Thursday, 6 October 2011

I Have Been Trading Like Sht

Good Evening,

Excuse my language but I have been Trading like sht! No need to hide it. No need to pretend I bought the recent low the low and am riding this market trend higher. I didn't.  Pure and simple, I have made some fundamental mistakes and thought this would be a good avenue to voice this.

As Traders, we live in a world of opportunity and also hindsight. We see movements everyday that may represent genuine opportunity or just random noise. Countless times I hear cries of "I knew that would happen" or "I told you XYZ would go up". I never understood these guys. What good does that do anyone? We deal with the now not then. In fact, I think these kind of statements are indicative of truly unprofessional traders who are not planned and who have no edge. I see traders like this at work everyday. The better approach is to ask what can I do to improve myself, why did I miss the setup and what does this mean for the next trade/market going forth?

My mistakes of late have been two fold:
i) Not taking a trading setup- S&P500 Double bottom trade (it was all written here prior)
ii) Not heeding the strength of the market when it was clear we were in a breakout mode- SPI futures above 4000.

These mistakes boiled down to lack of preparation, recent pressures at work (i.e. dont lose money) and frustration. I trade double bottom patterns the whole time but I didn't have an adequate enough entry signal for the S&P500 this time round. I knew the price I wanted to get long at, but I wanted to wait for confirmation given how dangerous things looked. Sure enough the confirmation came in the last hour of trade when I was on the way to work (the joys of the Australian timezone) and thus I missed it. The market kept moving higher and I didn't chase it despite knowing we had seen the low. My lesson- have orders in above the market which confirms the move! Have a defined entry for the particular trade setup. Go at your level or go after confirmation- either way have your orders in.

I took this frustration out today by shorting the market twice, albeit with tight stops, and missed the clear underlying strength. I am usually flexible but today I was blinded. A market that doesn't sell out of resistance is bullish. Sell resistance first and if it doesn't sell, join it.

So where does this leave us? To me this market has clearly put in a bottoming pattern/failed breakdown. Failed patterns are the best. The way we have recovered 1100 is indicative of the huge short base out there and the underlying strength at this juncture. The DAX made a higher low (which I have talked about forever) as has Australia. Bigger picture, we have a lot higher to run still. Thus the trades going forth should be quite simple: i) buy the first pullback into the 15mins/60mins timeframe trend OR ii) short term look to short a climatic reversal if this keeps going and gets overextended (1155/1160)- short term trade only.

That's my roadmap going forth. That's the new plan and my method for trying to get out of these bad habits. Everyday gives us a new opportunity to improve ourselves and make money. No one likes a hindsight trader. Learn from our mistakes, be planned, and go and make money.


P.S. Some things to get out of a Trading rut:

i) Cut size down. The aim is to get the winning mentality back and not necessarily the finanacial reward.
ii) Focus on one trade at a time. Back to baby steps
iii) Go over trading plans/setups. I always find it helpful to recognise my best setups, my best trades and then wait for these. Stay planned.
iv) Relax. Sounds tough to do but it is important. Writing helps me get my anguish out and then I can rebuild. Go to gym, have a run, read a book, do whatever just relax that mind.
v) Visualise your success

Any others? Would be interested in what other traders do to alleviate trading slumps.