Why Are You Losing Money?

As traders we all have losing trades but are you consistently losing money trading? In this video Merritt Black explores 5 key areas where you could improve.
View Video Transcript

why are you losing money as a traitor as
traitors we all lose money as in we have
some losing trades here and there a bad
month here there but if you’re
consistently losing don’t worry you’re
not too alone there’s a lot of you out
there but with the experience we have
here at SMB we can help you so we’re
gonna look at five key areas why you
might be losing money and we’re gonna
dive right in
hi I’m Merritt black head of futures for
SMB Capital a proprietary trading desk
based out of midtown Manhattan so the
first reason that I see people losing
money consistently is because they don’t
have a good what we call higher
timeframe read okay
in our group when we teach we talk about
developing a narrative developing a
thesis developing the big idea using a
higher time frame and developing skills
laws of market dynamics ways to see what
the markets up to the story that’s
unfolding as we call it and that’s how
we see our overall risk reward landscape
and what the market is up to and if the
market doesn’t continue doing what its
currently up to that’s meaningful
information for us that’s a shift in
what we call the current market
condition so how good are you doing at
reading that current condition seeing
the higher time frame quite simply
seeing the key levels key lines in the
sand as we call them key inflection
points that’s a skill in and of its own
and there’s a lot of traders out there
who don’t frame context as I’m
discussing it here the nearly good
enough it’s a very very lacking skill it
doesn’t matter how good you are at
recognizing a shorter term pattern on
the lower timeframes if you can’t see
the context of that situation well
enough you’re you’re kind of you you’ve
got a headwind right you’ve got an
uphill battle in front of you there so
get the hard time frame down get that
narrative down be able to see what the
markets up to and what the key levels
are personally I think market profile
and volume profile are fantastic tools
to frame this to simplify some higher
time it higher timeframe information
down to meaningful usable workable
thesis and things that you can use to do
better secondly timing right there’s
there’s other people out there maybe
this is you you’ve got a good
on let’s say volume profile and what the
markets up to whether it’s in a big fat
balance area or whether it’s trending or
whatever’s going on you can see those
things and you know what it’s up to and
therefore you have a pretty good
directional bias in mind and whatnot
but you can’t seem to get the timing of
the trades down right if you don’t time
it right you’re still wrong even if your
idea is right so timing is huge are you
fast enough the lower and lower
timeframes you go to the more problems I
see people who aren’t quite quick enough
on the trigger
whether that’s due to some form of
psychology issue where there’s a
hesitation a fear uncertainty whatever
it might be those things need to be
addressed so that you’re able to act
decisively when the conditions are right
to do so another big thing I see it’s
quite simple but it’s impactful is that
people aren’t prepared enough as the
market comes into a situation where it’s
almost time to buy this is the the time
of the trade sequence that we call
stalking the trade before that it’s all
about the analysis and okay I’m not even
interested in this market okay but now
it’s at a critical inflection okay now
it’s telling me that the trade is on now
I’m stalking the trade when it’s time to
stock the trade you gotta be a hundred
and ten percent on that market focused
not looking at your phone not watching
TV not in a chat room typing something
out you got to be focused on executing
and so preparedness is huge for
increasing your speed of going and being
able to time trades and execute them
well what kind of timing tools and
skills are you using or have right what
tools are you using what skills do you
have those been assessed in our group
mentoring and whatnot
we’re all about assessing the skills
that you have and highlighting the ones
that you don’t have so that we can teach
and grow them for me a big part of
timing is about understanding the rhythm
of the market how it kind of ebbs and
flows per a given volatility situation
also order flow whether you call it
order flow like I do whether you call it
reading the tape like Bella and Steve do
it’s all about it it’s it’s down to the
nitty gritty of what our buyers doing
right now how aggressive are they are
they absorbing are they showing sighs
what’s going on what our sellers doing
right now are they aggressive are they
absorbing are they showing sighs are
they weak are they strong that is what’s
really gonna help you avoid kind of
getting run over by a freight train from
time to time because you’re you’re right
there with the pulse of the market by
using the tape reading the order flow
it’s a critical skill for helping with
the skill set of timing thirdly trade
management this is a big one that I see
in in our groups and our students people
will develop really good narratives big
you know big picture view like we talked
about really great levels they come in
they time the trade well and then what
happens the trade management gets they
get in their own way we have students
who what we call mastermind the trade
which is a sarcastic phrase because
they’re essentially being idiots with
their masterminding of what’s going on
they’re really getting in the way of the
trade just letting it work so trade
management is absolutely critical so
some of the biggest problems I see with
that typically are around stops initial
stop placement is something that needs
to be assessed needs to be tested needs
to be back tested whether visually or
quantitatively you look at how much room
the trade needs to work and that needs
to fit within your overall trade plan
for are you someone using order flow and
whatnot to quickly get out but then
you’ll need to do what quickly get back
in or are you the type of trader
where you want to use wider stops and
really give their trade room to let the
whole the full idea work out you really
get to choose which of those two traders
you want to be I personally prefer to be
a little tighter
and have some reentry’s and things like
that and and take a little less heat and
maximize that risk reward I think
reading order flow and whatnot helps do
that but it’s really important that you
figure out what type of trader you want
to be and how you want to place stops
initially because it can kill you even
if you get the hard timeframe right and
you get your timing right it can still
be wrong
another thing is moving stops once the
trade starts to work that’s a big one
you know all those natural emotions and
different things come into play here
where you want to protect profits so you
aggressively kind of trail a stop or
move it with with momentum or whatnot
and a lot of people take themselves out
of really good traits especially on the
retail trader side you see that a lot
the more and more I think you get
towards institutional type trading
granted they are trading you know
typically hard timeframes the more they
give trades room to breathe to not be
taken out by simple you know noise if we
could call it that so really consider
initial placement and then how you
manage those stops if and when you move
them going forward I know we my traders
to keep stops very very stable away from
things typically in a more ranging type
market but if you are in more of that
momentum higher tempo trending market
you can trail those stops a little more
not too tightly granted if you’re just a
momentum scalper and you’re only trying
to capture a direct leg and as soon as
it starts to to turn or on you or
whatnot you want to be out fine trail to
your heart’s content because you know
very tightly with the momentum because
that’s what you need to do again you’ve
got to pick your identity you’ve got to
decide what kind of trader you want to
be and then you’ve got to go execute
that trade management flawlessly number
four this is a huge one lack of process
do you really have that trader identity
that I was just talking about do you
know the exact type trader you want to
be and have you gone from that general
identity you know mission statement type
thing down to the nitty
of developing processes for how you time
traits the timeframes you operate on the
tools that you use and how you use them
how the tools work together how you
might handle dissonance what do you do
with confluence what’s your risk plan
how do you handle moving stops how do
you initially place them documented
process plans for the way that you
operate and do these things you need to
have this because when the going gets
tough you need something that you can
lean on something that you can revert
back to and you know be your rock that
you can you find that stability when the
chaos is there whether that’s from
market chaos or from your own internal
chaos with emotions and whatnot you need
to develop process most people have not
developed proper processes for how they
go about operating in their trading
business which brings us to our next and
last point number five maybe your
problem is that you have process but
you’re unable to follow it we see this a
lot out there oh you know my system told
me to do the right thing but I just
messed it up I got in the way
trading is all between your ears all
these type things right it happens to
two humans all over the world having a
process is one thing but then being able
to execute on it is another thing that’s
why I listed them as points for and then
points:5 they’re different things so if
you are struggling to execute flawlessly
on your process I can’t strongly enough
urge you to take a look at the work and
the blog and the books of dr. Brett’s
Steinberger he has some fantastic
resources out there on being able to
self coach minimize errors play from
your strengths all these type things and
speaking of playing from your strengths
that would be my kind of initial advice
for you if this is what you’re
struggling with check for alignment
right you take your car in get a check
for alignment
take you trading to the shop get it
checked for alignment how does your
trading identity that you’ve carved out
and you do have your processes in place
right and all your business plan and the
timeframes you’re operating on and
whether you’re a momentum trader are
looking for more mean reversion stuff or
a combination of the two what are you
specifically and here’s what’s important
how does that align with you
who you are your strengths where you’ve
been successful in the past in areas of
life outside of trading how does your
methodology align with who you are and
your strengths it’s very important
because otherwise you run into some
ownership problems if you don’t really
own a trade any of the any of you who’ve
been trading for any time you don’t own
a trade if you don’t accept the risk if
you don’t fully take responsibility for
a trade idea you’re not going to be able
to go execute it flawlessly in any
consistent manner you know if you get
your ideas from Twitter or someone else
someone gives you a hot tip or whatever
you put the trade on you’re much more
likely to botch one of those trades
because you’re not fully bought in it’s
not your trade idea and to go a little
deeper cycle psychologically a lot of
people actually look for those trades
because it gives them discomfort relief
psychologically because they don’t have
to take ownership it wasn’t their idea
so take a look at that as well so number
one has your higher timeframe Reed can
you see what’s going on in the market
what it’s up to where that would change
assess that take a look at what you’ve
done in the past and take a look at how
good of a job you are doing at seeing
the key levels day in day out if you
don’t think this is possible for those
of you at home who think that’s crazy
all we can do is let the market start to
trade each day and see where the levels
form and then go from that forward it’s
simply not true guys you could and this
is this is not a pitch it’s just saying
hey check it out our room where I post
my levels every day it’s preposterous to
think that they
on the precision of those levels and
just how often the market turns from
them and they are significant after the
fact that it’s preposterous to say that
that can’t be done come take a look for
yourself so have a higher time frame
read work on your timing skills perhaps
you need to grow in some of the tools
that you’re using right perhaps you need
to learn how to use a footprint chart
perhaps you need to learn how to use
cumulative Delta things that can
quantitatively make it easier on you
your cognitive load in real time to
assess the strengths and weakness of the
buyers and sellers don’t I I really
recommend not to be archaic if you will
like it’s 1994 and just stare at a time
and sales window there’s much much
better tools these days
number three trade management how are
you approaching this it’s but it’s a
part of your trainer identity how are
you placing stops how are you managing
stops once things start to work it’s
very important that you get those right
with the the knowledge that it will
never be perfect for all traits that’s
the thing that Boches a lot of trade
management for people is they tend to
think oh well that wasn’t ideal with the
benefit of hindsight so therefore if I
just would have done this it would have
been perfect so I’ll do that next time
and then they use methodology B instead
of a and then the next time B was the
better one or a was the better one you
know you just keep missing find a way
where you’re happy with the misses
because it’ll never be perfect and then
process either you don’t have a process
or the the last one you’re unable to
follow your process in which you can
take a look at alignment with strengths
and things like that so five tremendous
ways that I see all the time across
Twitter across students junior traders
you name it struggle in these areas and
we can really help you with them what do
you need to do besides all the 150
things I’ve said so far quite simply you
need to track your results you need to
study and interpret the meaning of those
results and then you need to implement
changes not 2010
at once but one change at a time track
what you’re doing keep your statistics
take a look at how things are evolving
assess is part of your end of day review
how good of a job that I do today at
seeing what the higher time frame was up
to and where the key levels were as
before we come into this session how
good of a job did I do with that today
can I get better at that can I continue
to develop that skill we have four other
skills you can develop too so track
study review and then implement
incremental change and I promise you you
will be unable to prevent getting better
as a trader so if you like what you’ve
heard please head over to SMB futures
dot-com take a look at how you can
really get way deeper into these topics
with myself through our mentoring
classes through our futures foundation
program have a look at S&P; futures comm
and trade well

* no relevant positions