Continued from the Trader P/L thread, I've found that after I make a lot of positive trades in a row I tend to make a bunch of negative ones ruining my entire gain (and sometimes more). This results in a constant churning throughout the day that I wish to be rid of. My idea is to take a small break after a good run in hopes of eliminating this "over trading" that takes away my gains. So, please vote for if my upside target should be X number of positive trades in a row or a specific dollar value because I'm not sure which one to go with. Thanks!
None of your suggestions work from my experience. There is a solution that works for me: Define your setups and use discipline to only trade those setups. It sounds like you are overtrading and looking for trades that aren't really there. Just my .02. Regards, Mike
You are looking for the wrong answer. If you have good predefined rules then you should not need a break after a series of wins. Each trade is independent and should be analyzed independently and if it meets all criteria then enter into it and apply your risk management plan. What is happening to you is that after a few wins your greed and ego take over and you get caught up in the euphoria and emotions rule the day and all sensible trade management rules go out the window. Phil
First quit looking at the dollar amount in your account after each winning trade. Second, focus on the setup of each new trade as a stand-alone trade with its own win/loss probability instead of wether the prior trades were winners or losers. Define your trading plan into flow charts for 1) your entry signals 2) managing the trade once initiated 3) your exits, either on a stop-loss or profit taking. You need to backtest your trading plan to make sure it has an edge. If you feel you need a break after every winning trade, incorporate the break into your flow charts.
Ahh yes! After doing a little more analysis of my problem I've realized a couple things: 1) I have tended to obsessively check my P/L after every trade lately 2) My system works extremely well when the S&P has a clear direction and the times I get screwed are when it's been flip-flopping like it has for the past while. So what's been happening is (since the stocks I trade are very S&P sensitive) I grab a position thinking it to be a good one (and have a little momentum behind it) and then it quickly turns around and does the same thing the other way whipping me out. I see a couple ways to improve: - Ignore my P/L. (within reason of course, if I notice I'm making a lot of negative trades maybe check it to see how much I should decrease my size) - modify my entry points. I think my stop loss points are fine and make sense for my style of trading since they've proven themselves in the past, but perhaps a little tweaking on the entry would avoid my over trading and getting into less bad positions Does this sound like a good way to improve? Thanks for all of your suggestions guys.
Not sure what type of time scale you are on but taking an entry in 1/3rd's (or quarters - in terms of shares) works for me. The first third is a test, if the behaviour is good then add the rest. Push it hard when you "know" the trade is really working and don't add anything if the trade is junky or flopping around. A flow chart (as some one suggested) is a great idea too. Well defined/disciplined scaling into my entries has done wonders for me. Mike