Simple not easy

[atters88]

When the sun shines

I could have filled my boots today, but didn't. Last night I wrote that short trades were becoming easier to find than longs and that on the CAC40, you were spoilt for choice. How right that was.

However, a mix of timidity and other commitments which kept me offline for much of the day meant I just took 2 bites of profit today.

My situation today really sums up why I am writing the journal. I know I can trade and am profitable but I lack the ability to transform that into something more professional that can sustain me and my family.

I will dwell tonight on my failure to grab fully at an opportunity that was there for the taking.

 

[WklyOptions]

trading w/o plan = driving car w/o metrics...

I could have filled my boots today, but didn't. Last night I wrote that short trades were becoming easier to find than longs and that on the CAC40, you were spoilt for choice. How right that was.

However, a mix of timidity and other commitments which kept me offline for much of the day meant I just took 2 bites of profit today.

My situation today really sums up why I am writing the journal. I know I can trade and am profitable but I lack the ability to transform that into something more professional that can sustain me and my family.

I will dwell tonight on my failure to grab fully at an opportunity that was there for the taking.

Hi, atters88,

What you are describing is so very true and open and honest, thank you! :clap:

I have indicated many times here in T2W several important NON-TRADING skills that MUST be learned, trained, conditioned, implemented, and systematically reviewed (in addition to trading/executing without errors!): :whistling

(1) 100% Focus (or lack of!) is a major factor for overall NET profitability/loss.
(2) Not having a systematic written Trading Plan = lack of structure.
(3) Not having a systematic written Trading Plan = lack of consistent schedule.
(4) Not having a systematic written Trading Plan = Errors creep into trading.
(5) Not having a systematic Debriefing Plan = difficult to document trading skills and performance (Net $ gains) improving over time/metrics.
(6) Not having a systematic bet schedule = suboptimal bets and inability to maximize winning runs/sessions when markets present "gifts" for our "styles".

Trading frequently and placing real live $$$ without a written Trading Plan turns the entire trading journey into a game of "feeling" vs "intuition"!

T2W traders can easily find out - most family office & hedge fund and CTA trading desks do NOT accept discretionary trading. Traders have written Trading Plans, payouts are measured against trade performance metrics from the Trading Plans, and quarterly (or end of year) Bonuses are also based upon # of deviations from the Trading Plans' metrics. Note = even deviating from plan but getting more $$$ profit by "accident" is not appreciated; in fact, often Bonuses deducted some! :whistling

It is really good to see you searching and asking key performance-based questions (not necessarily direct trading execution)! Looking inside is evidence you are challenging yourself to push forward and grow as a trader. We either grow as traders - or we reverse direction and slide/decline in our trading performance. Really only two outcomes here - the choice is ours to make consciously!

Additional thoughts and key questions for you:

(a) How can you improve your metrics to "score" your performance like "A" or "C+" or "F" or etc.? Note = "performance" does NOT mean $$$ results in this case!
(b) How can you systematically document trading errors, analysis errors? And implement specific action-items to prevent the same errors from entering back into your daily trading routines?
(c) How can you optimize your bet sizing (vs bankroll vs drawdown metrics) such that you can begin to increase trade size especially when volatility, momentum tools, indicate the market "climate" is very strongly in your favor?

Summary = trading w/o a Trading Plan, w/o specific performance metrics, w/o systematic Debriefings = driving a car from point A to point B but w/o any feedback from key metrics like miles traveled, fuel level, traffic info, status of oil, tire pressures, radiator fluid, brake fluid, etc!

You may get from point A to point B - but safely? Definitely not efficiently! :whistling

Good to see your trades unfolding with more specific criteria. Keep it up! Keep asking, refining, WRITING it down and make it more systematic! :clap:

Good luck, atters88.

Regards,

WklyOptions

 

[atters88]

A (mini) revelation

Hi, atters88,

What you are describing is so very true and open and honest, thank you! :clap:

I have indicated many times here in T2W several important NON-TRADING skills that MUST be learned, trained, conditioned, implemented, and systematically reviewed (in addition to trading/executing without errors!): :whistling

(1) 100% Focus (or lack of!) is a major factor for overall NET profitability/loss.
(2) Not having a systematic written Trading Plan = lack of structure.
(3) Not having a systematic written Trading Plan = lack of consistent schedule.
(4) Not having a systematic written Trading Plan = Errors creep into trading.
(5) Not having a systematic Debriefing Plan = difficult to document trading skills and performance (Net $ gains) improving over time/metrics.
(6) Not having a systematic bet schedule = suboptimal bets and inability to maximize winning runs/sessions when markets present "gifts" for our "styles".

Trading frequently and placing real live $$$ without a written Trading Plan turns the entire trading journey into a game of "feeling" vs "intuition"!

T2W traders can easily find out - most family office & hedge fund and CTA trading desks do NOT accept discretionary trading. Traders have written Trading Plans, payouts are measured against trade performance metrics from the Trading Plans, and quarterly (or end of year) Bonuses are also based upon # of deviations from the Trading Plans' metrics. Note = even deviating from plan but getting more $$$ profit by "accident" is not appreciated; in fact, often Bonuses deducted some! :whistling

It is really good to see you searching and asking key performance-based questions (not necessarily direct trading execution)! Looking inside is evidence you are challenging yourself to push forward and grow as a trader. We either grow as traders - or we reverse direction and slide/decline in our trading performance. Really only two outcomes here - the choice is ours to make consciously!

Additional thoughts and key questions for you:

(a) How can you improve your metrics to "score" your performance like "A" or "C+" or "F" or etc.? Note = "performance" does NOT mean $$$ results in this case!
(b) How can you systematically document trading errors, analysis errors? And implement specific action-items to prevent the same errors from entering back into your daily trading routines?
(c) How can you optimize your bet sizing (vs bankroll vs drawdown metrics) such that you can begin to increase trade size especially when volatility, momentum tools, indicate the market "climate" is very strongly in your favor?

Summary = trading w/o a Trading Plan, w/o specific performance metrics, w/o systematic Debriefings = driving a car from point A to point B but w/o any feedback from key metrics like miles traveled, fuel level, traffic info, status of oil, tire pressures, radiator fluid, brake fluid, etc!

You may get from point A to point B - but safely? Definitely not efficiently! :whistling

Good to see your trades unfolding with more specific criteria. Keep it up! Keep asking, refining, WRITING it down and make it more systematic! :clap:

Good luck, atters88.

Regards,

WklyOptions

Once again, a very helpful and thoughtful post which got me thinking about my trading and may just have helped me come to a mini-revelation. Because my analysis is partly subject, I had tended to dismiss the advice often given about having a detailed trading plan and sticking to it. That, I assumed, was something for system traders - I however was a higher creature. But I think I have been missing something obvious.

In terms of selecting an entry, I do have a system albeit one that is tempered by subjective elements. I decide, based on market conditions, which ponds to fish in (usually Dow, CAC or FTSE) and decide whether I should be net long, net short or neutral. And all of my trading turns on trying to get a ride on momentum which I identify using a handful of set ups. But that frankly is where my method ends. I have spent so long focusing on the set ups that I have ignored developing a clear method for managing my trades once they are entered. The result of this lack of plan is that I trade scared. I take my profit too soon and now realise that my hesitation to enter a trade is because deep down I recognise that i don't know what I should do once I am in it. I am like an eager holiday makers who spent ages pouring over brochures to choose the perfect holiday destination but who then arrives bamboozled bot knowing what to do. I suspect I am not alone in this trait.

So my task is to develop a plan for managing my trades, in particular when and how I should take my profit. That is work for the weekend.

In the meantime, trading continues (after a short break due to business travel). I will scour the CAC and Dow for a short trade but, for a long, Disney looks like it could break upwards (price has been in a range for a few days with good and increasing volume).

 

[atters88]

Short Boeing (BA) @ 119.02

I've just shorted Boeing (BA) @119.02.

 

[atters88]

Boeing is biggest faller on the Dow today

The journal is really highlighting my strength and weakness.

My strength is that i'm pretty good at getting in early on breakouts/identifying stocks that are about to move.

But I realise that I lack discipline in managing profitable trades. So, my Boeing short is nicely in profit. But now what?

The limit of methodology on how to handle a profitable trade is to ask "would I enter the trade now?" Looking at the Boeing chart, the downwards drift doesn't seem to be dissipating just yet, there is no obvious support nearby and volume is decent. All this suggests that I should hold the position overnight.

 

[atters88]

A Perfect Set Up

I have written before about stock trades I like to take where the day's range and volume are both greater than the previous days. If certain conditions are met, the set up is the most reliable I know. Last week a stock on the CAC40 (Orange) threw up a gem.

The signal was given on Thursday 7 August when a lower low was produced by a candle which had a greater range than the previous days and on greater volume. So, go short either just before the close or at the open. And lo and behold, the next day also produces a down candle. Take the profit at the end of the day because the range and volume had contracted a bit. Simple.

So, why is this chart so great? Well, it's just that you can read the price action since May like a book. At the start of May, the price breaks upwards with decent volume and momentum. The move falters, producing a small head and shoulders top. The behaviour as the right hand shoulder is text book. The price level is breached, there is a wee test of the level but price then retreats confirming that a top had been put in.

By the start of July, the uptrend is broken, so we're looking out for opportunities to go short until the evidence shows that the uptrend is resumed. Price does recover a bit but the price recovery fails on 30 July at an entirely predictable level (the level of the right shoulder), so we know that there is no appetite to buy the sahre at the level of the previous top. This is also confirmed by the long wick on the candle when the recovery reverses.

So the downtrend is back on and there is a first opportunity to get short on 1 August at around 11.5 (a candle with greater range and greater volume) or on 7 August when again we see greater range and greater volume.

Am I selling into support? No. I'm not concerned by the small amount of resistance in April - its all on low volume and too much has happened since for it to matter. Is this stock behaving in a predictable way or is it prone to unexpected moves? It's moves are text book.

Will I catch a huge move? Probably not. But can I trade this with a good degree of confidence? Absolutely.

 

[atters88]

The odds of success?

I've been away on a Summer break (the Italian lakes, thank you for asking), but it's time to resume this diary and to turn my mind again to trading (not that my mind really left it).

I'm holding a couple of positions but I won't bore you with them as the time for doing that has passed. But what I will share with you is this research study that looks at how many day traders are consistently profitable (in the sense of being profitable year after year). It's posted elsewhere on the forum but is still worth highlighting.

http://traderfeed.blogspot.com/2014/...-actually.html

The headline of the study is that, out of 36,000 day traders in the study, only 1,000 were consistently profitable. The study looked at traders in Taiwan where trading costs are quite high which no doubt skewed the results a bit but it's clear that, whatever the costs, only a tiny minority of day traders are consistently profitable. But there some other, perhaps more interesting things which emerge:

First, whilst not many people have it, those that do have it REALLY have it. A lot of traders consistently lost a little money and a few traders consistently won a lot. Also, the best indicator of future success is whether you have been successful to date.

Winning traders also tended to share other qualities:
High IQ
They went short as well as long
They traded a small number of instruments/stocks
But they traded frequently.