Tuesday, February 19, 2019

How To Handle Conflicting Signals From The Markets?

When you are just starting out in trading it is probably the easiest, you don't know why you make money and neither when you lose it, but don't worry its same for everyone. As you start learning more and more about the markets you develop a habit of picking sides and then you start blaming yourself if you happen to end up on the losing side. Slowly you start fearing that you may end up on the losing side and choosing the correct side becomes even more important for you. Can anyone relate to this?

Now if you have a dream to become a consistently profitable trader or take your trading to a whole new level, you need to make peace with this. This habit of markets to offer conflicting signals at the same time, making you choose between sides.

And if you suspect there is someone behind this, then you have got it right, its the good old smart money that are pulling these tricks on you using these characteristics of the markets to their benefit...

So let's dive in...





Context Is The King

If you have been in markets for a while and have been reading books and blogs, watching videos, listening to podcasts (you can listen to mine right here though) you are told a few things, that sound very true and scientific but are equally difficult to practice, lets here a few of them...

Common sayings about the markets...
  1. Trading is a game of probabilities or chances, you win some lose some.
  2. You need to backtest your system and stick to it through the thick and thin to reap the benefits in the long run.
  3. Keep your emotions in check while trading which will help you take all signals in an unbiased fashion.
  4. And on and on and on...
Well, they are not all wrong, but they are often misinterpreted and that is what leads to the utter confusion about what the market is saying right now. Enter "current context" which is a new way of looking at things, if you have not already taken my course or been reading and listening and watching my content.

This is for everyone, beginners and experts alike. And understanding and acting as per the current context has the potential to turn your trading around forever...

Benefits Of Monitoring The Context

Conflicting signals is Smart Money's way of creating confusion in our minds. Understanding context can help us navigate the markets. - Dean Market Profile

I was riding in the same boat as you probably are right now. My trading too was marred with confusion, indecision and a lot of conflicts and blaming myself for the losing trades. But when I came across context and its importance to making successful trades, it all changed for me. I got some invaluable benefits out of it, some are mentioned below, see if you would be interested in having a few of those for yourselves...
  1. Reduced stress while trading.
  2. Considerably (almost negligible after 5-6 years of practising MP) reduced anxiety while placing trades.
  3. Complete ease in deciding to take or reject a trade idea.
  4. Ability to pull the trigger on exits at the right time, logically, and not beating myself up for not squeezing out the last penny in a particular move.
  5. An overall calm throughout the trading day and ability to patiently wait for the good opportunities...
I can't think of a single trader who wouldn't want the above benefits in his trading and understanding and focusing on "current context" makes it available to everyone...
The only way you can win is if you trust The Process. - Dean Market Profile
I want to share a small story with you about the jade master, it is one of my favourite stories...

The Story Of The Jade Master

Long back in a small town, there lived a man named Dean who wanted to become a Jade Master (one who tests and verifies precious gems). In his quest to become one he sought mentoring from a very famous jade master, an old man who lived in the small town not very far from his. This famous jade master was often called by the king to test and verify the gems in the king's treasure...

So Dean goes to this jade master and requests him to kindly teach him how to be a jade master himself. The master, old and weary now agrees to his request, seeing the enthusiasm in the eyes of this bright student. He promises Dean that he will visit Dean twice a week at his house and teach him all he wants to know about gems and stones.

Finally, the day arrives and the old jade master visits Dean. After offering him some tea and exchanging the pleasantries Dean sits beside the master, all eager to learn from him, almost impatient even.
The master having seen it all, patiently pulls a green stone from his bag and presses it in Dean's hand and says...

"Hold on to it for a minute, will you?", Dean obliged...

Then the master went on to talk about all the things except for anything related to gems and stones...

Weeks passed one after the other, but the same story repeated again and again. Dean started to get impatient, why was the jade master not teaching him anything. He even felt betrayed.

But the old man did not waver, he would come religiously to Deans house and press the green stone in his had asking him to hold on to it, talk about all kinds of things and then would leave with his green stone...

One day Dean mustered up the courage and asked the old master...

"I have been patient for so long now. Not only have you not taught me anything about the stones but you have been enjoying my hospitality for nothing. I feel betrayed as if you have been making a fool of me for so long..."

The old man stopped Dean abruptly, took the green stone out of his hand and pressed another one in its place... Before Dean could understand what had happened, he felt uneasy with the stone in his had. He looked at it from all angles and finally blurted out to the master...

"Master there is something wrong about this stone, it is not like the ones you keep pressing in my hands and ask me to hold on to, in all your visits..."

The old master smiles at Dean and says...

"While you were focusing on my blabber for all this time, your hands were getting used to the difference between real and fake gems. Art is not learnt when someone teaches you, it is learned when someone helps you learn it on your own. Congratulations you are now as good a jade master as I am. I wish you all the very best in your life...", and the old master left never to be seen again...

This is precisely what will happen if you focus on learning the art of Market Profile, without the prejudices and all that you have learnt so far. If you can take up the market profile with an open mind I am sure you will see the difference between the real and the fake signals.

Now that you have got the point, let's look at an example...

Market Profile Charts - Example Of Conflicting Signals

I have annotated the charts so that you can understand what exactly happened on those days...





I Know You Have Questions

I hope this example gives you a hint as what to expect from Market Profile. Let me clear some of the common objections I hear about it...

If you were thinking...

Que: Will market profile tell me where to buy and where to sell?
And: No it does not, it actually does much more than that. Unfortunately, people who are looking for buy and sell signals are not ready to take responsibility for their trading. Market profile not only tells you where the smart traders are entering and exiting it also gives you the means to take responsibility for your trading.

Que: Will market profile help me avoid such conflicting situations?
Ans: Hell, yes! The most difficult thing I often find with the market profile is believing what it is trying to tell me. So many times I missed great opportunities because my ego did not let me believe that MP could actually give you such deep and timely insights into the markets. My confidence in myself as a trader has gone up manifolds after I started using Marke Profile.

Que: Does it work in real time?
Ans: Most of my trading is intraday and I have found that there is no better tool than MP to get some really amazing insights in real time during the trading day. If you apply yourself and keep at it, you will be able to tell the fake jade from the real one. Not all green stones are Jades.

Conclusion

Now I have covered all this in great detail in my Market Profile Course. So if you want to take control of your trading and stride confidently through some of the most confusing situations in the markets, then MP is the tool for you.

Also, if you have someone you know just starting out in this field, please pass on this article to him so that he can get a broad idea as to what technical analysis is all about. So go ahead and share this on your social media accounts so that your friends and colleagues can find it, because...

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