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Trading Discipline, Part 3

Wednesday, April 15th, 2009

Today is Wednesday April15th, and all is well.

I had a fairly easy day on the board today. It could have been better, but the opposite is also true. I had one loss that totally could have been avoided, but I had to get over it and move forward. If I were to beat myself up over that, it could effect future trades. Knowing that, I saw my mistake very easily and learned something from it. It’s always important to go over your trades, especially after the trading day, to see anything that you might have missed. If you make mistakes, its OK, we all do, but we need to learn from them so we can minimize the damage and not repeat it if possible.

Today’s trading I had 12 gains 4 losses and came right up to $1,000 dollars and stopped. I turned my data feed off and did other things today. I traded for about one hour from 8:45 to 9:45 am West Coast time. There was not a lot of movement and it was a bit choppy, but I was still able to squeeze out my daily goal. I was only trading 5 contracts for all orders, so I had the equivalent of capturing 4 points net after commission. I came in to today’s market with low volume, not a great deal of direction, not a lot of overall movement and still captured my points. I am pleased when ever I get good results with less than ideal conditions.

Yesterday, I went over a new idea that portrays discipline in the life of a trader. Last week I pointed out another idea and will give a short recap now.

1) Your trading environment has an effect on your trading performance, so keep it neat and organized, it makes a difference. (last week)

2) A balanced home life and priorities that are a reflection of your personal long term goals and values, a key ingredient for long term success. (yesterday)

3) Exercises that you can take to expand your general level of self-control in any area, which will spill over into greater control while trading. (today)

Point number three is what I will briefly discuss now. Maintaining control while trading is going to be one of your best friends, if you can find a way to harness it’s benefits. One of the hardest things to do is to act when you need to, not before, and not after.

If you discipline yourself in small areas of life, it will send a message to your brain that you do what you say, when you say it. If you procrastinate in putting things off and then scramble to get it done at the last minute, like finishing your Taxes on the deadline day, you may not be as in control as you would like.

The good news is, we can all get better at improving in this area. Find something small, that you know you can overcome. It may take some thought and it can be just about anything that can effect positive change. If you resolve to overcome whatever that is, and get some desired benefit, you are now exercising your mind, will power, self control and gaining greater self esteem.  There are many benefits that can spill over into your trading session. You will come to trust yourself more over time as you exercise yourself in these areas. That will give you added self control when you need to stay out of the market because your trade setups are not yet present and a whole host of other benefits as well.

Back to trading technicals. Before you put a trade on, your TIMING is going to be critical.  When you see the trade setup that will yield you an easy point, you need to have the discipline to take the trade at that moment. If you wait for confirmation, you will either overpay and risk getting stopped out, thus also hurting your chances of getting filled at your target.

This kind of discipline and confidence can only come from getting a good handle on what you are looking for, but once you know that, the thing to do is execute. If you hesitate and are not sure, when a perfect trade setup presents itself, you have a problem. You will eventually get frustrated and your next few trades may become losses, when you finally get the courage to take the trade.

You need to not let that happen, by envisioning the whole process ahead of time, you can train your mind to jump on the trade, the moment you are sure it meets all the qualifications of a legitimate trade setup. With short term trading, you need to put it on only when your timing tells you to, but do not hesitate. Whatever time you take to examine your strategy for what constitutes a trade setup, that is what you need to get familiar with. You know what it looks likes before and have seen it hundreds of times, so when you see it in live trading action, that memory recall is what you will need to draw on.

Seeing the trade set itself up and developing in a live environment is critical. As the trade develops you see what has happened so many times before when the conditions are met, you come to expect the same outcome this time and place the trade with a high level of confidence and capture the  intended outcome.

http://www.screencast.com/t/YGyzRfgT Today’s equity chart

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Posted in Trading Discipline | No Comments »

Trading Environment, a key component

Monday, April 6th, 2009

Today is Monday April 6th and the Indexes closed well off their lows for the day.

The Dow moved up off its low by 110 points, and the S&P did something similar. The volume was very light on the futures trading side, coming in at around 2 million contracts. Whatever the news was, there seems to have been a reason or excuse that the market sold off in the pre-market as much as it did.

I rarely ever look at the news. I don’t look at a lot of things, like the Advance/Decline ratio, the Trin, Ticki and a  host of other things that other traders look at. To me, all of those things are present in the price action. They can be a distraction, influencing me to hold a bias, in overall direction.  

The direction will be revealed as price action unfolds. Your job is to position yourself in front of key turning points. We look for pressure points, like an acupuncturist would do. When you press down on built up points, it releases tension and energy then begins to flow. The same is true in finding our entry points. We look for pressure points and position ourselves in front of the release, to take advantage of the movement, up or down. We are usually out of the trade before the energy is depleted, then we wait for the next pressure point to build.

Today, there was no follow through on so many trades. For the people looking to trend trade this market, you were chopped up into little tiny pieces. If you only know how to trade for larger moves, what do you do if they don’t come? Try again, no luck, no movement. Try again, same results.  In addition, with wide stops of 2-4 points per trade, you are now hurting pretty bad.

If you are not able to trade for the small stuff, until the bigger swings are present, you are just going to give back all of your gains from other days, which will keep you unprofitable. You may find yourself having gains 1 or 2 days per week and giving back those gains the other 3 or 4 days.

Everyone is different, but anyone who only knows one trading style, is limiting himself. You need to put a lot of time in, to wait for trade setups as well and when those don’t work out, you may be tempted to make foolish trades. It is very easy to lose discipline when you are not doing the right things. It can turn into a snow ball effect and eventually a very destructive behavioral pattern of SELF SABOTAGE – if you are not careful. Trading is as much a mental game of discipline as it is knowing how to trade itself. Both are key ingredients to a successful venture.

You may consider trying to exercise your mental disciplines. Here are a few examples. I would first start with your trading environment.  Your trading results will be effected by a smooth home life, one that is in order. If your trading office is clean and neat, it will have an effect on other areas like your actual trading.

A small detail, but it does have an effect. It says that you put things in their place and you know where to find what it is you are looking for. You waste no mental energy. In trading, you know the trade setup you are looking for and you know right where to find it – same thing. So even something as small as what I just mentioned has an effect on your results. I will talk more about this tomorrow, so stay tuned.

In today’s trading, I had a very nice day. It was smooth, because I waited for the right setups. I took 15 trades with a few trades for 1 and 2 point exits and had 2 tiny losses and one full stop of 5 ticks. All in all, 16 pieces of profit with 3 losses for 85% profitable. I only traded with 5 contracts or less, with one trade for a double position of 5+5. I posted $2,063 for the day and my actual time in all the trades was less than 30 minutes, but I traded about 2 hours total.

One of my students did very well today, posting about 20 1 point gains and only a couple of 5 tick losses. Most of these gains were short trades. This is the same person who was having a lot of trouble seeing the short trade setups. After working with him, he is nailing the shorts and the long trades. Today was initially a down day, he took 14 short trades and hit all of them for 1 point each. Very nice.

It is great to see someone pick up a method like mine and now make it his own. He is getting it. If anyone out there wants to potentially get it as well, send me an email and we can go from there.

http://www.screencast.com/t/ly8jGduaiDv                Today’s equity chart

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Posted in Trading Turning Points | No Comments »

Interesting Trading Lesson Today

Saturday, April 4th, 2009

Today is Friday, April 3rd and I had a good day, but not without a few problems.

I started out just fine. I almost had my daily goal in just a few minutes. But then I was not patient enough to wait just a minute more for a clear signal and sure enough, I got stopped out. That trade was going to put me over the top and capture my daily goal, about 15 minutes worth.

What happened after that is, I found myself in an up-trending market and was looking for a counter trend trade setup. This was the trend starting about 8:30 am W.C. time. I doubled up on a trade short 5+5 for two positions short and got stopped out with a 4 tick stop. Why I fought that trend up, I don’t know. This goes back to what I was commenting on earlier in the week. If you get a picture or idea in your mind that the market is going to do something and it is not co-operating with you, the problem is not in the market action, but with you, or me in this case.

This is why we all need to be humble and respect the markets. Trading success can be a great thing to give you confidence in your ability to put together winning trades, but it can also be an Achilles heel. Each and every day, you really need to keep an open mind to direction. This is what can happen to a lot of traders if they think they know the next move of the market. Let the market tell you and don’t be impatient. If the whole series of moves looks a little confusing, just let a little time go by. That is what I did today, when I was up to almost daily goal and slipped back just a little in the red.

I took a break and came back a little later and started nailing it. I came right back like I have done in the past to post some real nice gains for the day. I ended up taking it to two times daily goal or around $2,500 in equity, but it took me some time. I just put on mostly small trades, 1 point, 3 ticks and so on. I was just focusing on market timing. I took my trade size down to average 5 contracts, some smaller, a few bigger, but averaged around 5. With a 5 contract average I probably picked up a net after commission 10 points of profit to get my totals.

If I am having trouble, for whatever reason, I almost always go back to my bread and butter trading. Sometimes when you are targeting 2 or 3 points in a trade and the market is not giving it to you, change and be satisfied with 1 point here and 1 point there. It adds up pretty fast, if you keep stringing them along one after another. It counts just the same as a 3 point trade. Trading is not always easy and there are many unseen factors you could be battling, but try and keep it simple. My method is simple, but not easy. And there is a difference.

I have a short video of some of the last trades I took today. It is on a clean chart and I will show you some of my timing techniques while using trendlines. I could have captured a lot more points on a lot of these trades, but that was not even in my mind for the most part. I was concentrating on market timing. If I just get that part right, I know I can pick up the profit, it all adds up the same at the end of the day.

Have a great weekend!  Vince

http://www.screencast.com/t/QfwuvFFWzMc            Today’s equity chart

http://www.screencast.com/t/e73y7VRj1                  Trendline trading lesson,  video 5 minutes

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Posted in Trading Lesson | No Comments »

Market hits resistance today

Friday, April 3rd, 2009

Today is Thursday, April 2nd and the overall market ran into some resistance today.

I have not talked much about daily market direction lately, because I had not seen anything that was worth pointing out. I wish I had posted what I saw yesterday, but today is still OK. I will give you a 5 minute overview on what I see and how it could be played out over the days to come. But before I do that I want to give a quick recap of today’s trading.

It turned out good. That is always music to my ears, but as I mentioned before, if you are not in focus and have distractions going on, your performance is going to suffer. That is how I started out. I was giving a trading lesson to one of my students and I had not yet gotten my points. My mind was not on the current price action and when I got around to taking a few trades, they were good for gain, loss, gain, loss.

I did that three times, back and forth, until I settled down. Part of the problem is trying to trade in the slow patch of the day. I needed to take my own advice from yesterday’s trading tip.

I thought about that today as I found myself in the red. On my way into negative equity territory, I had to pause, take a deep breath and relax. The market has a natural flow to it and you need to find that rhythm or flow. I cleared everything out of my mind and just waited for the trade to come to me. I did not have to go after it.  After that point, I had 10 gains, one loss and one even, to go from -600 to + $2,000, much better.

My daily loss limit is two times my minimum daily goal, (between 2 & 3 point) and I have yet to stop trading because of my loss limit. It has not happened yet with my daily gains now stretching into the start of my third month in a row. The actual trading totals have been on average about 3 times my daily goal. For a long time, I was struck on trading 5 contracts and I must have been averaging 3 times that on a daily basis. I have currently wanted to trade less and increase size, so I have been doing an OK job with that.

You need to be emotionally ready, as well as financially, to increase your size. But, if you are able to see the trades each day and know why and where it is you are taking those trades, then it is just a matter of doing what you know. Leave the fear behind. In a market with volume, you will not be in the trade for very long and this will cut your anxiety or fear down to manageable levels.

Again, for the trader who is just getting started, you need to be able to put those winning days together, one after another. That is why, I feel, you should not be in the market all day. It is too much for most to handle. The market has a way of wearing you down, until you get sloppy or let your guard down. Then you may find yourself in the fight of your life. Don’t put yourself into that position. Get your points and get out.

I have seen just about everything the market can throw at me, but I need to respect it, or I too will be humbled. There are times when you should not trade at all. Erratic movement without periods of consolidation and choppy direction-less formations are all telling you to take a break.

It is amazing what that decision can do for you. When you come back after an hour or so, it can look like a whole new market, with predictable swings and volume.  That is the environment you want to be in.

Tomorrow I will record a few of my live trades with commentary as I was doing before, for those who are looking for that.

 As I promised, below is a short overview of how I see things in the daily’s. I hope it helps, but remember, you need to think for yourself and see it for yourself to be able to trade it for yourself. 

http://www.screencast.com/t/qCTlcKhG         Today’s equity chart

http://www.screencast.com/t/bljwZXzuz9e   Market overview on the Daily – video 5 minutes

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Posted in Chart Patterns | No Comments »

“Keep An Open Mind”, while trading the S&P’s

Wednesday, April 1st, 2009

Today is Wednesday April 1st and I had another quick day of profits.

I start out today with a nice one point trade short for half of my now higher daily goal, followed up with another 1 point trade just after that, for a quick $1,000 dollar daily goal in just a few minutes. With the commission cost it put me just above $900 and I  needed one more small trade to at least get over a thousand. The next trade came to me very nicely for yet another 1 point gain, but with only 4 contracts on board to safely give me a little over $1,100 for about 20 minutes of trading.

That is what I like about trading the way that I do. I have said this before a few times, but it bears repeating. No struggle, just a few quick easy high percentage trades. When checking the stats for how long I was in the market to get my trades today, my computer told me that it was only 3 minutes of actual in the market trading time. That is an average of 1 minute per trade. That is COOL. 

When you are in the market for a long period of time, you do have higher exposure, no matter what the circumstances are. More time in the market = more risk – period. If you know what you are doing, you can minimize that risk with stop loss orders, but none the less, you have more risk.

Now, I get to do other things, that can be very rewarding to me. Time is something that you can never get back, once it is lost. You can always make more money, but if you invest yourself in things that can bring you personal dividends, you can look back at your life and have no regrets. That is the way I see it. The key to making something like this a possibility is knowing how to trade, so that you can pick up your points for the day. If you need a mentor to help you through the process, send me an email and we can discuss how I can help you put it together.

Here is a little trading tip for the day:   KEEP AN OPEN MIND WHILE TRADING

In looking back at the one thing that I thought gave me the most trouble in my trading, that would have to be keeping an open mind as to overall direction and not having a bias. This is one of the secret killers that is always lurking, looking to destroy trading accounts.

If you make a decision in your mind that the larger trend is going up or should go up, then you will not be able to see the short setups that are right in front of you. The same is true in the opposite direction. As far as the bigger time frame, leave your mind open and let the market tell you which way it wants to go. If you have a strong conviction about direction and things start to change, you will not see it. I GUARANTEE IT. 

You will become blind as to what is happening, because your subconscious mind will not let you see. You have created a mental block as to the current reality of the present price action. On the other hand, if you hold your opinion to general market direction lightly, if things change, you will have no mental blocks to overcome when you need to take a trade in the opposite direction. The market trades on a two way street and you need to see cars coming in the other direction or else you will have a HEAD ON CRASH, with the outcome producing casualties.

Example:  In a past struggle, I remember thinking that the market should go down and I was looking for a short set up. I place a trade and get stopped out. I still think the market is going down, but my timing was off, so I re-enter short and again get stopped out. Something is wrong and I need to stop and check market direction because I am fighting the trend. That is what I should do, but I still have in my mind that this market should be going down any moment now and you try and short again. What do you think happens after that? Stopped out again. If I would have taken the correct action, like I mentioned above, I need to stop and assess the larger time frame and wait to trade in the correct overall direction. 

The moral of the story, KEEP AND OPEN MIND TO OVERALL DIRECTION and don’t let this happen to you.

http://www.screencast.com/t/IORB9MjZY                  Today’s equity chart

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Posted in Trading Psychology | 1 Comment »

Best day trading I ever had

Monday, March 30th, 2009

Today is Monday March 30 and today was the best day of trading I ever had.

I had no idea that today was going to turn out the way it did. What a day. I was going to stop much earlier in the trading session, but I kept putting trades together and they kept hitting my targets. I said that I was going to stop when I had my next loss, but it never came, so I kept trading. This is one of those days that you get rewarded for doing the right things. I stayed out of trades until the trend had a high degree of follow through.

The thing about today, is that we had a very big gap day down and most of the drop occured in the night trading and premarket. I know better than to try and trade for long swings on days like this, especially in the morning. This is a day that you want to trade for short targets and be done with it.

And that is what I did on most trades early on. There were a few that I took for more, but they all added up to make for my best day trading. I was trading with bigger size after the profits started to pile up, putting on 10 and a few times 15 contracts. I had the room in my equity, so I went for it, all the while being patient, hitting the short term trends up and down, but mostly down.

Below is my equity chart and a little closer break down under that. If you are right with the direction of your trades, a 1 to 1 ratio (profit to loss) can add up very nicely. Timing is the key. Can it be learned? YES.

http://www.screencast.com/t/SpwL097Sh                  Today’s equity chart

http://www.screencast.com/t/52z5jIOWP                    Closer break down of stats

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Posted in Day Trading | No Comments »

Today’s Profits: Finished in 7 Minutes !

Thursday, March 26th, 2009

Today is Thursday March 26, and it was a quick day of trading.

Yesterday I had posted that I wanted to increase contract size and trade less. Well, I got my wish.

I was able to shift my thinking to attain my stated goal and it was nice. I had two trades, the first one for 1 point on 10 contracts, all in – all out. The second one was for 1 point on 5 contracts and 2 points on the other 5, and I was done.

This what I wanted to do as I wrote yesterday. $1,2oo profit after commission on two trades. Now I have the rest of the day to accomplish other things of interest. I would take every day in the same fashion, and will be working towards that end.

This was my original plan from the beginning and I will continue to work at it. Consistent daily profit is the objective, combined with the least amount of struggle to get there. Once you reach your daily goal, I will admit, it is and will be hard to stop trading. That is where you will also need a mentor, someone who is on the same desired path and can give you the support and discipline to stick to the plan.

Anyone who partners with me will have my full attention and support to help them see what I see and do what I do. It is hard to go it alone and you will most certainly pay your dues one way or another, but it would be my job to help make those dues as small as possible. There is usually no easy way around the fact that you will need help in trading consistently for daily profit. You will pay someone for the experience. Everyone does. You will pay the markets because of your losses and you may still not have learned how to trade consistently. Or you can pay someone who knows how to help you get there.

There are very few trading programs that are of any value and a lot of them are a waste of money. Many of them are focused only on indicators, or some other idea that puts you and your account at great risk before you are able to capture your occasional gain.

There are many ways to trade the markets and I believe that the way I approach day trading is one of the best available. When it comes to a choppy market, I love it. While others are just wishing for the day to be over. If we are seeing large swings up and down by several points, I love it. Because I can easily capture additional profits on extended moves. When the markets are showing long extended trending markets, no problem. We just look for low risk entry points along the way and pop in and out before anyone even spots us.

When you are able to trade the very small stuff, 3 or 4 ticks, you are able to take advantage of any kind of market, because you use the method to get you into a HIGH PERCENTAGE trade that gives you a pre-determined amount of profit. If you only need a couple of those trades for the day, it does not matter what kind of action the market is displaying.

In any of the three types of markets that I described above, you come out on top. There are many people out there that say scalping is the most difficult type of trading there is. In part, because they are not able to do it successfully, so they talk it down and people believe them. Then you look at the alternatives – trading a higher time frame chart, waiting hours for the right set up, risking 4 or 5 points on the trade, and then have it go against you for a loss. Now what do you do? You are running out of time before the day comes to a close and you want to be profitable for the day, so you take a less than desirable trade now for another loss and you are totally frustrated. Not a good day.

With my method, you will see plenty of trade possibilities in whatever type of action the market is displaying and have the ability to capture a nice trading profit each and every day the markets are open. That is the goal. Is it attainable? Yes.

If you have any questions, please email me and I will be glad to answer them for you. Have a great day.

 

http://www.screencast.com/t/gYuBtR2l              Today’s trades

http://www.screencast.com/t/GP2oGYTi            Today’s equity chart

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Posted in Profit Day | No Comments »

Quick Profits Today

Thursday, March 26th, 2009

Today is Wednesday March 25, and I am back.

I took a couple of days off to go to a conference on Monday and Tuesday and am glad to be back. The conference was not related to trading but of a personal interest.

I did not spend much time trading today, but that was just fine, since I was able to capture more than my daily goal for the day in less than 30 minutes. I was satisfied with my posted gains of just a little over $1,000 dollars. I had 6 gains with 1 loss to capture my total, with one of the trades having multiple exits. It was a very smooth 30 minutes, with little disruption.

I am going to increase my contract size tomorrow and make fewer trades, but capture increased profit. This is where you work less for more, but need to have good timing. So I may wait for higher probability setups, which will require a little more patience on my part. If you only have a few bullets, you need to hit your mark and make it stick.

If I traded 10 contracts and hit one trade for 1 point on 5 contracts and the other half for 2 points, that would be $ 250 dollars for the first and $500 for the second half – a total trade profit of $750, less commission. Then if I come back and hit 10 contracts for 1 point, all in-all out, for $500 more, that would be only two small trades for $1,250.

That could happen in 10 to 15 minutes. Why would you need to trade for more and create a possible struggle? It is nice to be able to do so, and I have been at it for sure, piling up much more profit than that in the course of a few hours. But some of those days were a struggle to get my equity up to higher levels. When you can trade in the 20 contract area and up, it sure adds up quickly when you are on the right side of the market. At that rate you double your profit to $2,500 dollars, and still you are only trading for the two – three point range.

The idea is to slowly build up and increase your contracts when you feel that you are ready. I have been at the 5 contract level or so for awhile and have the room to increase my contract size. We shall see, if I indeed do that tomorrow. Only time will tell.  

Below is an equity chart of the day’s profit. Until tomorrow, over and out.

http://www.screencast.com/t/6CL5zodFHWi                Today’s equity chart

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Posted in Profit Day | No Comments »

Day Trading Requires Focus and Discipline

Saturday, March 21st, 2009

Today is Friday, March 20th and the major indexes continued to back off.

The Dow was down 122 points and the S&P was off by 15. We will likely continue the retracement over the next few days as the market posted a back to back weekly gain, something it has not done since May of 2008. I have a daily chart below of the Dow and S&P and you can see that after redrawing the outside line, which I was off by a little originally, it is now lined up straight and the market traded right up to it. It also happens to be the broken support of a few months ago. I mentioned it yesterday, but you can see it today in the chart below. Support when broken will then become resistance when tested. That is what we have seen the last 2 days. The Dow also lines up, the same way.

I had a good day trading today. It was slow going in the beginning. I started late, during the slow volume time of day, and could not get any traction. I was splitting my trades when I would have done better with, all contracts in, all contracts out. After a slight draw down and the passing of a little time, the volume came back and I got myself on the right side of the trend and started putting it together. My equity had very little draw down after that, almost straight up. I settled the day out with $+1629 dollars after commission costs and had over 20 entry trades.  Still traded small for the most part and have not yet made any changes, like I was talking about yesterday.

I have one small video of a trade I put on and a still shot of the trades just after that. I backed off on the size again at the end, which is really a good idea. If you have solid gains and you decide to keep trading, you have to have a point where you will lock in your profits for the day and give no more back, if you fall below that point. If you start to over trade and make mistakes, you can give back what you worked hard to get. That is the reason for backing off on size at the end of the day when you already have your daily goal and good profits. You will be a conservative trader with this approach.  This is about money management as well.

Do not let greed creep into your mind and find yourself shooting for the stars. More is fine when it is the appropriate time. I would say that if any one is just starting out and you do not have anyone helping you through the process, you should only be trading for a small daily target. I recommend about 2 points and not really any more than that.  The reason is, you do not have enough experience to deal with all of the changes the market will throw at you. Eventually you will get taken out. That is the hard cold facts.

We all like to think it won’t happen to us, but that is presumptuous on on our part. Being honest with yourself is the first step to victory and that victory can come in the form of two points a day. If you can pick that up, consider it a big victory and try and do it again tomorrow.  A common scenario is, you will pick up a few points and think it is easy, then let your guard down.  The market then gives you a read that you have not seen, or are not familiar with, and the gains are gone. You then say, “Iwill get that back,” and don’t exercise patience having already lost your focus, because you are thinking about the money and your losses increase.

You have to be able to stop yourself, if this is happening and walk away. Clear your mind and when you take your next trade, don’t be thinking about anything else, other than the process. Are you doing the right thing based on the method? Don’t be thinking about getting even with the markets. That has been called, REVENGE TRADING and it can do a lot of damage, not only to your account, but more importantly to your ability to have confidence in what you are doing.

By losing your focus and discipline, trading like this, you only join the ranks of so many others who thought they could. The battle is greatly in your mind. That is why I have some very good books on my web site to help you with the process. If you have not read any of them, I recommend that you do. Some of them are not even related to trading, but it sure does apply and can help with many other areas of your life as a bonus.

http://www.screencast.com/t/MHjVQ0SI8L              Today’s equity chart

http://www.screencast.com/t/qBfXqtoGBXq             Live trade video

http://www.screencast.com/t/ITUh0ylJ                      Still shot of some trades, end of the day             

http://www.screencast.com/t/M4FpJW2M8kx          Still shot of Daily S&P

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Controlling Fear and Emotions while day trading !

Thursday, March 19th, 2009

Today is Thursday, March 19th and the markets back off on light volume.

The Market, in general, slowly backed off its highs from yesterday. The night trading saw a move back up to yesterday’s high and when the general market opened at 6:30, the Dow shot up 50 points and the S&P about 7 points. There was a gap in the S&P and when you get an extended move, like what we have had the last couple of weeks, with the market trading near its high at 800, it was likely the gap would be filled rather quickly.

I missed the initial move down by a second and found myself a little frustrated, not a good emotion when trading. I was looking for a low risk short entry and took a trade a little early and got high tick stopped. I was in a little heavy, I think 7 contracts. I was sure we were going down but was just a little too anxious. So I started to back off on size a little. I had to wait the market out, but I was still a little anxious. I prefer to see a choppy market early on, because there are usually a lot of small trade set ups, but when it is trending right off the bat, it can be hard to find a low risk place to get in.

All in all, I did OK, making 15 trades with 9 gains and 6 losses. I scaled out of all the trades with 2 targets. Posted about $800 dollars in profit. I made a few mistakes today, but it happens. The market did just what it always does, so I definitely can say that I was to blame on a few of the losses that I could have avoided. The other losses were no one’s fault – just probabilities that show up.

After yesterday’s big gains, I decided to back off a bit. I am trading a lot more than I usually do and I can’t complain. I have been posting very solid profit every day for about 7 weeks of trading. I need to do some assessments and go over my trading plan. I do not want to lose sight of my goals. I had wanted to increase my contract size and make less trades, but I have been making more trades with small contract size. Again, I can’t complain. I have been getting the increased gains that I had planned on, but I have been having to work a lot harder to get it.

One interesting thing I recently saw, there is a TV show in England that took 100 people and interviewed them for a trading career. Out of the 100, only 8 were chosen, with a mixed level of education. To make a long story short, within 2-3 weeks of being properly trained, 4 were making money and 4 were losing money.

The person who did the best was a mother of two children who had an entrepreneurial background. The person who did the worst was a I.T. engineer. The I.T. guy said this was the hardest thing he has had to do in his life. When a program is not working right, he just reprograms it with the right settings and the problem is solved. He tried to apply the same principles to trading and could not do it. The next best trader was an ex-soldier. He said he was used to making quick decisions and was flexible to the current task at hand. He was not boxed in, with seemingly an absolute frame of mind.

The moral of the story is, that being successful at trading has more to do with your personality than intelligence or I.Q.  We follow principals and not so much rules. There are definitely guidelines to follow and you have to know what you are looking for, but having the right personality for the job is essential. The Mother of two was cool under pressure and applied what she learned. She was not overly scared, but placed the trades as they came up and she got the expected results.

We all can learn from this story, including myself. There is no place for FEAR when trading. If you are afraid, then you are not ready. You may be trading with too small of an account or you may not really be able to take on the risk. The best way to approach this is to allocate an amount in your account that you can comfortably risk. If you draw down to that amount you will stop trading and give yourself a month off to assess the whole situation.

So if you are OK with risking, say $500, that would be 10 S&P points with only one contract. You could give yourself a daily loss limit of say just 2 trades or 2 points. If you are not on it, with gains out of the gate, then you wait until tomorrow and try again.

But do not trade with fear at your side. The worst thing that can happen is already predefined, so accept that fact and go forward. You have 5 days of losses, assuming you lose every day, before you get to your total limit for the month. That is really not too much damage to take on, when you look at the big picture of hitting your daily goal of 2-3 points per day.

http://www.screencast.com/t/RVRfEqSe19Y             Some of today’s trades - Still shot

 http://www.screencast.com/t/vGOqsxDEII               Today’s equity chart

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Posted in Trading Psychology | No Comments »

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