Process for Improvement
Im in a position now with my trading where im not happy. Theres a number of things that are going wrong.
1. I am taking way too many trades
2. My setups are not specific enough
3. My intraday setups are not specific enough
4. Im not exiting positions/losers fast enough.
5. Individual stocks / SPY fake outs / Lack of trend
6. Getting very emotional during trading
7. Risk plan does not cover enough. Catch? Failure? Breakouts?
8. Missing trades/Re entering trades
9. Accountability
Lets start with #9
I was in a pretty nice spot, Market trending higher with ease/ Everything up, I was making money just about everyday. Doing very well. Why change or adjust anything if im performing that well? I was not running into some of the issues listed above then during this stretch BUT, issues #2,4,7,8 were always there, just not that significant in my trading yet.
Now that these other issues have shown up, its making feel lost in my trading again. What I used to do it not working right now and I cant blame it on any 1 particular problem. The only thing I can do for myself is hold myself accountable, and be honest about whats going on. Its the only way to actually improve.
So I started thinking to myself where does it stem from. Well issue #2. Not being specific enough. It all starts from the stock we chose to trade. And as Bella says, we are only as good as the stocks we trade.
For the most part I do a very good job of spotting things on a chart and saying, theres a possible move here, or breakout potential, where I believe a stock may have a few things happen. Short and Long term traders being involved from both ends. Longs in and happy adding, or shorts unhappy and want out. Confluence.
But going back to issue #1 of trading too much, I need a better filter, or at least more description in what im doing.
But how do I do this. Theres so many different options I can keep track of. Volume profile shelf break? MAs? All or some? Consolidation breakout? How long was it in range? News? And this is all BEFORE the day starts. This isnt including intraday data.
I know some things about myself. I think a lot. Sometimes too much, sometimes not enough. But what dont I know about myself. Been thinking about where to begin and it was obvious. Dr Brett Steenbarger and a personality test. So thats what im going to be spending the next hour or so on is finding out a little more about myself.
Three Dimensions Trader Personality Quiz
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After the 3D test, Im 4/5 Conscientious. 1/5 Neurotic, 3/5 risk averse. And truthfully I think that hits me pretty spot on. Hes got a paragraph of each section talking about what it means.
Conscientious means I like detail oriented structured plans with rules. Right where I am.
Neurotic means more of a feel/gut trader. And experience a lot of emotions while trading. Doesnt seem too much like me
And risk averse, is being risk averse. This is my favorite one because Im only slightly leaning towards the defensive side. I still have moment where I want to press and not solely focus on losing less, but making more. Which connects with a 1 for neuroticism and 4 being aware and rule based still.
https://www.marketpsych.com/
Also did this one ^
This one telling me im generally well organized, very emotionally calm. I tell you I am not an extrovert at all, but this one saying otherwise. Also tells me that I am optimistic. I do not say no to new ideas but tend to rely on my own more often.
I am above average on over confidence. I sorta see this one. I usually do a pretty good job at keeping humble. I was on the hot streak all last month and knew the week like this was coming at some point. And I did mess up. Started shooting at everything thinking it would still play out the same way it used to.
And I believe that ties in well with my high optimism. Cant get too high on your horse. Bias can become a problem and it certainly is for me. Lately finding myself searching for supporting ideas while its generally too late for me to stay in a trade.
Very low on risk aversion here. Leads to over trading.
Emotional vulnerability is low. Im doing this review. Market cant stop me from getting better. I DO have moments though that bring me to this point. Its identifying those before hand that are important.
Holding losers is low, very true for me except for this week. It happens every now and then.
Self Discipline is high. I feel thats true. Says to look out for over managing positions which I can certainly fall into that category. But theres a lot of things to say about that. Rather be in than out, can always get back in, I know what my best trades do.
Immediate gratification is high. That is definitely true. I want to be in a winning trade from the second I am in and no drawdown. Talks about keeping the higher time frame in mind. I have thought about options (literal) for me on this one and will talk about it later on.
Excitement seeking is high. Thats one I did not expect. I have my moments for sure, but for the most part im able to keep it together and stay disciplined. Overtrading is an obvious problem from seeking excitement. I still have days I feel like putting something on, just to have something on.
Intellectualism is low. Im not sure if im offended or not. It has green as if thats a good thing. Says high intellectualism leads to overthinking. Well I have certainly done a lot of that in my career. I suppose now I have entered a stage where I know what I want and if I dont get it I dont do anything about it. Let it go and thats fine. Not black and white though I still slip up. It does say that low scorers tend to continue using same strategies even though market conditions have changed. Yup and thats probably why Im here doing this.
Herding is low. I dont follow anyone but myself. My ideas are my own. No problem taking some from others on twitter or something, but it has to align with my own ideology and strats. The other side of the coin though, Is that I can fight the market a lot. Getting stuck on my own ideas and ignoring what is actually happening.
So what does all this mean. Not much really. I suppose it solidifies the idea im on the right track still. I like rule based methodical/mathematical trading. I think I did this for confirmation that the way I trade, is the way I should be trading. And success, it is.
If what this says about me is true, then I need to keep working. Head down, do the dirty work and dig deep. Hold myself accountable. There should be no gaps in my system.
Issue # 1 Overtrading
Big issue recently. This week I took 132 trades in 4 days. More than ever before. Compliance down to 68% an all year low. A little misleading though because majority of my issues were from trade management, only 13 trades I took that I shouldnt have.
Most of this is stemming from me having setups on the daily that I like, compared to some that I love, and some that are just good enough. I know that I am settling for less in selecting stocks to watch that day. Theres a few reasons.
1. I recognize themes in the market. Banks look terrible and ready for a break lower, I settle on taking any of them short, regardless of if they are in the actual breakout spot. This applies to air/cruise and other beatdowns.
2. Theres flat out trades I am looking at that do not deserve to be on my watchlist. I get too ok with ok.
3. Market movement is causing me to put pressure on myself. I have begun thinking that theres huge moves to be coming from anywhere and everywhere.
I had 40+ stocks on my watch list just about every day this week. Never been that many. I have to find ways to reduce it. So..
Issue #2 My setups are not specific enough
That watchlist doesnt need to be more than 40. I usually do fine with it but because of my performance, I need to find ways to narrow it down.
Ive got several Daily patterns I look for now. Range breakouts. Reversals. Daily Failures. Trend reversals. Breaking news/gap/earnings. Trendline breaks. Typical chart patterns you can see everyday.
I go through a list of maybe 200 stocks every night to see which ones look good for one of these.
This was a short trade on LLY I was looking for. I called it a failed breakout. Short. Thats not a clear trade. 1. shorting it back into tight MAs, and 2, the break already happened and failed lower. Theres nothing here for me to look at.
This is a short on DDOG that was a solid win. Huge breakout got completely stuffed and closed back under breakout level. Looked for short intraday and got it.
The simple fix is to eliminate any trade that isnt completely obvious. Dont take anything I have to spend more than a few seconds to spot. No trades into coiled moving averages. Dont chase the breakouts if it already happened and was not significant break. A good rule of thumb is if I have to look for it, its usually not there. If it takes more than a few seconds to see, there is no trade worth taking.
To me it doesnt make sense the record my trades as something like, "Trendline breakout with coiled MAs and 200ma reclaim and anch vwap test." Because theres no limit to how long that strat can get. +volume profile value area break + fib 50% break + breakout of range + breakout of daily pivot + earnings. The list can be as long as you want it to.
So what I think is a solution for me, is to keep it as I have it with simple F/BO/TLB label, but to also keep track of each of each of those as a +1. Did it also break Volume profile levels? +1 did it also have tight coiled MAs +1. Volume cues +1 Etc
This way I can have a star system as well for D tags. If I find only 3 tags is underperforming, and 7 or 8 is over performing, then I know I can eliminate any setup that doesnt have 5 or more tags. I imagine that is the case, but you never know until you check. And ill keep stats on each individual tag as well to see what most important ones are. And from there, I should be able to get extremely specific about what the best ones are for me. Just a guess but I imagine that volume, volume profile, and consolidation would be most important.
Issue #3 My intraday setups are not specific enough
Now this is where I can start really re arranging what im doing and trading. I have my daily setups I look for, then intraday a tag for the method of entry, if its a starter or add, and other tags that may happen intraday.
What is the most important thing here that I am keeping track of. What is not so I can eliminate it?
I enter starters mainly on either breaks, or on pull ins and tests of levels. I dont need to keep track of LT because if they are based on D watchlist, thats all there is is starters and adds. Its obvious, I dont need that.
Now what kind of Entry was it though. Breakout or as it hit the level, or failure thats getting reversed. Did I get it as it first hit the level? the 2nd/3rd time? Did I enter as it was running away from the level?
My best setups:
Clearly above/under level
Vol/tape cues
Failed breakout opposite direction
Market helping
MAs helping
RVOL high
And I do keep track of all of these, but these are separate variable tags. Not part of the main focus of entry I am looking for.
The left I keep track of strats, and the right are tags, with an x. Im ditching LT and F as LT is redundant and F can be marked with a tag, not a strat. Catch is a tag I have not been marking because I am confused with it and I think this is the deciding point what it is for me. When a trade gets to the level, I am 'catching' it. Consolidation is another aspect to keep in mind as well. I think I need to have separate strats for if its been consolidating a while, or if its the 1st time at the level either all day, or after a while.
Here is a trade. What would I label these as? I have my starter and adds. But what else. It is not the 1st time here, there is clear consolidation so consolidation strat gets an x. Starter is as it pulled into test the level and saw something I liked to get in so catch should get an x as well.
So 1st entry is catch, consolidation and starter. 2nd is just an add with consolidation. 3rd is add, consolidation, and on breakout.
If I had entered any early than when I did, I would call it 1st. But because I gave it time to make a mini range, its now a conso. Where do I draw the line? Gotta be at least 3/4 minutes. So we have starter, catch, conso. Adds with conso.
2 trades
1st. It is 1st time being there. starter, 1st, catch. No adds.
2nd. Re entry on breakout. I would call it conso as well. wide conso, but conso nonetheless. Add also conso breakout. No catches.
So after doing this several more times in other trades it seems my entries boil down to 2 things.
Consolidation, or 1st.
Then,
Starter, add, catch, breakout
Then,
Re entry or not.
Cant explain to you how good it feels to finally have a plan around this and end the head spinning.
Now I have other setups I need to deal with as well. EE for early entry is gone, not specific enough. Reversal will stay. Different setups. Tape will stay but renamed to BIG. This is when I spot a huge bid/offer come in and I get in infront. Divergence is gone because...
Scalp. What is a scalp. Short term, intraday action, based on smallest of time frames, that I do not have a big picture Idea about. It is when I see action on the chart or tape that I think right here right now if this happens, we are going to continue in that direction. It can be on a breakout. It can be on tape/BIG.
A thing I have been playing with is momentum scalps. These are when the action on a stock is getting super tight and i believe its getting ready to make a move and never come back. I hop in with momentum as it starts running. I need to clear my head with this and boil it down again.
A scalp breakout is a thing, a scalp with big tape is a thing, but a momo scalp is something new. I think I just need a momo tag and leave it at that. Cause its a scalp, but what kind? Just like its a starter, but what kind? What conditions around it?
AND I just thought that say I dont catch the conso/1st trade right at the level, and hasnt broken out but still want that trade. I can list it as a conso and momo add instead of conso add. Because another thing to ask, what kind of add? Breakout? Tape? Momo?
I think that about covers it. Will revisit this after October and see how its been going if theres still things I need to clear up.
Issue #4 Not exiting positions/losers fast enough.
This is a psychology issue. I have done the work and research to know what my best wins look like, and what my losses look like after entry. If the trade at all goes negative, its not my best win. Ive had a bad habit lately of letting the losers go and pullback to see if itll come back to breakeven, or turn into a win. And 90% of the time it never does.
I just need to break the habit. Im imagining steve in an old SMB video where theyre doing the visualization techniques. Eyes closed, deep breathing, imagining hitting out of a trade that your supposed to be hitting out of.
Always better to get out and look to get back in. Im losing too much money from doing this. Always better to wish you were in rather than wish you were out. Just get back in if it confirms and looks good again.
The goal here is to cut losers short, follow your data, and have smaller losses when they present themselves. Ive got my sticky note next to me of what im supposed to be doing.
If trade is ever down -1R, I get out. If its ever down -.5R or more, I look to get out near breakeven unless it does improve. if it comes back to breakeven, and ticks lower just once, I get out. End of it. Get back in if it reclaims. Wins on average only go -.3 R against me. In-trade, anymore than that I know ive got a problem.
Issue #5 Individual stocks / SPY fake outs / Lack of trend
This sort of goes back to the issue of not being specific enough and over trading. The market was hot not too long ago. Straight up, no problems or questions about dumping lower. Until we dumped lower. The market has changed. We are no longer buying every single dip without question. This means that I need to be extra cautious in what I am trading. I should be trading less, yet I am trading more. A lot more. And clearly its been a problem.
I dont have a clue what the market wants to do. I expect it to go lower now given what weve seen. But when its stuck in a range and tight with MAs above and below us, there is not a clean and clear theme to be trading. Unless the individual stock is part of a theme in its industry, that makes it easier to expect something.
I have been forcing myself into a lot of expectations around the market. Whichever way the wind is blowing is what ive been trying to do. But the wind hasnt been blowing that hard. Yeah certain days may be clearly trending up, but not on the Daily/weekly. Not anymore. So that long term and short term bulls market is gone for the moment. Now its a mix. Now weve got longs wanting out, taking profit, shorts possibly coming in and happy with environment. We just broke range lower so downside seems to be best bet.
So if im charting my watchlist, and have a great long. It better be a damn good long intraday too with all kinds of stacking variables. Market doesnt have to help out, but it is one key ingredient in a good trade. This should filter out a lot of potential long candidates I see on the daily.
Also the market has been faking me out a ton lately. Partially due to range bound, or less vol, or lack of trend intraday. Theres a tough balance to find between cutting losers short based on my data, and recognizing that in my trades recently, a good amount of them have been the top/bottom that I get out on and then it makes the move.
My data that tells me my best trades work right away and never return was from the last few months we had where we were straight up. We arent doing that anymore, so I should expect something like this to be happening. New market environment means I have to adapt with it so I need to adjust my rules now.
I believe in following my data, but I also believe in recognizing current events and nuances. And its noticeable happening lately. For the best setups and performing trades I have, I want to give them that extra tick or two. Where I would usually stop out, ill give it an extra second or two to see the tape and decide if I want to remain in or not. For anything and everything else, its business as usual. Get out where I should, get back in when I should.
Issue #6. Getting very emotional during trading
Super pissed off lately. Biggest part is usually my confusion about why performance is so bad. The fix? Doing reviews like this. Im already feeling better about things going forward.
Issue #7 Risk plan does not cover enough. Catch? Failure? Breakouts?
Now that I have a clear picture of how im searching/labeling/tagging trades, the next step is how much to play with. I have a plan on how much money im putting down on any given trade. Majority of them are 10 star so I start around 50$ and build from there depending if its a favorite or now. Rarely do I run into a 9 but when I do must make sure im starting smaller.
Looking at my stats, looks like I need to reduce things even further. Looked at Aug and this months performance on 9star ratings. Im 60/218 for a 28% WR. Compared to 10star which I am 350/712 for a nice 49% WR. So last month I eliminated all 8star, now its time to eliminate anything that is not 10star.
I want to be risking the most on the best. So now I know 10star is the best. What is separating the best from the mediocre.
Tape is the biggest thing. If I have the tape on my side, with clear cues, and/or huge bid/offer supporting. Thats my all in sign. Have to be very fast and ready to click asap.
Looking at stats and which has the most green, MAs helping is a big one. Early morning, 1st 30 minutes.
Surprisingly theres no correlation with more daily volume and performance. I figured more the better but is not the case.
Last time I talked about this I had just started with a plan on risk and how I wanted to add to winners/trades. Heres a few things I learned.
1. I like to add twice
2. I like to keep it all the same size.
3. I dont mind chasing as it runs without me as long as I lower size a bit if RR has gone.
4. Breakouts are still part of the game
5. Not every trade is going to go exactly how I want.
6. I dont mind adding 3,4,5 times if opportunity presents itself.
My best trades come from catches. Not breakouts. Breakouts can turn into catches, but thats not my usual best. The best trades come from having the best RR because thats where I can get the biggest. Those are my best way to make the most money, but not the only way.
Starting $50 is the way I will start all of my trades. Regardless of anything else. A catch, from consolidation or 1st time. A breakout, a momo scalp, reversal. All of it starts at $50. The adds are where I need to be expansive.
If every trade I take is going to be a 10star, then the only thing that will be different is if its a favorite or not. This again I will have to get more clear on as time goes as now im recording daily setups differently, I can truly find out which ones are performing the best and I can risk up on. But for now I am ok with sticking just to favorites.
I add fast, and right away if the trade starts working. Its way too difficult for me to sit there and say 'ok I start at 50, now if I add I want to double risk if it starts moving in my favor and the markets helping, but not double down if theres no volume/tape cues. And if there is then I want to triple down, but only if the MAs are helping as well.' Thats too much. I dont like it I dont want that.
Tape cues are the biggest. If I spot it, its all in right away and all out if it doesnt go right now. Start 50, add same size risk, might put me at 75, then 100 if im using same size. My goal is to be trading bigger, but only on names that deserve it. Those that deserve it, I will just have to find out later which is what.
It feels like there is a lot of feeling around this. Maybe im just not at that stage yet to find out what the solution is to this. But now after keeping track a while I do know what I like to do and what makes sense to me. Risk more on the ones that look the best, and dont on the ones that arent the best.
Breakouts are a flat 50$ and looking to add on any successful pullback. Momo scalps and scalps in general I treat the same as the bigger picture trades on a catch or break. Add as it works. A trade that fails a breakout into a HTF level im looking to trade against gives me my best RR trades in most cases. Those are the ones I can get big with minimal risk.
Come next month or however long, ill have more data on what to do and ill have a better solution then. For now its business as usual, trade bigger on favorites and best looking setups. And stick to mid $100 risk max on anything else.
Issue #8 Missing/Re entering Trades
This is another psychology issue. I have my rules, I know what I need to do. I flat out dont do it half the time. I am getting better though. I think I was putting the cart in front of the horse in this case for a lot of things. This whole review is showing me I had a lot of other things to consider before I convinced myself that this was my biggest issue.
Being strict about what I am trading will make it easier for me to not miss trades/re enter trades as know I have a better idea of what I should be in in the first place.
Its an ongoing process that I will forever have to get better at. Sometimes its just as simple as clicking the button and I dont need to think about it so much.
WHAT ARE WE CHANGING
-Not settling for less on Daily chart patterns to make watchlist
-Adding section in stats for extra variables to make new D star rating
-Eliminate LT / F /EE / Divergence from strats
-Add Consolidation/1st/momo to strats
-Rename Tape to BIG
-Doing a better job at following process around getting out of losing trades
-Add market conditions column. (trend,chop,fakeouts)
-For best setups, and performing trades, give them a little extra room to see if fake out.
Lots going on here in this one. Plenty of stat work to do, ill spend all tomorrow working on re arranging that. Lots of new data to track in the next month and a half. Lots of more review to do when we get there. Problems listed, solutions found. Get to work.
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