Below is such a good piece on trading psychology, that I thought it might have great value for fellow traders. Compliments of Sowterdad; here it is:
Sam this is sooooo true. I started trading full-time Jan 2007 and I'll say that my primary strategies have DRASTICALLY changed. Mid 2007 thru 2008 was probably (hopefully not) the best daytrading environment that I will ever experience. But in my young career, coming into 2009 was a total paradigm shift where guys that I sat around that made hundreds of thousands of dollars per month couldn't make a buck on their best day. I had a lot of 5 digit days in 2008 and in 2009 that stopped...cold. Had to adapt. But I made the mistake of trading big and trying to impose my style on the market and I fell into a hole. I tried new strategies and tried with too large of size and lost. My logic was, "I made "X amount" of dollars last year, I'm not going to be some small 500 share trader..." Famous last words. Deeper hole. I learned my lesson and reduced my size, and came back to fight out of my hole. Glad I didn't go and buy too many extravagant things when the faucets were on because I needed it to live on until I figured out my new approach. That said, a lot of my strategies capitalized on market structure inefficiencies...once inefficiencies disappeared, it was either regroup or die. That said, I think that breakouts/breakdowns are going to exist in any market. They just become faster/slower and have bigger/smaller moves. I think trading breakdowns/breakouts is a pretty robust strategy that transcends markets and timeframes. That's my .02.
mdl060374, I think I understand you. If you look at my journal towards the beginning, you will see that I used to jump into stocks within 3 minutes of the open (esp. FAS). Sometimes I got lucky with it, sometimes I didn't. I only survived trading like that, due to keeping my stops tight. If the stock moved in my favor, then I would go on and successfully manage it to higher ground. My trading style has evolved a little since than and now I will wait for the opening chaos to settle and for setups to form. Most of the times they will not turn on me, and if they do, I take a small loss and see if and where I can re-enter. In regards to stock selection, if we have a look at today, this is what I had: <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=3087909.png"> Out of these, JNPR and WFMI were at the top of the list from the open. The other one in the top 10 that I would have chosen would have been EBAY, which is 3rd on the list at present. If you look at the charts, WFMI at the break of HOD would have given you ~$1.00 in profit and EBAY at the break of HOD would have given you ~$2.00 in profit. Both these setups had their entry point at about 10:30 am. JNPR's entry came about half an hour earlier (10 am) with an optimal profit taking of $2.00 - 2.50 (by 2:45 pm, depending how you played it). Hope this will help.
I would have, if, I had ever heard of that stock. At that time I was committed to my beloved FAS, until I found the pleasures of "going around" Hope all is well with you.
02/09: This was a short that was overly extended. I was pretty confident about the short, but failed to capitalize on it by adding positions as the trade progressed. I need to get into a habit of this for rainier days. Pic. 1: Trade 1: SHORT: Entry: $15.82 Exit: $15.04 +$0.78 <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=3087978.png"> Total (+/-): +$773.00; [+$780.00-$7.00(commission)] 2011 Net (+/-):+$11,915.37
Actually, I have been watching this hotlist, and mine looked similar. I added the "volume buzz" column, and sorted by that.. I found that most of the stocks that made it had a strong opening volume that triggered it (good) vs getting exhaustion volume spike at the end of a run.. What I like about this scanner is that it simplifies alot of stuff I was making complicated.. It basically brings you back to the basics which is something I have gotten away from... Looking at the 3 mn charts (hindsight) I saw about 20 of trades I would have made, at least 80% profitable... And that was trading simple S/R and trendlines only.. That was just today though. Hopefully I find other days where signals are clear. Today seemed too easy, so it proabably was an anomoly..
Hi Kon et al, I have been busy digging in to this big hole of the trading world. I was going to take a small break, so I could "catch up", but discovered that the more I dig this trading hole, the deeper it gets. I am still learning from the very many good and generous traders here (esp. NoDoji) and am overall improving. I'm happy with my progress, but not with my trading. I feel that I am lacking that consistency, but think this is due to the fact that I am still tweaking my methods. Overall, I am comfortably in the green, which helps, but I still have a lot to learn. I hope that when I come back, I will be here more consistently and will be able to give just like the very many others that have helped me become a better trader. I hope all of you are keeping well.