December 6, 2013
Today I had a really interesting experience. As you say in the last two minutes of Module 1 of the Wavy Tunnel, “master at least two of the trades, start with one”. I’m working on mastering the BO-3 and the BO-2. Simply because they are easiest for me to spot, or at least I thought so!
I haven’t been watching the market much in real time for various reasons, but today I decided that I was going to search for a BO-3 to paper trade in real time. So, I picked one of my favorite instruments which is TNA, a 3x ETF. On the hourly I saw what I thought was a possible BO-4 trade and if I went to a lower time frame, I might find a setup for a BO-3. So, I went down to the 15-minute and thought I saw a BO-3 setting up, but the Filter was not above the Wave, so I decided to check back in an hour. (I like to see the Filter above the Wave to take a BO-3)
When I went back an hour later and looked at the 15-minute chart, I realized that it wasn’t a setup for a BO-3, it was a setup for a BO-1. (Which intuitively makes more sense – you wouldn’t expect to see a BO-3 on the 15 minute, you would expect to see a BO-1). What I had done was dropped from the 1-hour to the 15-minute time frame during my analysis but I did not even take the time to see where the 15-minute was situated on the market map!
When I realized the mistake that I had made, it put me back on my heels! I was so focused on finding a BO-3, that I found one, even if it wasn’t there. I did not take the time to ask when did the Wave last cross the Tunnel? Has Price retraced to the Tunnel since that time? Do I have CAO divergence? Had I asked those questions on the 15-minute chart it would have been immediately apparent that there’s no trading a BO-3 on this chart because there was CAO divergence after price had traded back to the Tunnel. I don’t take BO-3’s if there’s divergence after a retrace of price to the Tunnel.
But I didn’t ask. My brain played a trick on me. This may be my biggest weakness. This is why my first trade doing simulated trading is almost always a loser. I go immediately to the current price action without first reading the story that the Wavy Tunnel has laid out for me.
So, my takeaway is that while simulated trading helps me refine my execution I still have work to do to make sure I spot the setup in terms of the bigger picture. I know what questions to ask, but I have to slow down and ask them every time I look at a new chart.
I need to do a few minutes of drills every morning to force myself to tell the “Wavy Tunnel Story” on a few charts on different time frames just to get my brain focused until it is second nature. I think this would, over time, make sure that I’m reviewing all of the questions that need to be answered to determine where I am on the Market Map on each chart.
Thanks for listening…