Philosophy of Right Way Trading

Right way trading is a paradigm where we don’t learn about how to trade the buy or sell signals i.e., where to buy or where to sell; rather we learn about how to think about the market. When I say ‘to think about the market’; it means a way to think in terms of odds & the behavior of market players. Right way trading is all about managing our market expectations in an objective manner through continuously monitoring daily auctions & using market profile graphic as information confirming tool. Market expectations can be understood from the analogy of game of cricket, where your expectations are either to go for a boundary or singles & doubles on next ball coming to you.

Risk management is an inherent aspect of Right Way Trader (RWT), since instead of forcing the trades, you would watch a trade as it develops & let the trade come to you. As an RWT, you don’t go to markets with a bias on the direction, rather you are prepared with possible scenarios that may develop in day’s auction, and act upon high odds trade opportunity without any hesitation. Also, you would be prepared in writing prior to placing actual trade, later on you keep taking notes of the market observations as well as your own emotions (i.e., self observation) while monitoring that trade; thus, journaling is an essential aspect of RWT, & it helps in building self-understanding too. As said earlier, RWT must have both- market understanding & self-understanding; when you know yourself, your strengths & weakness, you will be able to act on your market understanding with conviction.

Jim shared his observation that, people do confuse risk management being only about position size & stop-loss; he says many traders use protective stops for wrong reason such as comfort of safety or psychological reason. Contrarily, RWT uses destination trades & structural stops for exiting any trade; which means a decision based on whether the odds of staying in the trade have changed significantly or not. Jim call those odds-based decisive structures as trade location; and a good trade location, thinking in terms of structural odds, & knowing yourself are the three aspects of Jim’s risk management paradigm!

Another key aspect of RWT is an ability to monitor a trade for its continuation, which is a great skill one can master with experience. For the RWT, an edge is the ability to prioritize data points among sea of market information & ability to understand the behavior of your competition.

As a Trader, we make profits if we can judge the direction of price movement & its timing. As a RWT, all you have to do is to train yourself through right practice of JD’s concepts, so that trading psychology is ingrained automatically within your trading personality. As an RWT, you will be able to read the markets conviction in direction & also have self-conviction to pull the trigger without any hesitation when it comes to place orders!

Jim claims that, if one uses preparation before trading session, trades value & not price, and reads market profile structure as it develops; 90% of the psychological issues related with trading will be gone on its own. I call these three aspects of Jim’s advice as ‘Value Action Trading’; which means context-based discretionary momentum trading. Best part is that value action trading is a relaxed trading, where you are at ease with your screens & with your trades! Since, trading involves not just financial but your emotional capital too; nurturing emotional aspects of trading through relaxed approach & contextual thinking is an integral aspect of RWT. Here, Jim cautions us that being prepared is one thing & being able to execute trades is another; being prepared shouldn’t be implied as being mechanical, which means longing for exactness & certainty; since market has no exact answers, & nobody in the world has all the answers regarding market. Rather, be creative, be open for uncertainty & change; since markets change people & people change markets! Being creative doesn’t mean we don’t have to follow rules; rather Jim commands us to have all our trading rules written down. Trading rules are the ways you will trade different scenarios or patterns you observe in the market auctions; & it comes with market experience.

Please do remember that, trading markets actively to gain experience is an irreplaceable part of the process to become RWT; since nuances can’t be learnt only from the books or blogs! Nuances means reading in between lines, it means looking for fine details; & this is where your intellectual acumen will take over the journey to right way trading. Talking about the nuances, JD says- “Give me a chart & market profiles, I have trained myself to see the nuances immediately”. That’s why experience is called the best teacher. Let me assure you that, I will be sharing my own experiences, enough to steepen your learning curve. JD had done same for me!