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!