Welcome to the fifth iteration of my FIO journal. While last year, my intention was to focus on making better decisions (, this year, my intention will be to focus on execution.
How has my trading changed since last year? My belief in trading the market holistically did not hold up, based on the way I put trades on with tight stops. My ability to actually execute on my ideas without being pulled into market action was awful.
As such, I am trying to develop a more precise approach to trading, with enumerated trade setups (something I was really against before). Having hard such a hard time executing the trade I want in the way I want, I'm hoping the specific setups will considerably improve my execution. Additionally, I'm hoping having specific setups will temper my psychological failings, and give me a chance to practice Success.
My intention is to catch the main trend for the day.
My favorite way to trade continues to be trading in a location where my entries can be precise, and my risk tight:
1. A short term trend is reversing to continue the longer term trend. I want to be in it right after the reversal point.
2. A nascent long term trend, which is a risky proposition because it frequently takes a long time for the trend to actually take off
3. A trend that has recently started, but has formed a structure to imply continuation
My biggest weaknesses are:
1. Experimental trades, where I'm testing if a trend or reversal are truly underway. Frequently, this type of trading causes many small losses that add up to a substantial loss. These trades also eat up my emotional capital, so that when I do spot a good trade, I'm not able to hold it and see it through, and adds to the ever-growing daily drawdown. So the occasional success of these experimental trades is far outweighed by the negatives.
2. FOMO trades. Because FOMO. I need to learn to let go of the strong feeling of anxiety that occurs when I've missed a trade, either because I didn't act decisively enough or I wasn't at the computer.
My trading plan:
1. Enter with price action patterns, exit based on levels.
2. Enumerate, execute, and test specific PA patterns.
3. Set short term goals.
4. Base trades around what happens as price exits consolidations.
5. Develop (and stick to) filters that keep me out of trades
Ideally, I would like to develop a way to add contracts as a trend develops in order to maximize the movement. But I have found when I do that, I end up adding late, and losing any profits, even sometimes turning a profitable trade into a loss. In looking at my trades last year, I have found my most reliable trade is the second leg of a trend, either after a 50% pullback, or a consolidation. I'm not sure why trends seem to have at least 2 legs, but they seem to. So I will pay special attention to this trade. Really, the most important part for me is avoiding overtrading, so I need filters to keep me out of trades. I have a million reasons to enter a trade, but very few to stay out.