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How is a Trade Developed ??

How is a Trade Developed ??

 

Trade Development

You might have read a lot about the process of Trader Development.There are tons of materials available all over the internet. As always, I have a very simple approach to this subject also. In my humble opinion there are only three stages in trader development.You need to negotiate two slippery slopes and a plateau. These stages are Structure, Tactics and Action.


Structure

First stage is defining the structure of the market. This is a slippery slope and most of the traders fail to climb this, Structure is simply a frame work within which the market moves. Imagine a foot ball field. There are certain rules under which the game is played. If you are not aware of these rules, you will think that the moves are random, Markets do not have such hard and fast rules, yet you need to define a framework to trade it. Nobody knows the exact structure of the market. Indicators, Market Profile, MAs, Elliot waves, Gann etc are all attempts to define the structure of the market. We need to define this structure and identify the “Actionable” price levels where we can initiate trades, Observe and ensure price is respecting these levels repeatedly and these levels are “Actionable”. There is no point in proceeding any further without total trust in your defined structure.

Tactics

The second stage is deciding upon the methods to trade the price moves within the defined structure. This is all about tactics. This is relatively easy part and can be achieved with a little bit of trial and error. Interestingly many traders think this is the most important stage and try to trade without properly defining the Market Structure. I have seen people trading candle patterns paying no attention to the location

Action

The next stage is Decisive Action. This is going to be another slippery slope. Having defined the structure and identified the tactics to trade, we need massive action. We need to acquire the ability to take the right action at the right time. It is going to take some time and we need to preserve our capital and survive the learning curve. We may need to address many issues related to poor money management, trade management and psychological issues such as impatience, fear and greed.
There will be set backs, Instead of identifying the cause and rectifying it, many traders come back to stage two and start dealing with patterns again or worse start defining their structure again putting themselves all the way back to stage one. Trading Consistency will remain elusive for them.

Actionable Analysis

As far as trading is concerned every analysis should lead to the identification of “Actionable” price levels. If your analysis is not able to identify the price levels where you can take concrete action, it is a waste of time and you are practicing a useless skill.
Trading being a probability game, your success as a trader will depend on your ability to identify an actionable price level from where a non random directional price move can occur. If your defined market structure is not able to identify such levels, throw it out and look for something else.
 
Nobody knows the exact structure of the markets and the framework within which the price moves. We are like blind men trying to define an elephant. But still a workable model can be identified and traded.So we try our best at wiseman and the wiseman team works to keep working on the same and developing new and effective things in that market . 
There are so many trading methods available in public domain. You can very well use them as a template to develop your own method. You have to first ensure that the framework is capable of identifying actionable levels.
If you are satisfied with the template check the entry and exit tactics and ensure they are also actionable. Otherwise try to modify it to suit the structure.Do not waste your money trading a method that is not actionable.
Almost everything you find as technical analysis is an attempt to identify an actionable level or anticipate a directional price move. You can avoid a lot of frustration and loss of money by ensuring the method works before committing money on it.
 
I have seen many traders spending hours together doing analysis. Unfortunately most of their time and efforts are wasted as their focus is not on identifying levels on which they can “React”. Ensure your analysis is focused on something easily “Recognizable”, “Reactionable” and ‘Repeatable” otherwise you are analyzing to paralyze yourself.

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