1st Quarter Review
JANURARY
Best Month of my life. Inside and outside trading. Got married. Caught a ton of major short pops, huge quick P/L moves. Nothing to complain about. Still a bit upset as I traded a lot of those with a scalpers mindset still, not quite willing to hold them as long as I should have.
I have since recognized themes in the market and how I need to be trading around them. If theres a theme, and the stock acts right, and continues to act right, no reason not to hold as long as I can overnight.
Was about as 'easy' as trading can get. Until...
FEBRUARY
Bad month. Part of it I was not in superbowl sunday mode everyday. I returned to trading after the honeymoon and promptly lost my ass pretty quick. Breaking lots of rules trying to get back in the swing of things and got crushed holding a trade big size overnight through earnings. -3k new biggest loss of career.
But it was fine. More lessons to be learned.
1st and foremost, I hadnt traded properly in a few weeks to a month. I was still in wedding/honeymoon phase and didnt quite detach from it. Nor had I paid enough attention to the market day in and out like I do now. I didnt recognize/adapt fast enough to changing conditions.
Breakouts were not working anymore. They were making slight moves, good for scalps, then lost it, stuffed lower and then some. This was everywhere in everything. I didnt change my approach fast enough and gave back a lot holding on too long expecting it to keep running and these trades just would not run.
Another big nono was me holding overnight on names that I had no unrealized profit on. I would get in a choppy name with low vol near the close, see it not move in my favor, and then hold it overnight, with same size, only to see the spread + action at open crush me and lose way more than I thought I might. Lots and lots of -3/-4R losses.
MARCH +$875
First couple weeks I was doing excellent. Compliance Mid high 80s, consistent green days. Following management and entry and risk rules well. Just trading well. It started falling apart when I focused on keeping my green streak alive. I was down 30$ on march 11th and had made money 11 days in a row. I wanted to keep it going so I looked for a 40$ trade somewhere out there. Guess what happened? I lost 400$ more dollars. Just stupid.
And it got worse from there. I was up 4 grand those first 2 weeks and slowly gave it all back. Next week was breakeven from M to Thursday and friday looked like a big sell day.
Too emotional, couldnt detach and look at market objectively. QQQ was at breakdown point, so were my trades, we moved lower, we stalled. Problem. I held on, ignored management rules. I double killed myself that day. For starters I sized up. And 2nd I ignored management rules. I could have exited majority of those trades small green or breakeven, instead I held for max loss and risk and took it all. I lost 2k that day and half what I made on the month. Should have been a small red day maybe even small green day.
Next big sell day that came, I did not make that mistake again. And it was a repeat of same scenario. At good breakdown spot. Took my trades. Covered them when they reversed on me. If its gonna be a good sell day, its gonna go, now and hard.
Next week broke even. Lost 41$ on 26 trades. Compliance spotty, but did better.
Next Monday, 29th, I had dropped computer off at geek squad for them to put new processor and motherboard in. No way do I trust myself to do that much, just caved, forked over the money and let them do it. I had to trade from my laptop. It was a mess. I did the right thing by focusing on very little. But management went out the window. Lost another 800$ to close the month out and said fuck me its time for a break.
It took 12 days this month for me to make 5K and only 2 trading days to give more than half of it back. I still have those big red day problems deep in me.
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Overall I am a much better trader after these couple months. I have been able to adapt and reduce expectations while at the same time, keep expectations high when necessary if I see that A+ setup again.
Making new rules. Not holding trades that havent shown its a winner overnight. Not taking trades with wide option spreads. Avoiding stocks that are not in sector themes. Taking small wins ASAP when the stock doesnt do what it should do. Adding slowly, not quickly, to non breakout trades. Narrowing my focus little by little day by day.
Its tough out here. It is not the time to hit homerun trades everyday. Its more about keeping losses smaller than it is pushing to make winners bigger. There will come a time whether it be on the short side or long side. But until this market can prove it wants to make moves and breakouts, and stick them, ill have to keep trading the way I am. Single, single, single, double, single.
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1ST QUARTER STATS
+$14.8K
+71R
185/513 36% WR
162 Full -1R loss
118 more than -1R loss.
+$278 avg win
-$110 avg loss
-+$28 expectancy
-$120 Avg risk
-+$1150 avg green day
--$678 avg red day
-27 Green days / 51 Trading days total
-6772 contracts traded / Avg 13 a trade
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These are good numbers for several reasons. All of my Jan numbers were larger partly cause market was popping, and steadily declined as market was not popping. Which is great, it means I am trading less size when things are not as consistent. Managing risk overall well. For the most part, not taking oversized losses when not necessary.
80/20 rule still so real. Quite literally, only 3 trading days this quarter. produced all of this profit. Out of 51 trading days. The rest of the time it is me making mistakes, stepping on my own feet giving it back. Going even deeper only 2 TRADES gave me 75% of that profit. Crazy stuff.
Reminds me of chat with traders ep with Zach Hurwitz. Was talking about another trader saying, 'if you wanna be there for the good days you gotta be there for aaaaalllllllll of the days.'
Imagine that a life of a trader where majority of your profits made only come from a day or two of work. The rest almost unnecessary to even trade at all. But you gotta be there. You never know.
So this leads well into what I want to talk about next. Time. Time spent trading. Let me run you through an average day for me
-Wake up 445, go to gym.
-Get home, clean up, eat something, sit at desk around 630
-Finish up preparing for day/charting if I havent completed it night before. Ready to trade by 830
-Trade. All. Day.
-After close, finish putting stats
-330ish pm start charting for tomorrow
-Finish sometimes around 6pm and then prepare stocks selected for deeper analysis and risk prep.
-Eat sleep repeat
So from about 5 til 6/7 I am loaded up. There is no free time on weekdays.
I have got to find a way to reduce the amount of time I am spending on trading. Why?
More work does not always mean more profits. In fact if ive learned anything in trading, its reducing the number of things you do leads to more profits. I am also finding myself skipping steps in my routine either cause im tired a f. Or I just run out of time and have to trade without getting it all wrapped up. These are things I think I need to reduce on.
1. What does my stock list look like.
-I have 850 stocks I look at everyday to see if there are setups. It takes me more than an hour to get through them, just to find ones I like. Do I need to have a list that big? Probably not but I do have them all sorted by industry so I am clearly able to tell if a sector/industry is relatively strong or has a consistent theme.
2. Stats
-1st 5 minutes of the day this month is where I made the majority of my money. Taking trades right at the bell or just a few minutes after. The next, is the next 10 minutes until 845am. Then things start to fall off a bit. Still reason to trade as WR does not decrease that much, but profit wise, its not there. This applied to Jan/Feb as well.
-Also stats on option variables as well. Delta, Gamma etc.
3. Average stock tags on winners.
-I keep track of 30 different tags BEFORE the day starts on names. This is where I am skipping steps as I dont feel like doing it everyday. I do this because 1. It shows me where I should focus and risk more, also focus and risk less. If a stock is 30/30, thats the home run chance I need to push on. If its 10/30, maybe an avoid all together, dont even bother looking at it.
Lots of possible elimination to do. Stats will tell me what stocks I should focus on only, and tell me which variables/tags are most significant.
Heres what I keep track of:
Multiple setups in one. News. Abnormal Volume. Value Area edge. Moving Average curl/tightness (9/20 mainly). Multi day range. Range high/lo. Huge significant level. Weekly Chart Clear help. Failed breakout opposite direction. Anchored VWAP support. Fibonacci Significance. Short Float. No S/R after break. Market not hurting. Market clearly helping. Big Option Flow. Relative Strength. Consistent breakout price action on previous breaks. MACD Help. MACD Cross. RSI Break, RSI Divergence. Stochastic not over extended. OBV divergence. Theme (Sector/industry). Fundamentals. EPS. Just feeling it.
And after entry:
RVOL above 1.5. Clear trend at open in favor. Option R
VOL (marked by % done at certain times in day). Sustained RVOL throughout day (above 1.2). Abnormal option (marked by huge vol done compared to open interest in one/some strikes).
I am thinking about All Day Faders. Once posted a tweet saying this stock had a 92% on his ADF checklist. 92% in fractional form is 23/25. At least. So thats telling me he, for his trading style, is looking at 25 different variables also before the trade. Not too far off from my 30, so there is definitely reason to keep things on, but reduce some as well if they dont really make sense.
And stats for this month on these.
So for starters, my edge on winning trades seems to be around 18 tags+. I keep track of Avg star rating on wins and that matches.
That alone right there tells me if a trade im looking at doesnt have 18 tags, its a lesser setup. Possibly avoid altogether. This is reason I need to reduce watchlist so I actually have time and energy to go through stocks before the open, and see what that star rating is going to be. If under 18, can reduce that daily watchlist further, spend more effort on less names. But which of those tags is most significant? Are they all worth looking for everyday?
Im gonna go each one individually. Stats on it, and then reasons to keep it or get rid of it.
Before that, what are averages to compare to? Looks like WR is around low 40s. Avg RR taken around .11. Expectancy at $19. RR sum at 11. Net gain at $2.1k.
Another thing to consider is stats only mean so much based on little data. Especially when following plan comes into play. If majority isnt following trading plan, leads to insignificant results that dont mean too much.
-Multiple Setups.
-Obviously important. Not just a breakout. But a trendline breakout with a failed breakout lower previously. High probability stuff. A must keep. Stats show slight above avg.
-News.
-Obviously important. However I do not consider myself a news trader. If its there, great. It is also something I should be aware of if there is the day I want to trade that name. Ill have to keep. Stats actually below avg.
-Volume
-Keep.
-Value Area edge
-To show tipping point of traders. Stats are not good. But I know this is significant keep. Below avg stats.
-MA curl
-Adds more tightness to the trade if just coming off a big coil. Keep. Below avg stats.
-Multi Day consolidation.
-Shows stock is building a base and may be coming out of it. Keep. Above avg stats
-Range hi/lo
-If trade is take at that range hi/lo break. Matters. Keep. Above avg stats
-Huge breakout level.
-This is tricky. Sometimes I check it even if we have already broken this level before months ago, but have come back around it and trade location is at/around it. I may think about splitting this up. Stats above avg.
-Weekly Chart
-Clearly will only help. Keep.
-Failed breakout
-Usually is significant factor in saying "market didnt want to go lower and rejected, must only want to go higher.' To me it matters I want to keep it. Stats are well below average.
-Anchored Vwap
-I cant tell you how many times I have looked at a setup, set the anchvwap and said 'wow I cannot believe that is right freaking there.' Absolute keep. Stats are below average.
-Fibonacci significance.
-I am not a fib trader. I dont trade off of fibs. I only plot them to see where the retraces are. Stats are 2nd worst. I think this is a get rid of it. If anything I use fibs as levels to look out for at take profits, not to take trades off of. I think it would benefit me more to not bother with it, than to bother with it.
-Short squeeze.
-For short plays, if above 9/10% I mark it. There are reasons the short float is high on certain names. It provides confluence both directions. Keep. Stats below avg.
-Clear skies
-I mark when after break/entry, there is nothing left in way as R. Other than pivot points or occasional fib level. Stats are pretty below avg. I thought this originally was a smart one to look at, but the more I think about it, you can always find an R level somewhere. Through TLs, Fibs, Measured Moves. BBands, Lin regression. If you look hard enough you can find it. Only thing that changes that is an ATH trade, but even then, there are still things. Get rid of it.
-Market not hurting.
-Kind of redundant. I shouldnt be taking any long trades when the market is dumping. But I also have seen lately defensive names have been able to make decent breaks higher as market is range bound/trending lower. But would that mean the market is actually helping this trade? Stats slightly above avg. Ties in with....
-Market clearly helping.
-Obviously always want the market to be helping your trade and not hurting. So is it worth keeping both of these? I think yes because its important to make a distinction between when market is helping, and when its not hurting. If im long and market is range bound, I know its not going to help that much, but it also isnt hurting. If im long and market is dumping, 1. chances are likely my stock is going to be dumping to, and 2. its obviously hurting my trade. It means I should more than likely not be in that trade but there are times when you get the odd man out showing relative strength and it only makes sense to be long that name so long as its above important levels. Im going to keep both of these.
-Big option Flow
-This one will tie in with other volume aspects later on. Its a keep. To know im looking at longing UPS, knowing some dude just paid 500k premium on calls, is a good confidence booster. Stats not as good as I would like to see them, but positive.
-Relative strength
-Consistent price action/breakouts
-I do not have enough data on these. I added halfway through march. Going to have to keep. I want to be long the relatively strong and outperforming stocks, and short the opposite. I want to be long the breakout trades on names that have made great breakouts in the past. Only makes sense.
-MACD Help
-I label this if lines are positive and trending higher
-MACD day of cross/day after
-People look at and use MACD. It only makes sense to know that if they are watching it, and see the glorious cross, they are going to want to buy it. I want to know that. I want to keep this. BUT I will get rid of the help aspect. I believe cross is more important and helping doesnt really mean too much. Im more concerned about the cross. Stats on both are good but if its crossing, it is helping, if its not crossing and negative, im probably not even going to take that trade. If its positive and trending higher, well let the trend continue.
-RSI break/Divergence
-You can spot TL and range breaks on RSI too. Stats are pretty much average. Which is good. Traders look at it, I wanna know too. I wanna know when it hurts my long as well. Keep.
-Stochastic D.
-Stats slightly below average. Ive fought with myself about this one since i added it. I think id better just forget about it. Over extended indicator but I really cant see myself saying 'im going to avoid this trade because the Stochastics are telling me its over extended.'
OBV
-A fun one. Volume is everything right, why not look at a volume indicator. There are some very clear bullish divergence patterns out there on some big names. I would argue its important to know bulls are buying dips and with larger vol than the sellers selling pops. Stats are the worst. Im going to keep it though.
Theme
-Definitely keep
Fundamentals and EPS
-I dont trade fundamentals. I saw another trader on twitter using them and EPS growth as another trade variable to look at, thought Id do the same. Cant say ive really seen anything significant but stats are good for EPS, bad for fundamentals.
-Other thing to keep in mind, majority of names im looking at are big companies with big moves that have for the most part sustained. These arent bad fundamental companies in the first place so more often than not ill be checking that box anyways. Same as Stochastics I cant ever see myself saying 'im not going to take this trade because there EPS growth is bad or declining.' Get rid of both.
-Just feeling it
-This is me attaching emotion to my trades. I remember hearing somewhere 'you can use yourself as an indicator too.' And this is what that meant to me. If im really feeling this trade, it will show up by how many tags I can apply to it. Not from me 'just feeling it.' Gone.
-Intraday stats RVOL/Option Vol.
-Clearly the best tags I have going for me by a long shot. Really not surprising. If stocks have higher rvol and more option vol, it just confirms other traders are also watching the same thing, thinking the same thing, expecting the same things, more often than not leading to the same expectations. This is good to keep in mind going forward if a stock has these tags on it, reasons to size more. If not, reasons not to size more.
Getting rid of Fibonacci significance. Clear skies. Macd help. Stochastic. Fundamentals, EPS. Feeling it.
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So this is good. Keeping things that make sense and work. Ditching those that dont. Time spent day in day out shortened a decent chunk now. This is how I can save time by focusing on tags that are important before the open.
What else? What about my watchlist.
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I rate stocks I trade based on volume I give on a 1-5 scale.
AS IT ALWAYS HAS BEEN. I perform worse on stocks I rate a 1 and 2. And perform the best stocks that have 3-5. So why do I still have 31 trades this month I have on stocks I rated 1/2.
Yeah, ok, maybe, MAYBE that one or few times that one sneaks through that does turn out to be a good win. But this isnt my goal anymore. My goal is to reduce. Preserve mental capital. Only spend time on things that work the best for me that require the least stress.
This will eliminate a lot of stocks in my watchlist and that is good. Anything I would give a 1 or 2, is off the list.
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So now Ive reduced what I do before the market even opens. What do I do about reducing trade intraday now. Stats review.
I have to stop trading options priced bigger than 6$. I have to stop taking large risk after 1st couple hours of the day. No excuses.
I keep track of this in my own stats as well.
Again with compliance issues, my stats on options priced 0-2$ this month are bad, but compliance real bad. Numbers can change I know it.
Pretty clear. Avg win has 18 tags. Now looking at this as (12/13)/23 instead of 18/30. All volume aspects are higher on W than L. There really isnt anything here that would make me say no to a trade. Not yet. Maybe with more time/experience/data I can find something more significant.
BIGGEST PROBLEMS
-Risk
-Specifically risk on trades that dont deserve larger size.
-Absolutely my biggest problem this quarter. A little more than 1/5th of all my trades, were losses that I took more than my intended risk on. Just in March alone my more than -1R trades added up to -22.7R. Based on Avg risk of $100 thats $2.3K I gave away due to poor risk management.
-Oversized on trades that arent that great.
-Adding too quickly
-Not respecting the plan.
-Not cutting trades at -1R
-Giving it a chance, maybe itll come back I can bail close to breakeven.
SOLUTIONS
-Theres a lot here with regards to risk. For one, reducing # im looking at, and being more selective, means that if im not even looking to trade lesser setups, then I cant risk too much on them, because im not even looking to trade them anymore.
-I have a plan of risk attack I set before every trade. I start off usually just fine. Its my adding is where I start getting off course.
-4 Separate ways I want to put risk on
-N = None or neutral. I like the name, like the setup, not my favorite ever though.
-S = Slow. These are not breakout trades, therefore I should expect to hold them longer with wider stops.
-1 = Favorite and want to risk more
-2 = Favorite and everything screaming to push pedal to the floor
-My issue is on N and S. I like to add as I see things working in my favor. Be it next minute or next 10 minutes. With new restrictions ive found above with regards to what I should trade and avoid, im getting rid of N all together. 12/13 out of 23 variables ONLY. And if I do find a setup that has that many tags, its more than likely going to be one im interested in increasing risk on.
-I have to find a way to limit myself. I need a clear picture from the beginning.
-S ranked setups are slow
-Enter with 75$-100$ risk.
-Add once on anything in my favor
-No more adds for at LEAST half an hour.
-Trade around the core, take profits as necessary.
-Leave 1 to ride to stop. Add and restart process again if setup is there again.
-1 star are favorites
-Start 75$-100$ risk
-Add once anything new in favor
-No more adds until pb has occurred and holds levels it should.
-Trade around core. if profitable trade.
-2 star are mega favorites
-Start 100$ risk
-Add on anything new in favor
-And keep adding as it works.
Always following management rules at all times. Quick to cut fast. +1R = stop to breakeven. +2R = stop to positive. +3R stop to +1R
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-For trades reaching past -1R.
-What is going on. Why are there so many. How does it happen in the first place.
-I set my risk based on either spread or where I think it will be if I have to stop out. Some options are as simple as looking at spread. Others do actually have some movement and I have to take my best guess. For the most part it is fine.
So why do I still have so many?
I will admit my record keeping has not been the greatest. I am not taking screenshots of trades anymore. Mainly cause, time.
Discipline. Mainly. My trade is at -1R. I dont hit out. Why do I not do it. Ive done so many reviews that my best wins are never negative so why do I still hold on to these mothers at -1R hoping and thinking it can still come back.
It doesnt matter if it comes back. Thats not trading with probabilities in mind. It is focusing on this one single trade, not thinking about my next 20 trades. Its thinking im smarter than the market and trading like it. Never works in the long run. Clearly after I gave up an extra 23R and 2k dollars trying to.
Sometimes you just get screwed and thats the way it is. But I know me and my trading and 9/10 that is not the case. Its me just refusing to follow through with it.
Ive given myself solution after solution on this and it just doesnt matter. I dont do it. I tell myself I just need to do it, I wont do it.
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Trades only reach -1R, because I label my risk at that level. Its -1R because I define it to be that way.
There are scenarios where an option trades by the penny, there are other times it trades in nickels. Sometimes they have .10 spread. Others a few pennies, others .40cents.
My issue seems to be underestimating what my risk really is going to be in all cases.
I have accounted for spread, slippage, algos, action of the stock and delta in determining my risk point. But I havent been including the most important aspect of all.
That is myself.
If I do not stop out of trades where I expect my risk to be, then I have to be expecting more risk. I like to give my trades a chance at testing my stop area and seeing if it will fake out, because sometimes they do, its just the way it be. Other times they dont, and I get crushed.
This is something that I have to account for from now on. I usually give myself the spread + 1 tick extra to account for whatever may happen, but im going to have to include that extra tick because of my weaknesses and habits.
There was a good ep on Chat with Traders recently, a new one with Brannigan Barret. He said 'we cannot eliminate our weaknesses, but we can do things to mitigate them.'
This has to be my thing. Just give it an extra tick. Best case scenario I start seeing a LOT more -.7-.8/-.9R losses, and no more 'unexpected' -1.5R losses.
I had 90 wins. 4 of them went past -1R and came back. Excluding those 4. 16 of them reach a ~-1R and came back to be wins.
This part is difficult to get a clear answer because like I said, some options are priced so that my risk is only the spread. So I label my trades and Max drawdown, at that spread, at my risk point, IF the trade did go against me at all. If it never did, I leave it as it never did.
BUT 16 of 90 is still only 18% of my winners. The average is -.4R. My stats on this are actually pretty good. Telling me that yes, I should in fact hold on to these ones because I would in fact be giving up a good chunk of profit.
So not only does it make sense for me to widen my risk, it also give me another add chance, if where my stop is, holds.
The bottom line here is I have to accept that I myself am further risk to my trades, and I need to account for it.
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I am thinking about something.
I know my best trades work immediately, but I also know that my style is a bit different now. I try to trade to hold. I follow themes and trends and not everything happens on the 1min chart. I am thinking about trading around breakeven, which for the most part I still do and still plan to, but sometimes structure sets up in a way that just because it doesn't work right here this second, there is still clear reasons to hold the trade. So whats the deal?
Is it right to enter trades, see them fail 1st move, then hold it to my stop?
I think that it is.
My trades are based off of daily and hourly levels.
I also know that my best wins work right away.
But now I also know that some of my wins still hit near my stop, turn, and can become big wins. A significant portions worth.
Im not a scalper anymore. I scalp/day trade when I have to. I have rules that tell me exactly when I need to do that.
Market conditions right now of course are not in a swing traders favor, but that doesnt mean I have to abandon it all completely. I still have my rules in place to protect me in any market condition. Stop placement is not the important thing in this matter.
Plus changing my risk/widening my stop allows me to add deeper in and improve average. Its not adding to a loser if its part of the plan. On my Slow trades this is 100% an advantage. On other breakout names, maybe not so much, but it is clear I need to give my trades that wider risk to start accounting for the real risk I am taking in my trades.
WHATS NEW
-S ranked setups.
-Start trade normally 75$. Add once. Thats it. Take profits following management rules. Leave 1 to ride to breakeven. Add if new setup appears.
-1 star
-Start 100. Add once. Add only on successful pb.
-2 star
-Start 100. Add as I see things work.
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Accepting myself as a risk and accounting for it.
Normally give trades and extra tick to account for slippage, spread, volatility, delta, time. Now giving it one more to account for myself.
This will mean smaller size.
But more importantly it means consistent results, less frustration, and smaller losses.
FINAL THOUGHTS / GOALS
A lot of my trading early in my career was very black and white. And last year it turned into art and I started free flowing. Trading how I felt trading. I saw success with both. And now see problems with both. I have to tie them together and keep building my rules/systems to trade better and protect my account from bad habits.
Im only setting one goal for myself. To have 90% compliance.
Here are my main 6 mistakes. If I make any of them during the trade. It is not a compliant trade
-Did not anticipate correct risk $ (risk)
-Too big on lesser setup (risk)
-Didnt Keep win (management)
-Didnt stop out correctly (management)
-Settled for less (selection)
-Let L stay too long (management)
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