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