For background, I've been daytrading for 3 months, scalping NYSE stocks. I'm usually in a trade for 5 seconds-5 minutes, and usually am looking to make between 10 and 30 cents with between 1 and 10 cents of risk. I've recently started to get A LOT better - I'm able to consistently read the order flow and tape of certain stocks, and able to more accurately ascertain when the orderflow is unreadable. What's holding me back is the "mediocre" trades, or the purely downright "bad" trades. There are certain setups I like, but my trading style is very discretionary and cannot be summarized in a list of "these are the acceptable setups" to take. Therefore, saying "only take particular setups" won't be helpful. Anyway, I'm sort of rambling, but my problem is that when I'm down money - especially an amount of money near my "max loss" for the day - (which is a hard number, but it's flexible depending on the situation and what my firm's head says) - I become very irritated, anxious, and have a pressing need to make money... I churn, get into trades and quickly get out when I have a profit, and sometimes get out just when I'm break even after (or before) commissions. Unless I catch something good when doing this, either through luck, or because I stumble upon a setup or scenario I'm familiar with, I lose money from fees and sometimes from losses which aren't made up for by wins. Today, I lost about $50 doing this. I was over my max-loss, and anxiously trying to make it back quickly, knowing I would be reprimended for trading beyond my limit. Then, I saw a great setup in a stock I had been trading all day, and made 25 cents on 200 shares. This still had me down to a level I was uncomfortable with, and I DID THE SAME THING... and lost another $35 and then I found another great setup, and made 22 cents. In the $85 I lost trying to frantically reach an arbitrary target, maybe $15-25 of the losses were "good" trades that didn't work out - and if so, that's a stretch. Had I just waited for those two 25 and 22 cent trades, I would have actually finished positive today. This state also comes when I'm up a certain amount - say $150, then go to a level I don't like - $85 - and get really anxious and pissed. Besides the obvious stress-management related solutions, does anyone have any interesting insight on this dilemma of mine?
You're an "excitement junkie". You feel compelled to trade too frequently instead of waiting for that "good set-up" that produced your winning trades. If you're willing to precisely define what that set-up is, you'll have to be more patient to let it show itself while you let those other random trades go by. Be willing to develop rules and guidelines that you can comfortably execute. Otherwise, you'll get exhausted too easily from forcing bad trades and dealing with the stress associated with each one.
Take a break from your trading and completely redefine what trading is, and what it should be for you.. Taking PROFITS too early without letting it run is the worst sign on a good trader... actually, it is the one thing that separtes the best from the rest.
The problem is my good setups change based on market conditions, what stocks are in play, and what's working. When I'm reading a stock well, familiar with its behavior for the day and how orders are interacting, high probability setups show themselves to me. The stock in which I had those two great setups I mentioned I also had traded succcessfully with the same setup 4 times earlier in the day. I traded the same stock earlier this week and all of last week, but with totally different setups since the behavior of the buyers and sellers was different. The setup worked because I identified it early on in the day, but it wasn't something I could write down as a rule or guideline. It's as if I intuitively know what a really good setup is, and when I take one, there is a different feeling - when I lose, I'm usually surprised, but I don't mind as much, and I can usually go the other way (short if I was long originally, or vica-versa) because the failure of that setup shows a significant underlying change. Also, the consistent taking of randomish trades where I book profits extremely early or break even and get killed from the few losses is not something I do when I'm not feeling agitated from earlier losses or discontent with my P/L. If the trading pattern were not linked to specific mindstates and feelings, I agree it would be correct to infer that the problem is my setups not being specifically defined.
I'm generally good at letting my winners ride in relation to my winners (I've improved upon this a lot in the last few weeks)... all my scalping setups have an out defined, which when reached, I get out (not based on an arbitrary number, but based either on S/R levels, or the price action/LII).... I only do this when it's a very mediocre or downright poor trade, and I'm anxious to make some money back, and fearful of losing anymore.
I can't take credit for this, but someone talked about "hiding" your P&L. When I'm up money, Set your P&L to 0 so it is like starting a fresh. Then foget about what you already made.
FXWill: It sounds like you have a pretty good plan as far as your setups go and that you are very capable of making money. Getting away from the plan and not being able to hang on to the money seems to be your problem. The other reply is right in the fact that you are somewhat of an excitement junkie of sorts. My brother had VERY similar problems. Very able to make money, but not hold onto it. Good plans to make $$, but was ALWAYS in the market even when the plan was not there. 2 things with him; There was a greater need to make money (2 kids and a wife..not sure of your situation) and he had no patience to stay out. You are able to make or lose money in the markets within seconds. If someone ran into the room, punched you, stole your wallet, and then took off down the street, what are you going to do? Run after the guy immediately because he stole your $$ and you want it back. It's only natural, right? So in the markets when some guy steals your money you want it back immediately also, so you jump right back into the markets to chase the guy down....but you have no idea what he looks like. Sitting around and waiting doesn't sound like what being a trader is supposed to be, but that's largely what it comes down to. I have gotten away from daily goals, just because it puts to much pressure on me to make money on days where nothing goes on (days before unemployment/Fed meetings among others). Just be ready for when your setups come and take full advantage of what the market offers you. It may take days, weeks, months, but if you stay out of the bad stuff you will be adding to your P and L and not digging out of a hole. Good Luck
You are so focused on money. Thats your problem. YOUR P AND L IS A RESULT OF YOUR TRADING, NOT THE CAUSE. Wake up. Wake up.
Most traders make money and lose money via a psychological pattern that can sometimes be shown as an intraday cycle. Go over all your trades for the year to determine if your losing money during a particular duration of the trading day and do the same to determine when you tend to make money. For example, if you tend to make money between 0930am - 11am est and lose money via churning your account after 11am est... The solution is simple and you now have an edge via knowing when to trade and when not to trade (walk away from the computer). Mark