Posts Tagged ‘trading performance’

Trading Psychology, should not be overlooked

Thursday, December 30th, 2010

Today is Thursday, December 30th and we saw the market back off early and close down slightly for the day.

The market is still in the doldrums with low volume and movement in the major index’s. Look for things to get back to normal after the second week of January. No trading for me until after the New Year, but am posting the low risk market turns as shown in the chart below.

As we approach a new year, traders will be looking for answers to there personal trading performance. Many times, they will be looking for new trading methods and or trading systems to solve their problems and that could be the answer for many, but their could be other solutions to look at first. Trading psychology is best not overlooked.

One of the first things we need to look at when assessing our trading performance is “ourselves”.  I will agree first of all, if you don’t have a solid trading method that you follow, with rules for entry and exit, that is clearly defined and in writing, you are going to have a hard time. Having it in writing, is important, as it defines exactly why, where and when you are to enter a trade. Then can define, when you should exit a trade. All of that said, to say this;  If you have that and things are not working out, many times, it is the unseen things withing ourselves that we are overlooking that is holding you back.

I know for sure that their are traders who have a good trading method that they themselves have come up with and or, purchased from the outside but have failed to make it work. The first order of business is to examine ourselves and see if something has been overlooked within ourselves that is holding us back from hitting our trading goals.

Many times it is these hidden things that if uncovered, will set us straight and put us on the road towards our long term trading goals. Let me expose just a few of them which may help jar some memories.

Do you move your stop after entry?     Do you second guess yourself after pulling the trade trigger?       Do you find yourself over-trading?       Do you find yourself always cutting your gains off early?     Are you taking bigger stops than you should be?      Do you have blow out days?

All of the above are things related to “US” as traders and many times not the trading method. We need to be able to follow the method and not our emotions while trading. That can be easier said than done, but if you identify the possible problems, then you are better able to do something about it. Ignoring these issues will not make you a better trader and looking for the Holy Grail of trading systems or methods will not do it either.

This may sound a little harsh, but it is intended to help only. We need to be totally honest with ourselves if we are going to see the lasting change we desire.

Go back over the list of questions above and ask yourself to answer those question to see if you are doing any of them. No one will see your answers but you.  You need to come clean with yourself and if you find that you are doing some of those things above, ask yourself why? Then ask, what can I do to stop?  Often the answers are found much deeper within you and can be difficult to extract, but is possible.

Fear, is all to often a reason for some of the above. Fear of loss can get you out of a good trade and force you into a bad trade. Both are motivated by a very strong emotion. Eliminating or getting control of that emotion is essential and must start with asking what am I afraid of. Is it fear of being wrong? If so, then it could be your ego is getting in the way. To often we don’t like to be wrong and will force trades and or re-enter a trade to quickly because we so want to be right.

Their is no room for large Ego’s in being successful in this business. The market will humble any trader who sports this attitude before to long. Humility is the opposite of this and is what is needed. If its not within your character to be this way, then you know the first thing you have to change.

Greed is another strong emotion that often goes together with trading fear, kind of like, peanut butter and jelly (lol). Trading greed can make you do things that you will question long after the trade has been made. You will say, “why did I do that, I knew better”. Well, these are only some of the obvious factors that can hold us back at traders. I am not immune to all of this myself. Writing about it, helps me maintain the right attitude and hopefully helps a few along the way.

Not trading with true risk capital can bring in additional pressures that not need be present, which can be traced back to a lack of patients, to wait until your financial situation is best suited to take on this risk. So here risk capital is traced back to lack of patients to wait. What do you think will get transferred to your trading screen and account if you lacked patients before in pushing to trade sooner than your situation properly allowed? That is right, a lack of patients to wait for the right setups and a lack of patients to wait for the trade to develop once in. Both are going to give you less than optimal results.

I can continue, and may pick this up from here tomorrow, but you can see, the traders who engage in some of these things may have perfectly good trading methods, but the problem is within themselves. It is not always the case, but it can be.  Every trader needs a written plan for their trading and it needs to cover everything, whether it is self done or purchased from the outside.

Examine your self and trading behavior to best see the results you desire this coming year, 2011.

Good Trading to all, Vince.            P.S.    Please feel free to comment on the above !

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Improving Day Trading Performance

Thursday, April 1st, 2010

Today is Thursday April 1st, and the market moved out of the consolidation zone today as mentioned in Tuesdays post.

We moved out side the inside range in the pre-market and continued that on the open for a couple of hours, only later to fall back inside the trading range. We had a gap on the major index’s as they jumped instantly up to the futures. Often times, we see the gap being filled and it happened today as well, but took a little while to come together. Around 10:45 am West Coast or 1:45 pm East Coast, the market came alive, with a move down for several points bringing the gap to a close.  We did see a nice rally at the end of the day bringing things back up to close positive on the session. The Dow was up 70 points + the S&P 7 points and the NASDAQ up only 4 points, clearly the laggard.

I have a video of the market action below. It is taken in my T-2 Trade Screen and shows the major turning points and add on trades for the day. I did the video before the market had closed and was just getting the last long signal which did end up much higher if you road it out. I took a few small losses inside the slow time of the day, kind of a bummer, but I knew what I was getting into. If I did not see or get what I was looking for, I got out. I could have waited for the afternoon session and would have made it easier for me, but it was still OK. I had a one point S&P loss, but did it on three trades. Then I came back with a three point gain on 1 additional contract.

I really liked the last trade. I thought it was coming earlier, but just as the market is about to make a big move, it usually gets a little tricky. That is a good point to remember because I see it happen all the time. It does not want to give you easy access to the big moves and will do what it has to in order to make you miss it. That is just how it is all to often. But if you know that ahead of time, you can keep an open mind as to what its intentions really are and be ready to take the appropriate action.

Today I am going to offer a way for traders to help there trading performance. That is by giving you something to first think about. Traders, especially scalp traders, need to have clear pictures of the trade setups in there minds. You need to know what makes up a good trade from a bad trade. What are the likely results of this setup vs another and which one is likely to outperform. The trade that you take will have an impact on your trading results. So, trade selection is going to be a very important part of being successful. How does a trader know which trade is better than others and what makes up a good trade? That is the 64,000 dollars question as it has been called. I won’t go into the details of that here, but will recommend that every trader clearly define what he is looking for and then to wait for just that. If you do, you will be rewarded.

One way to better help you train yourself is to get a clear picture of what you are looking for and try to identify it, again and again. I would say the more familiar you get with what a winning trade looks like, the easier it is going to be for you to identify it, when you are scalp trading the market. Seems simple enough, but that is not what usually happens.

Example: Fighter Pilots when engaged in battle do not have to think very much about what to do. It has become instinct for them to react as conditions change. A traders inability to change direction quickly enough will hold them back, because of fear and uncertainty. Those emotions only exist because the trader has not exposed himself to enough of those same conditions over time. If he has not seen that read before, how is he supposed to know how to handle the new developments. The result, under-performance. A fighter pilot has spend hundreds and hundreds, of hours in a simulator before he is taken up in the air for a real flight. Should learning traders to the same, that is for you to decide. If you have the risk capital, real money trading is the best. If you have a limited amount of resources, simulator trading is best until you have been exposed to the elements.

The same is true for a boxer. He does not have to think about how he is going to react when he is in ring. He knows, because of all the training, sparring and conditioning he has done to help get himself ready to fight. A professional boxer spends hundreds of hours in these various preparations to help him not have to waist time and think about what to do. He just knows. How is it that he just knows? Through the training.

Know we come to scalpers who day trade the market looking for price discrepancies where they can position themselves for profit. We need to have the same dedication to the cause. By first knowing what you are supposed to look for and how to position yourself so your risk is very limited and being able to do this hundreds of times, even thousands. That is a tall order, but ask yourself, how many successful day traders are able to take money out of the market virtually every day? Your answer, not many. It is the losses of the other 90% of traders that make up the profit for the 10% who can. How are you going to get on the side of the 10%. It is not easy, but is possible.

There are many factors, but getting to know for sure what you need to be looking for is the start and how to position yourself to take advantage of that is the key. I will continue with this line of reasoning in tomorrows post.

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Be Determined to Reach your Trading Goals this Year

Thursday, March 11th, 2010

Today is Thursday March 11th and the S&P’s are putting in a good late day rally.

It is nice to see the markets have some life left in them for the bulls sake. The Dow was up about 45 points but remains the lager of the bunch. It is still 110 points off its January high, while the S&P today is 4 points beyond its January high; (10 Dow points is equivalent to 1 S&P point). The NASDAQ is 48 points above it January high at 2368 and putting in a good showing.

Today I took a couple of small trades and was done. There definitely was more on the table and I am not crying about it one bit. I even had a second chance on my second trade to stretch it out but I just took what I had in mind for today. I only watched the market for a few minutes with the first trade lasting 5 minutes and the second trade lasting the same. I was doing things in between those trades and was not totally into it. I was sure that my timing was good and it was. I did see this move coming. I will put up a screen shot of what I saw just before my first little trade. As I said, I could have easily stayed with the trade and took it out of my T-2 Screen for multiple points, but again, its no big deal. Next week I will gear up mentally for some good gains if the market is cooperating. My two little scalp trades below, first for 1 S&P point and the second for .75 and 1.00 point.                                          

Here is a chart of the S&P futures mixed with the Cash Dow Index and the Cash NASDAQ Index. There is a nice strong pattern that was building for the bulk of the day. I have some notes on the chart so take a look. The expected target for something like this is the body of the consolidation, high to low. Measure the distance top to bottom, then project that out on top of the high to see the expected return of the move once it breaks. I played the trade for a 1 point move before it broke. I missed the actual breakout, but I was doing other things. This week has just been like that, but I have still been able to participate.

Yesterday, I was talking about trying to create new habits and replace the old ones. One of the key points was to balance your life with all of its duties and expectations. If not, pressure will build up in area’s that are left unattended to and that will eventually come back and bite you. It will have a drag to some degree on your trading performance. Since that is what we want to improve, it pays to be aware of this before the imbalance becomes to great. Taking action to improve, change, redirect and prioritize is going to be key.

Being consistent with your trading has a lot to do with keeping things balanced in your life and that is the bottom line. Paying the price to achieve this balance takes discipline and was another key point from yesterday. Are we willing to pay the price to achieve greatness. The possibilities for living a wealthy, healthy and fruitful life are all just before us, but again, are we willing to pay the price? I put myself in there too. I have my challenges and I know what they are specifically. Do you know yours? It is important that you do, so if and when you want to see lasting change, you know exactly what you have to do to achieve it. Not knowing, wastes time, energy and keeps you that much farther away from ever attaining it.

If you are willing to pay the price to attain financial independence, then you can not shrink back from making the hard choices in all area’s of your life. Trading can be addictive, I think everyone who trades knows that. If you don’t, you probably will pretty soon. You need to keep a handle on that, and not let it take control of you, and other obligations. Its more than just money, it is time. We often want to work hard to achieve, that is what we are always told. What we are not told, is that if we become unbalanced with our pursuits, we often times will fall. Remove a leg from a stool and see what happens. Straight down to the ground.

Some traders don’t like addressing things like this and see it as a waste of time. I hate to say it, but those are the ones who will never make it in my opinion.

Being willing to pay the price comes in many forms. Many traders do not want to admit that they could use help, but hold to the idea, “I can figure it out on my own”. I was one of those guys. I never took a course, had a trading mentor, or subscribed to anything stock market related. It took me a lot longer than it had to to figure things out. I guess I did have a bit of “PRIDE”, which was hard to see at that time.

Paying the price can take many forms:

*Not willing to learn from someone who know how to trade * Not willing to change destructive trading patterns * Not balancing other time obligations * Getting in a better financial position so that we are not risking money that we can not afford to lose * Putting our past failures behind us, but being determined to learn from our mistakes and on and on the list can go.

Are you willing to pay the price to be the trader that you aspire? Only you can answer that question. If you need someone to help you trough some of these tough issues, I am here. Don’t let PRIDE get in your way from reaching your goals and dreams this year.

Wishing all my readers the best, “Trade On”.

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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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Trading Discipline, Part 2

Tuesday, April 14th, 2009

Today is Tuesday April 14th and another large gain for the day.

I had a nice return on my time invested today for solid gains. I will get right to it with the stats. I had 20 gains, 3 break even trades and 3 loses. One of the losses was rather large, with a double position and a little larger stop than I usually take. That was early on, but came right back to forge forward into new equity highs. I ended the day at + $3,000 with very little draw down except that early trade.

Very happy with the results overall. I missed the large swings in the early trading. That makes it a lot easier to get the hit and run trades that I like to put on. It is harder to trade a slow moving market because it keeps you in the trade longer. Any time you are in the actual trade, there are forces working against you, straight up. You cannot get away from adversity, but it is how you handle it. A very large part of success is between your ears and we all need to remember that. Every other trader across the globe is having to deal with the same issues on a daily basis. The difference is going to be, who is going to handle the pressure and come out on top?

Having targets and stops built in, is a way to cut down the adversity that takes place. Many people argue that if you have small targets, it is not enough to make up for your inevitable losses. That can be true, if you have more losses than you have gains. In addition, if you stay too long, you may lose your concentration and give back your hard earned equity. All things to remember, especially if you are fairly new to the game.

I have heard it said that when you start and open a trading account, don’t deposit too much into it, because you are going to lose it ALL. This is actually not too far off and it’s really true if you try and go it alone. The world is full of S&P day traders who think it won’t happen to them. That’s the kind of thing that happens to the other guys, but not me. Well, I hate to break the bad news to would be traders who think they have a handle on this, work on your discipline after you know how to trade and what your looking for.

If you have one without the other, you are doomed. You will need to exercise discipline, just like a group of muscles at the gym. If you zero in on that quality, you can improve it and get stronger. This may be a foreign idea to you, but it is totally necessary to your success.

Here are a couple of ideas. I stated before that your environment has an effect on your trading results and that is true. A clean, neat work space, that is organized and in place, makes and has an effect on you mentally. It can have a reflection to your inner world, which translates into clear thinking, patience, focus, etc, resulting in better trading performance.

Now just think about other elements in your life that can have a similar effect. I don’t mean to get personal, and maybe I can just talk about myself to make my point. My goal is to create a home life that is balanced and also in order. By tending to the things in my life that have real true meaning, it helps establish a foundation of stability which gives me a sense of well being. This may not be for everyone, although I feel what everyone needs to know is “Why are we here on this earth?”

I ask myself this question often and it reminds me of what is really important. It is a way of centering myself with the busy lifestyles we all tend to live. The answer to that question is going to be different for everyone and I cannot answer that but for myself only. I get a great deal of peace when I reflect on this question, which then helps me to become a better husband and father to my grown children. It also provides the balance I need in my life to help me compartmentalize my trading goals and pursuits. If I do not exercise balance in that area, I may devote too much time into trading and letting other responsibilities get away from me – the ones that really mean the most. So it all boils down to discipline and remaining in control of your emotions and leaving your trading EGO at the door.

As a trader we will have those trades that bring us nice returns, but always need to remember that this is not easy to master and you need to remain Humble. That too is a form of discipline, to hold yourself back from becoming emotional after a nice gain. It is normal to be excited, but you need to see it as just one trade in the path of many that will eventually take you where you really want to go. That may be spending more time with your family, vacations, helping your neighbor with a project. These are all the things that a successful trading career can give you.

Just remember it’s not all about “us”.  What can we do for others?  You may be surprised, but that attitude will have an effect on your trading results and all for the better. It may say, “I have enough in me to give some away, whatever it is.” With that approach, you open the door for additional resources to find their way into your life, i.e., a growing trading account that seems to always expand.

This is what I find to be true in my life, anyway. I hope it helps someone out there to better handle and exercise discipline in their trading ventures. More to come on this subject. It’s a big one.

http://www.screencast.com/t/72VlG1w2 Today’s equity chart

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