Good trading questions I have been asked by Carlton

On Friday, on my NFP trade plan post, I was asked some good trading questions by Carlton. I thought it would be of benefit to answer them here for everyone’s benefit including myself.

Q.1 How do you deal with ‘information overload’ in trading?

With so many resources online, twitter personalities, websites, books, blogs, news to follow, how do you choose which ones to focus and learn from and which to ignore. How to you make it manageable. Trading often creates a FOMO from an informational perspective as well as from actual trading. I often find my pursuit to learn more, creates cognitive dissonance and undermines my own trading decisions and confidence – but yet, you need resources to progress.

A.1 In the past, I found this has been a question that I have asked myself many times, as you rightly say there is so much information out there that overload is a not constant threat and battle. I have found myself trying to read and follow too much which has been detrimental to my trading progress.

A turning point for me on this was the book Thinking Fast and Slow by Daniel Kahneman, which I think should be essential reading for every trader. One of our bias is a thinking that more information can only be good, when all the studies should that the opposite is true. That quality is more important than quantity.

So when deciding what to read and what to follow, I look at the following

1. Does the information source cover an area I am working on or trying to improve? Whether is it is macro, mental, news or any part of my whole trading process from start to finish.

2. Does the source give me information that I can understand and is relevant to my trading style.

3. Can the information provided be turned into actionable tasks that will improve by trading.

4. Is this information source really providing similar information to other sources, I already follow. If so which is the btter source.

So the first step is to decide what information you need to supplement your trading and then decide what part of your trading that you are going to working on, then look at all the sources through that lens.

Be ruthless with who you follow and what your read. Less is more in this field, quality counts.

For example I have John Boyd’s book on the OODA decision making loop, whilst this will be an interesting read and I am looking forward to reading it. I have already read a summary of his works and this has given me enough information to incorporate a version of the loop into my own decision making. Therefore reading the whole book does not score highly on above four criteria. So it is not a priority.

Q.2 Would you mind sharing the calendar you sourced the graph for NFP from, assuming you didn’t create it yourself in excel?

A.2 I use the calendar from Investing.com. If you click on the link with the actual news release, it drops down to give the past history of the release. I then copy and paste that information into Excel to produce the table and the graph.

We only have to do this once, after that we can just add a column to the table and add the latest release information and everything updates.

Q.3 Given your detailed NFP plan, I would appreciate if you could post afterwards how you directly used your plan in your trades

A.3 My NFP trade plan review is here.

Q.4 Finally, and hopefully not too much to ask, can you explain your reasoning behind a big beating of NFP expectations is negative for bunds.

A.4 My starting point for all news for the Bund is that if it is positive for the US Dollar then it is bearish for the Bund. This is based on looking at the market reactions on the past news. I then look to see if there is any reason why this might not be the case this time.

Q.5 I’m interested in the Price Ladder Course by Futex, but not sure they cover my markets (ZB/ZN). I’ve tried to access a list of markets they trade and focus on, but struggling to find anything concrete. Can you let me know the main markets the course focuses on?

A.5 The replays and examples tend to be focused on the Bund and Eurostoxx 50. Out of the 11 drills we do, 8 of them give you the choice of trading the T-Note’s. So in my opinion whilst they focus on European products during the actual course material there is plenty of time to practice the order flow skills on the market of your choice.

2 thoughts on “Good trading questions I have been asked by Carlton

  • 03/04/2016 at 15:24
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    Adey,

    Thanks for such an in-depth response. I really appreciate it.

    I spent the morning listening to the audiobook of Thinking Fast and Slow in the gym, I must have been annoying everybody as I was constantly taking notes on my phone whilst hogging the platform. It didn’t exactly increase my lifts but fascinating stuff.. I actually wrote my economics dissertation on prospect theory (loss aversion) which he alongside others founded.

    The checklist for sources is a good one, and I tend to agree that less is more, quality over quantity.

    Thanks again for sharing and answering my questions, I didn’t take any trades around NFP myself. The volatility just makes winning and losing so much faster, I find it more difficult to trade- requires some more practice for me. My last news environment trade lost 4 ticks in 5 seconds compared to my average loss time of 5 minutes. Though wins are the same, 7 year auction gave me a huge win in 15 minutes compared to my average winning time of roughly an hour and a half.

    All the best with next weeks trading,
    FGBL and FESX are great markets, think I’ll wait for your conclusions when the course has finished and if positive get on board myself.

    Cheers,
    Carlton.

    Reply
    • 03/04/2016 at 17:28
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      Hi Carlton,

      It is a great book with lots of relevant stuff, not just for traders but anyone that makes decisions. The part on interview processes, was very interesting and we used that to alter the way interviews are done at my wives business. And it has worked a lot better than the old system.

      Today, information overload is always just around the corner. But we have to be ruthless, if they are not adding value then they have to be sidelined. Some stuff I can see the value in it for the future, but not now, so I keep notes of sources to check when it becomes the right time.

      The NFP, I have been trading it on SIM for a few months now, and I have been slow making progress from it being a complete farce to only being a minor disaster. But this course has improved my understanding of order flow by so much that this was the first time I could connect the order flow with the price swings and actually made a profit. Early days yet of course.

      The mixture of teaching by traders that know what they are talking about and can explain it (a very much unrecognised but important skill) and the sheer amount of practice trades on a DOM without any charts, is a powerful combination.

      Have a good week trading and keep in touch.

      Adey

      Reply

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