As a financial trader, if we say we are performing well, we mean that we have substantial and consistent profits over a large sample size. But they are two different goals. ‘Consistent’ has to be achieved first and maintained as we gradually introduce the ‘substantial’. Each brings its challenge.
In doing so, one of the skills discretionary traders work hard to develop is the ability to see beyond arbitrary divisions in chart structure and to perceive the flow of the market for what it is.
However, the more we trade, the more we firmly realise that the market works in some wonderfully counterintuitive ways. And to add to that, there are significant differences in the ways that equities, futures, and currencies trade. We should not think that one trading system fits all.
My trading foundation is the knowledge that (as Grimes says) “markets tend to work in mean reversion mode after a period of expanded volatility, and in range expansion mode after a period of contracted volatility; this is a price-pattern expression of an underlying cycle in volatility. Cueing into this cycle, and being able to predict the most likely emerging volatility regime, is perhaps the most important skill for the discretionary trader.”
Grimes continues, “in the best case, discretionary trading techniques are an ideal fusion of reason and intuition—right-brain and left-brain thinking—that tap into the most powerful analytical and decision-making abilities of the human trader, but everything depends on a deep understanding of the true tendencies and forces behind market action.”
Once realised my job is to have a detailed trading plan that understands the above quantitatively proven occurrence and then to put on trades dictated by my methodology and setups.
In other words, as a trader, my role is to follow my trading process and to do what it tells me at the right time. That is the principle behind any disciplined trader.