Please visit: http://www.thetradingframework.com/blog for all the latest Blog Posts and News.
L2ST’s new Brand for Technical Training and Coaching wil be featured at: http://www.thetradingframework.com
Please visit: http://www.thetradingframework.com/blog for all the latest Blog Posts and News.
L2ST’s new Brand for Technical Training and Coaching wil be featured at: http://www.thetradingframework.com
As a trader I had to learn how to see myself in such a way where I would not be limited by just one perspective of myself and my own self-image. I realized that I could see different perspectives and recognize different parts of me that made up MY SELF as a whole. Beginning to see myself in such a way allowed for me to recognize the Ego part, which is the part that is concerned with the self-image and how I may be perceived from my own perspective as well as others. Most people are dominated by the self-image obsessed ego and don’t even know it. I don’t think I would know it so well if I didn’t go through the process of becoming a better trader and learning to let go of the needs of the ego and self-image so that I could be freed from the mental slavery and a life controlled by my ego with the traps that come along with it.
So let’s break it down further for anyone that is a little lost. I believe most of you will know what I am talking about if you have traded for long enough to experience the pain and discomfort that trading with the ego in control can bring.
I had to realise that there are different parts of me that make up the greater whole which is MY-SELF and these parts can get involved in the game of trading on any given day and many different ways. Quite often leading to internal conflict, where different parts want different things.
There is parts that take me TOWARDS my objectives and parts that can take me AWAY from them. Some times unintentionally!
For a typical trader their more conscious, rational and logical thinking part doesn’t typically run the show in the moment, it would be great if it did but by default it typically isn’t the way for most of us human beings. It’s the more automatic reactive unconscious mind that is fuelled by feelings and emotions that takes over when you become engaged in the game. Many can mistakenly blame the feelings and emotions as the culprits, however as human beings you will always have feelings and emotions and they will not just disappear as some people may like to make you think and believe. Some try and block them out and that makes things worse because then we end up repressing them. This idea of being emotionless like robots came from traders who thought they could be robots whilst trading mechanical systems and not have to think and feel anything. Well that is only possible if you stop being human, as feeling and emotions are natural and part of being human and is a part of our natural biological, physiological and psychological makeup.
We do have a choice to either let the feelings and emotions work for us or against us. It all depends on how we process them and use them. Think of feelings and emotions as indicators in your trading. When something doesn’t feel right, the first thing you have to recognize is if this came from the perspective of the ego and self-image? Or is it from the trader part that is actually trying to help you? – these are the two common parts that play a part in a traders lifestyle and can lead to internal conflict.
When you do this you will recognize if the feelings\emotions are in line with your plan and your expectancies based upon market structure or are they feelings trying to take you away from this? Typically anything pulling you away is from the perspective of self-image and ego. Meaning that it’s concerned with if it goes wrong and you lose, it’s concerned with what happened in the past when there was a situation where it went bad. This insecurity will naturally create feelings of doubt and fear and you can’t stop it if you think you are the ego and if you are too identified with it! HOWEVER these fears and doubts are not necessarily true threats in the moment, it’s just the fear of the unknown. If you become aware in the moment that the doubt\fear is from the ego and that is just a part of you, you can disassociate yourself from it and therefore release being controlled.
That’s why embracing uncertainty is essential as a trader because the ego and self-image want the security of certainty. There is no certainty, but your ego wants certainty and when it doesn’t have it you will receive all those thoughts, feelings and emotions to doubt what you are doing. You ego is scared of the unknown and not knowing for sure!
Although this quite naturally happens for most traders (whether they know it or not) there is a way to engage more with the “Trader Part” of us and just recognize the Ego part. Don’t fight the ego, instead you just have to raise your awareness of it and practice letting it know you know what it’s up to and how it works. If you watch and observe the ego you release it’s control over you, because you are aware that it’s NOT the whole you, it’s just a PART of you.
Here are some steps to Raise awareness and align more with Trader Part so that Belief and Confidence may over shadow the doubts\fears cast by the ego.
Going through the process of consciously setting goals\objectives and risk parameters for the day are essential. This sets you up with a plan to embrace and defeat the ego.
Doing your Pre Market Analysis is also essential so that you have a plan that guides you towards focusing and engaging in certain scenarios rather than trying to make it up as you go along whilst trying to trade anything and everything. Therefore having your plan for the day has to be in place to guide you, so that your unconscious mind is at least aware of what it needs to align with! I call these visions because I visualise the ideas in mind’s eye and ensure that when the ego begins to whisper I do not sway and I can keep reminding myself of why I should have belief and confidence in what I am going to do whilst I perform. You have to be like the Eye of the Hurricane in the moment and let everything happen around you whilst you stay focused and undisturbed.
Trading inevitably helps you realize that there is an ego part of you that is concerned with its self-image and it has different objectives than you as a trader should have. The ego part is concerned with whether you win or lose, and how much, it is ruled by fear and doubt because with any sign of danger it must protect itself to keep looking good to itself and others. It’s all about self-image for the ego! It can’t see the bigger picture and is very short term focused because it wants results right now, so that it can prove to itself how worthy it is and how special it is! BUT the big problem is all this wanting, needing whilst being identified with the ego takes you away from how trading should be approached if you wish to succeed! Because Ego is controlled by Fear and Doubt it’s easy to allow for you feelings and the energy behind them to keep you occupied because there is always a sense of danger, pain or discomfort. Naturally human beings try to avoid such situations and that is exactly why they focus on this! We focus on what we do not want! This is Trading NOT to lose and is NOT “Trading to Win”.
The issue is as traders we have to embrace these issues of the ego and self image whilst remaining in control.
The other Trader Part that helped create the plan is still there and present within our mind and body, but what we do in these situations is give special attention to the Ego part instead of the trader part. Yet, the trader part knows what we need to do and what we need to focus on, however you MUST give it that special attention and much more attention than your ego!
Start listening to the Trader Part in the moment rather than the ego part. This can be achieved through lots of practice and new experiences, through which we can create new habits and ways of thinking.
SO how to do we do this?
First you MUST raise your awareness of the SELF as a whole. You must be able to raise your conscious awareness in the MOMENT to the internal conversations that you have with yourself, you have to listen but with an objective to find the “Trader Part” and release the ego part.
You have to raise awareness and listen to the Trader part that is there, through focus and attention listen and even reaffirm by saying out loud what needs to be done and why by always referring back to you plan. This CAN be achieved as I do this every time I trade. Inner Silence and Stillness are tools that you need to tackle this. However it takes time and practice. The best tool help raise your awareness to this level is DAILY Meditation for around 10-15 minutes at the beginning of the day and again at the end of the day to start with then over time increasing towards 20-25 minutes meditation as experience is gained and you become more comfortable with the joy and peace meditation can bring you. Don’t expect changes overnight! Although you will instantly feel more relaxed and silent within after one session, you must meditate daily for at least 3-4 weeks to start really feeling the benefits of raised conscious awareness so that you can use that state in the moment. The longer you do it the better it gets as your awareness continues to increase.
There are many forms of meditation, and some people that are new to it will find that using meditation music and guided meditations will help. You can find many on-line and even YouTube. Consider looking up binaural beats and isochronic audio technology as this can help people who are new to meditation break into the deeper and more relaxed states of awareness where brainwave activity is slowed down through the meditation from the typical waking state which is in Beta brainwave frequency, towards Alpha-Theta brainwave frequency.
I like to use Neuro Programmer 3 from Transparent Corp whilst I am actually trading with some positive affirmations on loop. You can check it out HERE: You can download a free trial and it lets you create your own tracks, which is awesome.
However I also personally like to practice Qigong and Yoga techniques for meditation as they help me get used to becoming self-aware, in the moment and more silent within as well as many health benefits. Practising silence and stillness within helps you listen to your inner self better and much more effectively. Of course do not forget about the simple things like Diet and Nutrition, this can change how you feel on a consistent basis and therefore effect you state of awareness. Eat healthy, perform regular exercise and get at least 7-8 hours of sleep each night. The simple stuff can take you along way. Being a Trader is much like being an Athlete as your whole lifestyle has to change to stay in Peak States for Performance.
So there you have it … I believe I have just shared some of the most important techniques to me as a trader and I hope that you will find it useful to help you progress further on you journey too.
Kam Dhadwar of http://www.l2st.co.uk
Now there is a lot of reasons why what Kam Dhadwar’s “L2ST Trading Framework” goes WAY beyond what traditional Auction Market Theory and Market Profile Trading teaches. The market keeps teaching and Kam will always be one of those traders that will listen very carefully and keep creating better and more effective ways to trade with Auction Market Theory (AMT). There are hundreds of ways to perceive AMT and trade it using profiles however not all strategies will utilise the edge to the fullest potential.
There is an ART to discretionary trading, which requires an understanding of the finer details. What Kam is trying to do with the “L2ST Trading Framework” is teach the ART of trading and not just the science!
Here is some of what makes the L2ST Trading Framework so unique:
– The use of Custom Profiles for Value Perception NOT just limited to day-to-day profiles.
– The use of a FULL market session.
– Top-Down Approach – Daily, LTF (Longer Time Frame) and STF (Shorter Time Frame).
– A High Probability way of defining Potential Composite Profile Reversal and Target Areas.
– The ability to measure how far a market can extend away from value and still return with high probability!
– The ability to measure and perceive when a market has a greater chance of moving away from value.
– The use of Price Action and Timing with market relationships and confluence.
– The use of Order Flow for added belief and confidence.
– The use of dynamic Trade Execution, Risk and Trade Management Techniques.
– A Business Perspective with clearly defined Goals\Objectives and Plan.
– A huge emphasis on the development of Discipline, Belief and Confidence.
– Focus is NOT on becoming emotionless, but instead more aware and learning how to use your emotions\feelings to help direct your trading.
I often talk to my student traders about the importance of having a Business Plan as a Trading Business and not just viewing yourself as a Trader with a Trading Plan. Whilst the Trader and the Trading Plan is an important part of the overall Trading Business, its in itself is not complete. Yet many traders approach this business armed with themselves and some sort of trading plan alone. This is no way to approach ANY business let alone the Trading Business. Actually as a Trader it’s much more than just any business, its a COMPLETE LIFESTYLE! so in effect your business plan is a actually a plan for your lifestyle as a trader!
I believe it is imperative to include all of the following in your Trading Business Plan at its most basic level:
The above is just some of the things that I suggest Traders Consider so that they have CLARITY in what they heading towards, but most importantly so that they can also establish a true feeling of being in line with the Life’s Values rather than going against them. Many Traders struggle because their unconscious beliefs and values are not aligned with their goals\objectives. The inner conflict stops them and forces them to do things that they don’t want to do consciously, which is another subject in itself!
Developing a complete plan is not just for new traders, its for those that have not got where they want to go and also for those on the journey. Above all it’s about gaining CLARITY, and that is something everyone can do with no matter what your level.
Author: Kam Dhadwar – L2ST
Unlike many others that attempt to teach others the WAY in trading, we DO NOT teach a systematic way to trade. What we teach is a “Discretionary Framework for Perceiving, Understanding and Ultimately Trading the Markets”.
The “L2ST Trading Framework” consists of focusing on understanding and applying the follow principals:
1. Auction Market Theory – Understanding Participants Behaviours for Negotiating the Market Price and Structure.
2. Value Trading Framework – Understanding a Perceptional Framework for defining fair and unfair prices.
3. Volume Profiling Techniques – Mastering the understanding of Acceptance and Rejection of prices and Market Structure.
4. Perception of Price over Time – Price Pattern Logic for defining Market Structure and Context.
5. Confluence – Short-term Price Patterns and flow, Market Relationships.
6. Preparation – Understanding and then Visualising what the market may do before it does. This aligns the unconscious mind with conscious plan in ADVANCE.
7. Execution – Dynamic Entry Techniques utilising Price Action and Order Flow.
8. Trade Management – Advanced Position Sizing, Effective Risk Management, Efficient Target and Exit Strategies.
9. Discipline, Belief and Confidence – Through: Business\Life Planning, Self Motivation, Raised Awareness, Mental, Physical, Spiritual and Emotional Development\Management Techniques.
For one to be a successful trader they must realise that Discipline is absolutely necessary and not luxury. It is absolutely compulsory and without Discipline it’s impossible to make it as a trader. This isn’t anything new all of us know that Discipline is key. However the reality is that most treat it as a luxury rather than a necessity. If it was truly perceived as a necessity then traders would do all that is required to develop the required level of Discipline.
Traders seeing Discipline as a luxury, is shown by their actions. If for example you find yourself knowing that you must Meditate daily before trading, you know that you must do your Pre-Market Analysis and build a trading plan for the day and you also know that you must execute that plan and nothing else. Well if during the day you decide to ignore this part of your Trading Plan, well that’s a good example of perceiving discipline as a luxury rather than a necessity, because if it truly was necessary to be Disciplined you would have been so.
In its simplest terms, Discipline is about doing what you were supposed to do. One of the most effective ways to get things done is to develop routines. Then over time allow those routines to become habits. Good Trading Discipline is a Habit; it’s a way of being. Once you have developed it will remain with you. Being Disciplined is a way of life, to be a Disciplined Trader you need to be disciplined in general. Lazy people don’t make it.
Good examples of routines\habits of Disciplined\Successful traders include:
All the above is a Necessity and not a luxury for a Disciplined Trader.
I often get asked what do I look for when I execute into trades and how do I limit my risk. Firstly I say that you must understand the Market Structure and the opportunity potentially setting up. You must have a vision of what the market may or may not do next. You must know and understand where the market may go from and where to BEFORE you get in. Then “You must trade in the gap between where you are and where you want to be” (A popular quote from the late Ari Kiev). When you have this basic foundation in place you can then look to build some belief and confidence in the idea through your perception of real-time activity. This is why planning every trading day and individual trade is the most important thing to have in place.
When it comes down to doing business and getting into a trade I personally watch Price and how its moves around my levels and areas of doing business. At the same time I watch the volume trading on the Bid and Ask.
Much of trading is an Art Form so, just watching and reading the information alone is not enough, you must also FEEL IT. This takes time and experience to learn but it can be developed. You will often hear me say that this feels like its topping, or its bottoming, it feels like its lifting offers well, or hitting bids well. That”s how I get into the rhythm and the feel of the market, that’s how I get in tune. Trading Price and Order Flow is all about gaining Belief and Confidence in a trading idea. Using your feelings whilst trading is essential. I look to get into a trade and stay with as long as it not only looks good and the premise remains intact, but it also has to feel good. If I develop any sense of doubt, that is my signal to get out. If I really know what I am doing and the opportunity is that great the level of confidence I have in the trade should keep me in it, once the confidence has gone so has the opportunity. If you make the wrong call you can always get back in again.
The secret to reading order flow and trading with it for execution as well as trade management is to ensure that you DO NOT just watch the order flow to make decisions. You must observe what affect the orders had on price and understand where price was trading in reference to the market structure (context) and the opportunity that you are observing. Some novice traders will get sucked into looking for size on the tape and footprints, looking at Delta (Net Market Buying\Selling) and make decisions on this alone. Whilst this is useful information it in itself is fairly useless. As there is a buyer for every seller and a seller for every buyer when you see size trade, it by itself has achieved nothing and means nothing. For example 200 sellers hitting the Bid, just filled 200 contracts from Buyers on the Bid, so they cancel each other out. It’s always Zero Sum. Also one decent trade alone doesn’t move the market, especially a liquid market! Its a competitive marketplace with many big players, quite often trading against each other.
So what is useful? Well I believe you must ask the right questions, like:
– Who is becoming more aggressive? Is it the buyers lifting sellers offers, the sellers hitting buyers bids, the sellers offers absorbing the buyer lifting or the buyers bids absorbing the sellers hitting?
– What was the market able to achieve after those orders traded? Did those that appeared aggressive continue to show the same level of aggressive behaviour, if so how aggressive? or did it just dry up? What caused it to dry up?
– Where and at what prices is rejection occurring? Where and at what prices is acceptance occurring? what can it possibly mean in this context?
You see developing a feel for the market and understand what is happening is about having the right kind of thought process. The thought process is influenced by holding the right questions. If you hold the right questions you can allow the market to give you the right answers in the MOMENT.
Click Image below to enlarge:
Author: Kam Dhadwar – Professional Trader and Owner at L2ST
The most important concept to understand for Market Volume Profile traders is Acceptance and Rejection. If only more traders understood the simplicity of this concept and how it can help them improve the odds in almost every trade that they take.
Trading “Auction Market Theory” and “Market Volume Profile” has always been for me about gaining an EDGE. As a discretionary trader I don’t believe or have faith in percentages and statistics alone. Therefore I like to trade what MAKES SENSE and is more likely to happen just because it makes more sense than if it were not to happen. Quite simple really. With that in mind I know these opportunities are more likely to happen, but at the same time remain humble enough to understand that doesn’t mean always, as nothing always happens in the market!
By viewing the markets through the lens of an understanding of Auction Market Theory principals, and the concept of Acceptance and Rejection, you may begin to use a Market Volume Profile more effectively.
So what is Acceptance and how is it perceived? – It is defined by areas on a volume profile where MORE trade was facilitated by market participants. Visually its the bumps\peaks on your profile (See Below). The fact that more volume was traded proves the acceptance has taken place at those prices in the past.
So what is Rejection and how is it perceived? – It is defined by areas on a volume profile where LESS trade was facilitated by market participants. Visually its the pockets\valleys on your profile (See Below). The fact that less volume traded proves that rejection occurred at those prices.
(Click on image below to enlarge)
I believe that the market and its participants have a memory, the Market Volume Profile represents that memory as the mind of the market. The areas that were previously accepted have a tendency to be accepted again and the those that were rejected to be rejected again. Of course this doesn’t happen for ever, but as the market references those areas time and time again, MANY opportunities are presented around these levels. Quite commonly the market will spend more time at areas of high volume that have shown acceptance, and lesser time at low volume areas that define rejection.
As I am looking for the market to move rather than just chop, I use areas of Rejection for potential Entries and Areas of Acceptance as potential targets. Therefore in both theory and practice I look to trade from Rejection into Acceptance, then back towards another area of rejection. This is the natural flow and rhythm of the market and you will see it repeating time and time again. Just bring up a Composite Profile on any market covering a significant period of time (i.e. 3 -6 months or even more if required) next to a price chart and you will see how the market constantly moves from low volume areas to high volume areas and back to low volume areas again.
We can see evidence of this playing out around areas of Balance (Sideways Market) as volume dries up and rejects above and below the range of development. As well as when we are getting ready to break outside of the range as further acceptance takes place when volume builds at price outside of the range. Then of course we see further evidence of this when the market begins to trend and further acceptance and rejection areas begin to form and trade around.
(Click on images below to enlarge)
Understanding this concept of Volume Acceptance and Rejection is extremely essential so that you may become creative with your level of understanding, and begin to apply the Auction Market Theory and Market Volume Profiling techniques in ways that provide unlimited potential. Of course these concepts are also applicable to the way that I read and trade Order Flow using the MarketDelta Footprints.
AUTHOR: Kam Dhadwar – Owner and Trader at L2ST
I am often asked which books have been most influential in my own trading and help formulating the right kind of mindset for better trading. So here it is. Firstly I do not recommend reading too many trading books that are technical, all you need to know about technicals is the basics of price action and price patterns. I have found that the most influential books to my trading have been on how to understand the market and its participants better and those books that help you work on your own psychology. I am a huge fan of Ari Kiev’s books and work (He sadly passed in Late 2009, and may he Rest In Peace – A GREAT MAN!). Here is my recommend reading list with links to the Amazon.co.uk website so that you can get more information and checkout the “look inside pages” or I suggest downloading samples if you have a Kindle device as they are free:
Super Trader: Make Consistent Profits in Good and Bad Markets
I Hope it helps. Kam Dhadwar – L2ST.