Step by step psych cap trading*

Once you decide to manage your trading via your psychological capital, you need to know what to do (that is different). 

Here we go – the cliff’s notes version.

1. Know what you are looking for.

2. Know where the points of judgment and decision are. (They are definitely there because unless you are an algorithm, you are evaluating the quality of signals at a minimum. Most likely you are evaluating many other things). Now… one and two can and should be done beforehand – outside of market time and preferably even away from the screen at first.

3. Make a list of the factors you will consider when making judgments – in my case it is $TICK, trend of the breadth and the Russell futures. Realize that you are going to feel unsure and there will be uncertainty when you have to decide…

4. Decide to get used to that uncertainty.

5. Get as familiar with that uncertainty as possible – try to feel it outside market time. Write about it. Get the visceral, kinesthetic experience front and center. Basically, you want to be able to tolerate this as it is happening. Think of the dentist chair. You live through it and don’t pretend it isn’t happening!

6. Come up with your own ways – in the context of verbalizing all feelings – to research anxiety. 6b)You can treat it like an object – what color, shape etc is it?

7. When the feelings come over you while trading, judge their intensity. If over a certain level that you feel comfortable with (think golf shot, ski slope, sailing conditions and your sense of confidence) then don’t trade, leave the screen. (Just like you would chip into the middle, find another way down or give the wheel to someone else).

This last one will make you money – it will save you money in the trades you didn’t take and it will the in turn increase your confidence in the trades you know you can handle. Repeating step 7 over and over and over is managing to Psych Cap. It is the single most profitable behavior you can engage in.

…and yes you will miss trades that would have or could have worked. You will also execute much better in the more elite situations you have chosen. With those two realities in place, what will be the P&L impact come end of the month?

 

*by Traderpsyches (www.traderpsyches.com)

Patience exam – failed

IR presented an excellent trading opportunity today. I got in and out a few time (without any real reason) and missed a high yield trade. As of now, the stock is trying to stay above the 15mins ORH and I may try it again on this time frame.

Week 1

Well, after trading correctly last Friday, I approached this week all fired up. However, bad habbits are hard to break nad I kept messing around and screwing up each and every day of this week.

I managed to pull out successful trades almost every day (except for Tues, where I took TYC like almost every other Trader X follower – it didn’t work), but unfortunately I still wasn’t 100% focused and commited to my plan and therefore, I successfuly ruined my good trades with bad, unplanned, impulsive, C grade trades.

At this point, I don’t know what else to do.  It seems that I suffer from a much deeper problem that causes me to want to be in a trade all the time, making me feel like I’m missing something.

I’m reading a lot of trading psycholgy books and visiting frequentlyDr. Steenbarger’s blog in a search for a cure. I only hope I will be somhow able to find some inner strength and make it through.

Hope you all have a good weekend and a very successful trading week.

 

Not a strong gapper, but still, I spotted the strength in the sector (Rails – BNI, CNI, KSU) and with the overall market’s conditions I took the setup that looked great. Entered off the 5th candle, took half position off at the  $32.50 level (it is a bit more than 1R and it is not according to my plan, but hey! I went through a bad week and I just wanted to lock up the profits and get out of this day in 1 piece). It didn’t take long and the stock reached the Fib’s ext which was also 2R and I got out of the position. Managing it right and according to the plan would have yielded a much better returns (take half off at 2R and trail stop. Take half of what’s left at +$1 and keep trailing. Get out at the 5th candle before the close as it broke below the $33).

 

Unlike CSX, BBL was a strong gapper. It kept on churning sideways and formed a very nice entry candle (the 9th) together with its “twin” stock BHP. I like BBL better and took the trade. The problem was that the entry was pretty close to the round number (4$0) and the stock indeed had some difficulties to break over it at first. This together with a pullback in the mkt, the time of the day (12:00 reversal) and my “boosted up” confidence caused me to dump the position as it went below my entry (since my entry candle created a HL, I exited when it went below it, a bit below my entry but with some slippage it cost me 0.5R).

n hindsight, I didn’t have any reason to exit, the market came back and BBL went fast and broke the $40. I was still watching and decided to get on the boat this time, but with only half position. I rode it all the way from 40 to 40.50 and fully exited, overall just making up for the prior loss.

Day 1 – long way to go

The only reason I don’t get a nice F for today, but a C-, is because I managed to act according to my plan in a fewof trades. The rest was a pure crap.

I started the day with a setup not in my plan, however pretty legit – VLO off the 2nd 10min candle, which was a nice IB. The initial action and direction were good, but soon after, the price reversed sharply and I got stopped out.

Then I took COP  off the 5th 15min candle, suffered for quite a bit as price wiggle around the ORL until it fell down. I got 1R (didn’t take any profits), moved stop to entry and…. got stopped out.

In parallel took short YUM also off the 5th. Suffered for even longer till price finally went my way. As price moved near 1R I decided not to play any more games , took half out and moved stop to entry – shortly after got stopped out.

This is when I started to lose focus, initiated a few impulsive trades within the lunchtime dead zone, lost some money, made a bit back and eventually lost nearly 2R after commissions.

Luckily, I have the whole month in front of me and hopefully I’ve learned my lesson and tomorrow will be much better.

 

p.s – as a lesson from the COP trade today and a few others I’ve mentioned in the past few days. It is worth it, to keep an eye on good setups that were stopped out and look for the interaction with the 20sma that usually comes between 13:00-14:00. In COP’s case, there was a beautiful IB+NR7 candle that closed below the ORL around 13:30. trading off this candle could have yielded and easy -34R trade.

The 20 days challenge

First of all and before everything, I need to load it out, clean it up and make this confession.

I’ve been trying to daytrade for about two years now. Just like probably most of you out there, at the beginning it went well (beginners luck for about a month), then it became a disaster and I’ve decided to do something about it. I tried to learn a method which will give me an edge and I actually found it. For the first 5 months of 2008 I’ve done pretty good. I barely had a losing week and I was making money (although not much) constantly. Then June came and the streak has stopped. I started to lose money and it became an avalanche. Since then I can’t seem to get my mojo again.

In order to keep on trading, I realize that I need to do a few things. First of all, i need to find a reliable system that could give me constant results. I need to re-grow my self confidence as a trader so that I could take actions and not  second guess myself. I slowly need to re-build my capital (that was nearly blown out in the past 6-7 months).

What I chose to do is to adjust my style, which was based more on the shorter time frames, to the longer time frames charts (mainly 15mins – a-la Trader X). I need to stop my impulsive trading, take only crystal clear setups (which will be limited to a very few that are actually working with high accuracy) and let the trades unfold themselves.

To tell the truth, I’ve made this kind of decision already a few times in the past, BUT, I’ve never put it on writing (1) , never made it public (2) and of course, most important of all – never took it seriously enough and executed it.

So, what now? I’ve decided to make February 2009 my challenge month.

There should be 20 trading days in Feb (unless I’m missing here a holiday or two).In those upcoming 20 days, I’ve decided that I will reduce my R unit to about $50 in order to eliminate the fear factor and gain confidence at the system as much as possible (however, this will create a different problem that I will have to face and deal with – not being able to make “good” money).

My Trading Plan highlights are:

• Core time frame 15 mins.
• Trade gaps with > avg volume
• 5 core setups are – F-U, Brick Wall, Hangin’ out (thx OONR7), Bread & Butter (Trader X) and the PBS (Pristine Buy Signal – I will elaborate and give examples later).
• Money/Risk management rules: Max daily loss 3R. After making 1R –  trailing Max Loss to (-1R). After making 2R trailing to +1R and so on…
• After 1R profit on a trade I trail stop to b/e.
• Take profits (half position) at either 2R, $1 (or $0.50 for stocks under $25) or Fib’s ext.
• Trail stop on rest according to chart (mainly to new swing high/low) but also be aware of climactic volume and candle formation (shooting star, spinning top, hammer, etc)

Since this challenge is not about the money, I set myself a total monthly profit target of 15-20R. On a weekly basis, I’d like to have at least 3 winning days with only 1 loss ( I’d really like to see comments from you guys out there regarding whether those target make any sense or not).

So, that’s it for now. I must say that it gives me a much better felling to put everything like this in writing. I feel pretty confidence about my ability to execute my plan and to make February my “Turn the Corner” month.

I wish you all a very good and peaceful weekend and a very successful February!

Friday’s gold

exactly like last Friday, gold is rocking and I m anaged to pull out a very nice trade in GLD 🙂

Still messing around

I am just amazed of myself, I just cant keep control of my actions. I will post a few good trades I’ve had today, but I made many more impulsive bad trades that put me  deep in the red.

Short BA off the 10th bar (15min) + add& reduce under 40.89 with 41 stop: working nice and I  am still waiting for Fib’s ext.

Short PLD off the 8th bar. Took profits at 1R (Fib’s ext as well) and at 10.50.

Short PRU off the 10th, but couldn’t handle the pb to 30.50 and bailed around b/e – currently it is at 29.65 😦

I also missed FO (watched earlier and even tried over the ORL but got stopped out on a small position, then stopped watching it and missed the break), BDK ( had a nice early trade, then tried twice off the 5min chart and lost on both and eventually missed a great antry on the 10min chart – the 20th bar – whic led to a $1/6R trade) and WHR that hovered around the ORL but eventually broke too late on the day.

Breaking

my own rulls…

It seems that these past few days, I can use OONR7’s post title and just change a bit the post it self. Today he had a “Fist full of hair” and I ended the day with a Fist full of AIR…

At 1 point in the morning, my P&L was even showing net profits of about 3.5R’s, but somehow, after trying to let the trades run, I was stopped out with only 2.5R (which I’ll take every day) and then in the afternoon I lost everything that I had. It started when I took a legit setup in MT and lost (while seeing other stocks I was watching running) then trading with frustration, trying to “make it back” I managed to lose all the rest that was left too.

My good trades were NUE, MT (first time) and WFC (well, a good trade management wise – but ended up b/e)

 

NUE – I entered after the 2nd bar (NRB near the ORH). I aimed for 45, but  as it stalled at the 44 I took profits and then the chop started and I just bailed out. The45 arrived w/o me later.

MT – The was actually a plethora of good setups at the metals sector. RIO CMC RS and many more… you had only to chose. Unfortunately I didn’t take all of them and I also wasn’t lucky enough to pick the ones that worked real nice.  I took on MT an aggressive entry when it broke the ORH off the 5th candle. When I reached about 2R I took half of the position off and moved my stop to the top of the 6th candle. I was stopped out soon after. Then when the ORH was retested and a nice candle appeared in the afternoon, I re-entered and took a full loss.

 

Why couldn’t I just pick CMC (with a great 7 cents stop candle – the 4th) or RS? Both ran beyond the extension…

 

As I mentioned, I also traded WFC, but was stopped out after it reached almost 1R and couldn’t cross the 20.50 level.

3 charts not traded, but I wish I would…

As usual, at http://www.hindsight-trading.com things look so easy…

Following are 3 charts that although I saw and thought of getting in during the day – I never did.

The first is a climactic buy, ATMWallstreet‘s tyle. This is a setup I want to learn as it usually yields high returns with relatively small risk (can take less than a full risk and get easily multiple R’s)

The 2nd is very similar to MCK. If I’m not mistaking , Trader X used to call it the “Bread & Butter setup”, but he mentioned he doesn’t trade it so often anymore because of reliabilty problem.However, there are 2 good examples to how it should work today (MCK and KCI)

The last one is a “regular”  Trader X/TraderAM 15min trade that could have been played in two different ways – Short USO or long SCO (ultra short crude)

I watched, hesitated and missed a great move.

 

Have a good night everyone and I hope for a good day tomorrow.

66% day

just as ooNR7, I also had a 2/3 day.

Each on a different time frame…

First VLO on the 5min that worked, then VZ on the 10 that didn’t and the last is MCK on the 15.

I don’t know if you guys out there are trading a lot the 10min charts, but to me it seems that those setups are not as reliable as the 5 or the 15?

 

VLO – I took VLO on the 5min chart. I had 2 entries – the first (half lot) was on the actual trigger candle, as soon as it broke the  ORL (my stop was over its own high). My 2nd entry was when it broke the low of this candle. I took profits at 24 (round number and 1r) and got out  at PP S2 level which was just below the fib’s ext and also at 2R.

 

VZ – man, it really sux to get stopped out on the same candle you enter (or on the following one). I don’t know why, but it seems to me that I’m having too many of those recently. Anyway, VZ gapped down on earnings, pulled back,  then came back down and broke the ORL (Brick wall – ooNR7’s registered mark 😉 ). I don’t think that you could have asked for a better candle then the one it printed. But apparently, it wasn’t good enough as immediately after triggering, it pulled back sharply and stopped me out (I tried to hold on, and changed my stop a bit to the high of the entry candle, but this was taken out too shortly after).

 

MCK – I was watching MCK as it gapped on good earnings and came from a very good basing pattern yesterday. After the gap it pulled back and based in the middle range. I noticed on the 1/5/15mins the basing pattern with 3NRB’s and decided to hop in. The trade went well, I took profits at the ORH (which was about 2R), at $45 and tried to let a few shares run, but I got stopped out on the first pull back . I stopped watching it and missed the other more conservative ORH entry. In hindsight, my stop wasn’t located properly, I should have waited for a new swing low and put it there. This way I could have stayed for the next leg up.

 

I hope  you all had a good day today!