and spontaneously, not by conscious design.
Could Maslow’s “peak experiences” refer to the same mind state noted by Herrigel in Zen archery, by Pirsig in his exploration of “quality”, and by traders who have experienced “the zone”?
Research by University of Chicago psychologist Mihaly Csikszentmihalyi would answer in the affirmative. Studying unusually creative, successful individuals across a variety of disciplines, Csikszentmihalyi found that their work activity is accompanied by a state of “flow”. This flow state is experienced as inherently enjoyable, in which workers are so immersed in their tasks that time seems to melt away. They lose awareness of themselves and their settings, becoming one with their labors.
In his book Creativity: Flow and the Psychology of Discovery of Invention, Csikszentmihalyi identified nine characteristics of work activities that yield the flow experience (See Figure One). He found that challenging tasks with clear goals and immediate feedback provide the greatest intrinsic pleasure. Summarizing these studies, Csikszentmihalyi writes, “Every person we interviewed said that it was equally true that they had worked every minute of their careers, and that they had never worked a day in all their lives. They experienced even the most focused immersion in extremely difficult tasks as a lark, an exhilarating and playful adventure.” He describes performers in the zone as “programmed for creativity” because their pleasure-pain mechanism leads them to seek ever-greater productive challenges. (See Figure One at the end of this article for a list of characteristics associated with “the zone”).
What makes the creative, successful, self-actualizing person unique, then, is not just the presence of “peak experiences”, “flow”, or “the zone”, but the ability to access and sustain this state with regularity. This is only possible, Csikszentmihalyi asserts, when people intrinsically love what they are doing. The trader who is primarily motivated by factors extrinsic to the markets themselves—by a need to prove himself, a desire to avoid failure, or urges for fame or fortune—is less likely to find the zone than the trader who finds the markets fascinating in their own right. From the Maslow-Csikszentmihalyi perspective, it is the trader who is “programmed for creativity”—who finds intrinsic enjoyment in the rigors of studying and trading market patterns—that is most likely to develop unique, winning trading strategies.

Exemplary Achievement and the Zone

Persistence of effort fueled by intrinsic love for one’s work seems to be a formula for success across a variety of disciplines, not just trading. Studies supporting this conclusion date back to Francis Galton’s 1869 work on Hereditary Genius. Investigating eminent creators, Galton found that these high-functioning individuals were capable of performing large amounts of highly laborious work, as if they were “urged by an inherent stimulus”. This “laboring instinct”, Galton believed, was a major factor in determining success or failure.
Subsequent research has confirmed Galton’s early conclusions. Psychologist Dean Keith Simonton of the University of California at Davis, in his book Greatness: Who Makes History and Why, explains of highly productive creators, “These individuals are driven by huge motivational forces that far eclipse the impetus behind less accomplished colleagues…Geniuses cannot spend so many hours without an inherent passion for what they do”. The reason the successful people are successful, Simonton found, is that they produce more than their colleagues: more works of art, more scientific experiments, more political initiatives. Because of this productivity, they are more likely than the average person to hit the jackpot and stumble across a truly meaningful contribution.
These findings have significant implications for traders of futures and options. A trader’s productivity might be measured, not just by his or her equity curve, but in the number of unique and viable trading strategies that can be generated. The trader motivated by an intrinsic fascination with the markets is constantly working on the markets, seeking a tradable edge. A developer of 100 mechanical systems, on average, is more likely to come up with a robust trading method than a trader tinkering with the canned “systems” that accompany many charting software programs. Similarly, the discretionary trader who has observed and paper traded thousands of days of market action is more likely to internalize tradable patterns than the part-time trader. The zone is important, not just because it blocks negative emotions from trading, but because it provides the motivational fuel for achieving market mastery.
The hypothesis worthy of consideration, then, is that the factors underlying trading success are similar to those underlying success in other fields of endeavor. The successful trader, like the scientific genius or great artist, attains a state in which effortful activity is experienced as inherently pleasurable. This state of flow—what traders know as the zone—blurs the distinction between work and play, fueling an extraordinary level of creative effort.
This hypothesis fits well with the research of K. Anders Ericsson, who has found that successful performers in sports, the arts, and sciences are distinguished by the amount of intensive, deliberative practice they devote to their disciplines. As Ericsson reports in his book The Road to Excellence, there appears to be a lawful, linear relationship between the amount of time spent in high-quality practice and the performer’s ultimate level of achievement. Significantly, many of the characteristics of high quality practice, as observed by Ericsson, overlap the factors that generate the flow state, including challenge, clear goals, and rapid feedback. It appears that exemplary performers structure their practice in such a way as to maximize flow/zone states, thereby sustaining their motivation for hard work.
Ericsson observes that effort alone is not enough to generate the zone. Physical exertion by itself, for example, does not ensure a pleasurable experience. Rather, it is the specific effort of mental concentration that generates an altered state of consciousness and heightens learning and performance. When a musician is immersed in her craft, Ericsson notes, she can generate a flow experience. When that immersion is interrupted by coaching, the zone is lost. As Herrigel discovered in his investigation of Zen archery, it is not possible to be at one with an activity and simultaneously concerned with the activity’s outcome. If traders are to find the zone, it can only be through the highly focused concentration that occurs during trading itself. While positive thinking and trading discipline are necessary for reaching the zone, they are not sufficient. Sustained mental effort appears to be the key.
Cognitive Neuroscience and the Zone
What is happening in the brain when traders are in their zones? While studies have yet to be conducted measuring brain activity during actual trading, we do know quite a bit about the brain activity associated with sustained mental effort thanks to imaging studies and investigations of patients with localized brain injuries.
This research suggests that attention, concentration, and sustained mental effort are associated with a high level of activity in the brain’s frontal lobes. In his book of the same title, neurologist Elkonon Goldberg refers to the frontal lobes as The Executive Brain. When people need to coordinate complex activities, such as generating and executing a trading plan, the frontal lobes receive a disproportionate share of cerebral blood flow. The frontal lobes, neurologist Oliver Sacks writes in the foreword to Goldberg’s book, “are crucial for all higher-order purposeful behavior…The intentionality of the individual is invested in the frontal lobes”.
When there is injury to the frontal lobes, the result is a decline in the ability to carry out purposeful behavior. Neurologists refer to this as the “dysexecutive syndrome”, and it is typified by emotional interruptions of intentional activity, impulsivity, and distractability—qualities not unlike those seen in attention-deficit hyperactivity disorder (ADHD).
Figure Two summarizes characteristics of successful and unsuccessful traders derived from writings on trading psychology. These include my own recent investigations with Linda Raschke, in which we surveyed the traits of 64 active traders. Notice how the parallels between the successful and unsuccessful traders mirror the differences between individuals who have intact versus impaired frontal lobes. Could it be that the conditions associated with frontal lobe activation—the intensive concentration and mental effort of the zone—are also the stuff of which good trading is made? (See Figure Two for a comparison of characteristics distinguishing successful and unsuccessful traders).
Research supports such a conclusion. Arthur Shimamura at the University of California at Berkeley summarizes a series of studies that identify the role of the prefrontal cortex as one of “dynamic filtering”. The frontal lobes allow us to carry out intentional, complex tasks by filtering out extraneous stimuli. This permits us to keep plans firmly in working memory while we carry out the specific tasks associated with those plans. Among the stimuli that are filtered out by frontal activity are emotional experiences. Activation of the frontal lobes by remaining focused on planful, intentional trading—i.e., trading in the zone—turns out to be among the most effective strategies for eliminating emotional interference with decision-making.
Interestingly, the frontal lobes tend to be more involved in novel tasks than routine ones. When a skill is first learned, blood flow to the frontal lobes is at its greatest, and is centered in the right brain hemisphere. As the skill becomes automatic, the flow shifts to other brain regions, particularly in the left hemisphere. This makes sense, since the greatest attention and mental effort are needed to process new stimuli. Once a task is routine, such as driving a car, it no longer requires the participation of the brain’s executive center.
Experienced futures and options traders know that patterns in the markets are never static. The patterns one finds in a low volatility, bracketing market are different from those observed in a trending, volatile environment. In his book The Education of a Speculator, well-known trader Victor Niederhoffer refers to this phenomenon as “ever-changing cycles”. To the extent that market patterns shift over time, traders are confronted with ongoing novelty. Trading can never become a wholly automatic task, as the identification of new patterns requires the effortful involvement of the brain’s frontal lobes. This conclusion suggests that the capacity to sustain mental effort is a necessary ingredient in ongoing trading success, allowing traders recognize and exploit ever-changing cycles before they melt away. It also helps explain the common understanding among traders that one must filter out emotions to be successful. To the extent that one is immersed in greed, fear, or frustration, the zone is lost and novel patterns cannot be identified and exploited. Temporarily, it is as if the trader functions with a dysexecutive syndrome or ADHD, reducing the capacity for intentional behavior.
This brings us to a second, important hypothesis: The experience we call “the zone” is an altered state of consciousness that accompanies ongoing activation of the brain’s frontal cortex. It facilitates accelerated learning by enabling us to sustain effortful, focused attention. As I emphasize in The Psychology of Trading, the zone can be thought of as the “second wind” of consciousness. It is a by-product of sustained, high-quality effort that becomes a motivational state in its own right. Recognition of that fact opens the door to new and promising strategies for trading psychology.

Finding the Zone: Strategies for Traders

How can traders improve their ability to operate within the performance-enhancing zone? Several strategies can be derived from the research covered to this point:
  1. Deliberative Practice – The trader can structure practice sessions in such a way as to mirror the conditions needed to produce flow experiences. This means that practice sessions should: have clear goals; be sufficiently challenging to require a high degree of mental effort; offer prompt and accurate feedback; and proceed with a minimum of distractions. Such practice sessions are not merely teaching exercises; they also serve as training in reaching and sustaining the zone. Simulated trading exercises using historical data are particularly helpful as tools for deliberative practice. By advancing data bar by bar, constructing trading plans, placing trades, managing and exiting positions, traders can rehearse essential trading skills in a challenging fashion, receiving immediate feedback about their efforts.
  2. Progressive Resistance – The development of one’s executive capacities—the hallmark of operating within the zone—is very similar to one’s physical development. Just as weightlifters must challenge themselves with sufficient resistance to build muscle strength, progressively increasing the resistance over time, traders can improve their focus by tackling increasingly complex trading challenges. For example, deliberative practice involving simulated trading of a single market position could be followed by rehearsal requiring the management of multiple positions. Simulations could also be initiated under conditions of increasing distraction to require greater mental efforts. (See the September, 2002 SFO article, “Trading the Ranger Way” for a model of training drawn from the military that incorporates the notion of progressive challenge).
  3. Frequent Breaks from Trading and Deliberative Practice – One of the interesting findings from research with expert performers is that they rehearse their skills in bursts. Episodes of high-quality concentration lasting no more than a few hours are followed by frequent breaks, often in the form of brief naps. A number of successful traders note that they stop trading when they are tired and stop trading at points in the day when volatility diminishes. This gives them time to recover their concentration and stay in the zone when they are trading. In a recent interview with Mark Etzkorn, for example, well-known trader Mark Cook reported that he finishes most of his trading by 2:00 ET. “At that point,” he explains, “I’ve already been thinking ‘market’ for seven hours, and that’s about my limit.” His self-study revealed that his performance diminishes when he trades beyond his fatigue threshold: when he is presumably out of the zone.
  4. Biofeedback – Of all the strategies for developing trading expertise, this may have the greatest potential. Biofeedback systems that measure skin conductance, heart rate, muscle tension, and brain waves are becoming increasingly affordable, allowing individuals to monitor their own levels of calm and arousal. While a calm biofeedback profile does not guarantee that one is in the zone, an aroused profile almost certainly ensures that the wrong brain regions are being activated for optimal performance. By combining biofeedback with deliberative practice, traders can track when their emotional patterns are taking them out of the flow state and threatening to disrupt their trading. In my own research, I have been working with forehead skin temperature biofeedback, which is highly sensitive to enhanced blood flow to the brain’s frontal cortex. By tracking rises and declines in forehead temperature during practice sessions, traders can objectively measure the degree to which they are in the zone and discover strategies that maintain the state.
  5. Cognitive Exercises – Elkonon Goldberg raises the intriguing notion of creating gymnasiums for the mind, in which cognitive exercises raise the level of frontal lobe functioning. Such exercises are already utilized with success among patients who have experienced brain injury or dysfunction. Goldberg believes that normal individuals can similarly enhance their brain functioning by exercising their frontal lobes with tasks that require sustained concentration across progressively challenging tasks. For example, in my own research, I measure forehead skin temperature while performing mental sums on the stock prices moving by on the ticker tape. Because the tape moves relatively quickly, the task requires intense concentration. Interestingly, forehead skin temperature tends to stay highly elevated throughout the task (suggesting frontal lobe activation), resulting in a state of quiet focus akin to the zone. Through these and other exercises, such as those found in Zen, it may be possible to create flow experiences on demand, placing traders more consistently in a high performance zone.


Robert Pirsig, in his Zen and the Art of Motorcycle Maintenance, offers the interesting observation that the real motorcycle the rider works on is the cycle called the self. Whether it is cycling, Zen archery, or trading, working on one’s craft and working on oneself are one and the same. Through disciplined and intensive training, we literally shape the brain and create the motivational states necessary to sustain exemplary performance. This article suggests that traders can greatly accelerate this process. “What I do every day is a mental exercise that increases my mental dexterity…” trader Mark Cook observes. “I always say, ‘I am not a trader, I am trading’. Trading has engulfed my being.” The real market we are trading, he has found, is the market called the self.

Brett N. Steenbarger, Ph.D. is Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University and a daily trader of the stock index markets. He is the author of The Psychology of Trading (Wiley, 2003) and coeditor of the forthcoming Art and Science of the Brief Psychotherapies (American Psychiatric Press, Inc., 2004). Many of Dr. Steenbarger’s articles and daily trading strategies are archived at his website,
Csikszentmihalyi, M. (1996). Creativity: Flow and the psychology of discovery and invention. New York: HarperCollins.
Douglas, M. (2001). Trading in the zone: Master the market with confidence, discipline, and a winning attitude. New York: Prentice Hall.
Ericsson, K. A. (1996). The road to excellence: The acquisition of expert performance in the arts and sciences, sports and games. Mahwah NJ: Erlbaum.
Etzkorn, M. (2001). Mark D. Cook: The deep roots of trading. Active Trader Magazine, 2(7), 66-74.
Galton, F. (1869). Hereditary genius. New York: Macmillan.
Goldberg, E. (2001). The executive brain: Frontal lobes and the civilized mind. New York: Oxford University Press.
Herrigel, E. (1999). Zen in the art of archery. New York: Random House.
Kiev, A. (2001). Trading in the zone. New York: Wiley.
LeDoux, J. (1996). The emotional brain: The mysterious underpinnings of emotional life. New York: Touchstone.
Pirsig, R. M. (1984). Zen and the art of motorcycle maintenance: An inquiry into values. New York: Bantam.
Shimamura, A. P. (in press). The role of the prefrontal cortex in dynamic filtering. Psychobiology.
Simonton, D. K. (1994). Greatness: Who makes history and why. New York: Guilford.
Steenbarger, B. N., Raschke, L. B., & Barber, B. E. (2002). Trading the Ranger way: Training the elite trader. Stock Futures and Options Magazine, 1(6), 26-31.
Figure One
Characteristics of Work Experiences Associated With “The Zone”

  1. There are clear goals every step of the way;
  2. There is immediate feedback to one’s actions;
  3. There is a balance between challenge and skills;
  4. Action and awareness are merged;
  5. Distractions are excluded from consciousness;
  6. There is no worry of failure;
  7. Self-consciousness disappears;
  8. The sense of time becomes distorted;
  9. The activity becomes autotelic (pleasurable in its own right).

Adapted from Csikszentmihalyi, 1996

Figure Two

Characteristics of Successful and Unsuccessful Traders

Successful Trader
Unsuccessful Trader
Trades with a plan
Trades impulsively
Trades in a rule-governed fashion
Trades on hunches and urges
Trades when in a clear mental state
Trades emotionally
Trades when focused on the markets
Trades when focused on the self
Becomes problem-focused after a loss
Becomes emotion-focused after a loss
Trades with tested strategies for trade management
Trades with little or no risk management
Trades selectively, based on risk/reward
Trades inconsistently; overtrades and undertrades

Friday, June 1, 2012


Bounces :

a bounce scenario occures when price gets rejected of a pre definied key level area
wether it be of a support area or resistance .. or a swing igh/low..

it just m,eans that price gets rejected of a particular area.. and is seen as unfair.. this will cause nice trading scenarios where u can take advantege from,

on a bounce several points have to be met, inorder to take and play that bounce, but it depends if that bounce is anticipated from a supportish level or a resistance level.. ie a bounce to the up or downside,,

if that bounce should occure to the downside, then we have to look at resistance levels and if they hold and price refuses and gets rejected from the resistance level, then supply has to overcome  demand at this point to bounce off

else if the bounce should be upwards then we should move torwards(down) a support level wich should hold. ie due to demand getting stronger and outrun supply  or supply dries out to such an extend that demand is getting stronger .. at such a level wich causes the bounce...

for example in order to take a bounce trade to the DOWNSIDE, off a resistance level..
vice versa four a bounce to the upside offa support level

we should have following situations to be met,

1. path of least resistance should be down

2. selling pressure should be stronger then buying

3. supply should be stronger

4. corrections (buying) shoud be weaker.

so in order to judge a bounce setup and trade it , we want to see and wait how price moves torwards our key levels , now lets say for example we see how price moves torwards a key level  3,70 and price moves up to test / visit that level

so now we focus how price moves there and how it reacts @ thelevel ,
for a bounce trade worth taking we want to see in this case ,
that on the move up .. the buyng pressure and demand is reducing
and on the otherside that supply and selling is getting stronger..

so we want to see a weak price move torwards our key level..
and an increase in selling @ or arround our key level.. note that price may spike or trade one or two ticks above our key level but as slong as the demand and buying is still weak .. no need to rethink if we should play that bounce ( key levels arent fixed numbers but zones)

so we have traded @ 3,60 and removed that size on the backside.. but the follow thru aint so strong at the layside , we see an increase on the backside @3,7 signaling a strong resistance may be a head.. and if it looks like it will hold due to several actions we take the trade and antcicipate a bounce off that level..

we tarded at 3,65 and moved up again the follow thru is not really weak (relative.. but deff not strong either) and one or two orders dont change the whole picture/story

so price moved rather weak and at least with no signs of strenght to our key level.. and now lets watch some scenarios that could occure on such a level and how to spot them.. note that those scenariors can come up in various forms and sizes etc.. but u will start to see what to look out for..

Below a video of a Bounce :

Bounce Scenarios

1. BigSize but No Front Running :

on this scenario it looks like there is some serious size
on the layside an ready to this pictuer looks strong
but remember the prints are more important then just size on resiting orders...

if u see such size right @ reistance , but we dont see anyone jumping infront of them (at least with significant size) then there is something foul, or simply put
the market isnt ready to move up or thru this level.. no one is following the market up any further ie, no buying.. so be rather sure that price will bounce

as the saing goes no demand leads to supply

and be quick! as if that big size is one guy, it may get pulled fast and that will result mostlikely in drastic drop in price.

so in this case the order @3,65 got pulled and immediately
we see 200 at the there is supply vs. no demand
therfore u should position ursfelf for a bounce..

Scenario 2 : Supply Swamping Demand

in this scenario , we see that a big number prints @ 3.70 on the layside.
so a good sign of demand and buying but look @ the backside and how it reacts to such a buying instead of a decrease or a removing of the order ,its still standing with 600.. so there is more size on the backside and its getting ready to swamp demand at this stage and level

a bounce would be more likely, as if the layers and backers fight both with good and big size.. but one is clearly stronger u dont want to be on the weaker one .. right ?

and it gets clear on the next pic, as we see an increase on the backside
where we have previously traded ie. bought, wich is a good sign ,
as imaging u see big hits on one side but instead of the amount decraesing it even increases! now that tells us that there is more supply then anything else..
we even see a big number print on the backside @ 3,65 this just addsto the allreday told story .. that A supply is swamping demand and selling pressure increases..

therefore bounce should be anticiptaed and played

Scenario 3: No Demand

when u notice that price trades torwards our level on low volume and we have a lack of follow thru , then we can speak of no demand and no demand at a key level in this case resistance is deadly..

we see weak prints and low amounts on the layside

on the other hand we see size on the chance for price to break that level.. with such weak actions and no size to support any move up..
and no size to sustain at this level

Scenario 4: Effort vs Result

on this scenario u can see that when huge effort is taken in action
but the level still holds, then it rather bounces then breaks..

as in somecase demand will loose its firepower and the resting supplywall will still hold and therfore outnumber demand

we see a big print @ 3,70 but we still stand with 600
(ice berg) order ... a sign that there is more size then u first whitnessed

another big print of 400 , but we still stand back with 550
it just decreas a lil.. but it witholds the attacks. that level will mostlikely hold

an after a some big attacks we even increase in size at backside..
thats a sign that u rather should think about that the level will hold and u should play a bounce

Remember! nothing is Black and White! and these are just some of manny scenarios out there
but now u know what and how too look at the markets and tades that take place.. etc..
stay Tuned for more to come ;)

Saturday, May 26, 2012

Breakout Scenarios

Here is the follow up on Breakouts

Scenario 1 : Eating Thru Resitance

when u notice that a good sized order on the backside gets hit frequently with good size
and it gets eaetn up without or just marginal new money coming in @ backside ..

then u consider to join the piranhas and put in a laybet @ 3,70 .. sometims it goes so fast that u will miss the train.. but hey.. it doesent mather the markets will be therfore evere and the next setup is just arround the corner ;)

so we see 50 print @3,70 wich we say is an average price.. /is always relative to the current market) we see that the backside doesent get a refill.. we stand with 350

we see 100 print a good size and the backside does nothing we stay with
250 @3,70 and we notice that the lay queue increased in size at this moment
we could put in a lay bet @3,70

again we see a nice sized print @3,70 150 get matched and we only stand with 100 left
ie. there is no new supply coming in @this level.. no supply against an increase in demand..
this level has to break ! ;)

and bam the remaining 100 have been trading and we break thru the resistance level..

Scenario 2 : Absorbtion (Compressed Bounce)

we can also see a bounce off that resistance level @ 3,70 we then have to judge the bounce, is it supply that overcomes demand? , does supply gets absorbed ? ie do we hold gains ?even if supply is coming in.. ?

on this battle something like this can happen

lets say we bounce off 2 ticks , but now focus on the money on the backside its not that big noir strong..
and we have no follow thru..

next we trade back up to resistance.. we even test resistance with a print @3,70 of 50
and please look at the good size on the layside.. compared to previous size on backside

now we bounce off again but this time only 1 tick lower
and again the backside size is small but layside even increased again.

and eventually we trade back to 3.70 with big prints and an increase of size on the backside..
time to think about a lay bet.. and a breakout to follow

so whats happened here is that the remaining supply at this level.dried out and got absorbed by the demand wich on the same time increased..
this u will notice on how far we bounce back and if we move back up we should bounce off
each time one tick or two lower then before..
aswell as demand should have signs of strenght ,while the selling pressure should be weak
and should get weaker the more we test the resistance level... this may go on for awhile..

but its a good scenario as u could get in a lil lower then @ resistance..

Scenario 3: Holding Gains

here is a scenario wich on first sight looks like supply is overcoming demand at resistance
but only on first sight! ;) as u also need to focus on whats happening to the layside when big prints hit the market..
as if u dont see it on first sight its doesent mean that there is no size (ice berg)

we see an increase @ resistance 3,70 of 1500 wich is big , we also notice
a print of 200 @3,65 but we still stand lay with 250 , so there is probably
more money on th layside then first excpected..

another big print of 500 and we lost some money on the laside but we still stand with 100
(u can often see that some money gets temporarely eatne but then we have a refill pretty fast a sec. later)

there u go we have a refill and stand 300 @3,65 .. so even thou we have big prints hitting the layside.. we are holding gains .. this is a n indication that there is size on the layside and a sign of strenght as the layside is able to absorb the bomabardement of the backers

another big number hits the market as we print 700 and we still stand with 300 @3,65 this is the last confirmatinn we need.. and we would get ready to lay.. as soon as we see prints of good frequence and size on 3,70

no the attack starts and we see a big print of 500 @ 3,70 while the size at lay increases and the backside looses size .. this could be the start of a frantic and fast eating thur the 1000 @3,70 wich would unfold in a simillar way then scenario 1 we spoke about...

so whats happening here is that there is more size on the layside.. wich isnt revealed and the heavy selling pressure gets absorbed.. wich results in an inbalance in favour of demand.. so if there is size that can keep up with supply and whithstands its attacks.. till the supply dries out and demand increases at the same time.. there is only one way price will go.. and that is up !

Scenario 4: The Lure

another scenario would be . if u see lay orders get pulled to lure in backers .. ie to make the marketlook weak at resistance.. wich is a part of an article i work on in the future,, about spoofing and games played on the ladder .. there is alot to tell... ;)

so let say someone pulled the 250 from 3,65

and u see that someone jumps in on the backside with 100

and as soon as this happens it gets hit and u see another nice size on the layside

the 200 get pulled again.. and now a backer moves its order from resistance 3,70 to 3,65

and yet again as soon as this happens someone takes the 300 @3,70 and we stand again with a good size on the layside..

if u see that money gets pulled and as soon as a backer got lured in.. and that back money gets matched with size.. all the time ..
this is a signs that someone with good money and prob bigger pockets want to buy there

and therfore u should to ;)



Definition of a 'Breakout'

A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility.
we look at a breakout either up or down from a range or key levels , like support restistance , value areas,rejections ,high activity levels...

Here iam going to explain what to look out for and how to play a breakout scenario :

First we are neutral as we just spoted our key levels and we watch the market actions around and between those levels,to judge the quality of demand and supply and where the past of least resistance most likely is..

this gives our first slightly biased view on the market . ie. lets say that we have whitnessed that the quality of demand is stronger and price has it much easier to move up , therefore we are slightly(bullish) ie. looking to lay first..

so then we watch where our nearest key level is and watch How price moves there and how it acts at our key level.


lets say we have identified a key level @3,70 , now we watch how price moves to that level .in order to play a breakout several points have to be met and the market has to act in a certain way at our key level in order to take a trade wich anticipates a breakout to the top of the key level.

first we want to see that the path of least resistance is upwards , second we wanna see an increase in demand third the buying pressure has to be strong , and fourth the reactions/corrections should be weaker (no selling pressure)

how do we know if the path of least resistance is up ?

if price moves up in a rather smooth way having no problem eating thru the backsidefor example.. we move 3 ticks up and 1 tick down .4 ticks up 1 tick down etc.

how do we know if demand is increasing?

if we see an increase in size on the layside of the queue , and if the backside gets removedand instantly replaced with good volume on the layside (ex. we stood back @2,50 it gets matched now we stand Lay @2,50)

how do we spot that buying pressure is strong?

if we have good frequency of high or good sized prints on the layside wich eats its way thru the backorders u will notice that a strong buying pressure is like an avalanche of orders and money coming in.. with good size

how do we know that we have weak corrections?

if we see strong good volume sized prints on the upswings and/or with good frequeny , but we have small sized poor frequency prints (if any) to the downside ie. on downswings .. with less chance to make back ground.. (4ticks up, 1tick down)

example on a move torwards the resitance level of 3,70 , wich shows signs of strenght
and u shouldnt think about backing such a strong move up anyway ;)

we saw a print of 200 @3,60 and immdetialty stand lay with 150 now at that level (note it could be one order matching the size or witha size of 50 and frequent hits)

we increase in size on the layside

we move up again and print 600 @3,65 and again instantly go lay with 200

so we stand now @ resistance .. and size on the backside increases ..
we know whe are at an important level,, where something has to happen
we are slightly biased torwards a breakout due to the ongoing action that took place torwards that level.. and an increase in backside size doesent change that (prints mather)


these trades that took place + the fact that we stand lay on that traded areas has to be considered as signs of strenght and increase in demand and good buying pressure and therfore we anticipate a breakout of 3,70 . but only if price acts in favour of our anticipation @ that level..

Below is a Video of a real market example of a breakout , wich can come in manny ways
a follow up article on Breakout scenarios will be posted

Sunday, May 20, 2012

how to approach trading in general

how to approach trading in general

well u need to emphasize that each market and each new event is different then the one before!no market is the same as the one before or the next to come... there is no black and white!however the underlying market mechanics and principles dont change , they are always the same..the market reflects those principles just in a different way each time ... based on liquidtity,volatility, average

volume etc. it just comes in differnt shapes forms and size but the mechanics behind what u see are still the same..
and how to interpret the current market action.. is just a matter of experience.. and the basic logics i describe on this blog

u need to know that setups and trading opportunitys wont play out picture perfect all the time.. as there is no exact situation then the one before ,even if it looks like it is in first place .. there is always an uncertainty ,any thig can happen within the next few minutes or seconds or even a blink of an eye.
u never gonna know if someone throws a big size bet and scares the market etc..or something similar crazy thing happening ,but u have to act in such a situation the right way and this is a just a matter of reading the action correctly , with the basic laws in the back of your head , it will sink in and any new situation will be read correctly and therfeore the action u take or not , will be because of the current sitaution and not because of pre biased views or actions.. u will adobt t each new situation ...

the market is a ever changing beast u cant force into simple patterns.. wich do occure from time to time but thats just a part of that chaotic behaviour... notice its not random.. its chaotic if u know that there is a cause for each move u know what might be the next most likely action to take place.. but its not 100% sure... nothing is but we are not here to predict the future , but to put as the odds in our favour and participate.. what the market does next is not in our hands , but when to exit is in our hands and that should be as soon as there is a change in behaviour in progress , wich will develpoe again depending on the actual situation.. u will notice that sometingis cooking or doesent seems rihht .. for a open position etc.. as u have watched the market till this hapened..

aswell as u need to know that u have to find the perfect market situation in order to decide if its tradeable or u need to see if the markets talks to you.. or not..

u know ,there are bad and good market conditions and u simple have to decide if the current market is tradeable or not depending on alot of factors , wich includes your approach on trading wich have to be met in order to be successfully aswell as the market ,believe it or not , will often throw out almost crytsall clear signals in wich driection it will go or if a certain level will hold or break , and then u have to trade the obvious scenarios .. where the market litteraly begs you to take a certain trade .. this is where patience pays out .

only trade the obvious! if in doubt stay out.. the market can act pretty unpredictable from time to time ;).. and if u cant see anything or read the market comfortable.. then by all means stay out!

u will know when to trade or when not or when the market gets freaky.. etc..
and u will know when u can act uppon the action as u have interpreted .. then u can take a trade.. and even then the tide can change within a second.. so u have to stay flexible.. either scratch or change direction of a trade (wich would be more advanced)

so basically

u have to get the actual market situation right and the conditions to your trading style have to be matched u need to get the odds in your favour .. (the more the better)..
u have to trade the edges not in bewteen , only on key levels
u need to trade a size where you feel confident...

Stay Tuned for Breakouts , Bounces and more... ;)


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