Sometimes traders become aware of an element in their trading approach that is risky, but don’t realize they are doing it in the moment - they can only see it in hindsight. Some would call this a blind spot, some a vulnerability. If risky behavior creeps into an otherwise proven trading strategy, it will become tainted and can lead to harmful losses. I’m not describing fundamental issues, which require time in the simulator working on fundamentals to correct. I’m talking about a little bit of drift from effective trading behavior.

There is a simple solution which can counteract this drift: visual indicators. Signs, lists, meaningful mementos, and rational reminders of what purpose trading serves for you, are all examples of physical, visual indicators. They are there to steer you back on track when you drift away from acceptable practices or allow unhelpful emotions to hijack your mindset.

For example, if a trader continues to find themselves speculating on sideways stocks – thus introducing unnecessary risk - they are being impatient and manufacturing trades. Getting down on oneself accomplishes nothing, but simply recruiting a physical indicator can aid in reestablishing a proven trading process. The following remedial visual indicator I personally use (strategically positioned under the current candle on my main chart) is immensely helpful in waiting for an obvious trend:

I label this a “remedial” indicator because I had been successful without it, but had drifted slightly off my path.  So, this hasty mental “anchor” serves to counteract my drift and keep me within the bounds of my rules. Indicators are practical tools which remind us to consider the big picture. My recent low risk trades with obvious trend setups are examples of how indicators  help me blast away tunnel vision and embrace the big picture:

BABA broke below major support (SB + significant $150 price) with volume and the other big four. BABA also was at new lows on the 15-min and likely bottom at $149 based on recent history. Gains registered as high as 19% before a big turnaround, which triggered my exit at 11.8%.

After logging my trade and taking a screenshot to share on Profit Zone, I returned to my scan as another strong bear trend began in the market @ ~10:20. AMZN broke SB, multiple support lines, and the big $1550 price.  AMZN was also at a 7-day low with the big four, then added volume and charged down.  This was an obvious entry setup, to say the least.  With clear exit signals (blue star + SC + y-point) I nailed 15.4% profits.

The point is not that traders are happy when they make money. The point is that usually consistent traders can drift away from their process, identify and address the issue, and successfully implement corrective measures. If you have a misstep, bring your behavior back in line with your strategic goals in the most practical and effective manner possible. That could be in the form of a written indicator in your workspace or some other creative internal/external intervention. The big picture objective is to get your trading process back on track as swiftly as possible. The power is yours, but indicators help.



-Coach Rob