Still not immune from dumb trading.

Stats were bearish for month end closing. Hence I shorted the market but unfortunately my timing was bad. While I was fiddling with my stop loss order around 60 pts area, YM just zoomed 300 points in 5 mins. That's more than yesterday's range! I'm not sure whether it's because of inflation numbers released an hour ago. Didn't make any sense but I'm not asking questions anymore. Since it felt very similar to erratic DAX move earlier, I concluded that it's likely to be month end related PA and hence I decided to wait for a pullback to get out. I was lucky to get out during a deep PB with lot less damage but still -130 pts is not fun.

Though I wanted to call it a day, I noticed big sizes selling the top and hence decided to bet on the shorts again. However, I got in at a much better price this time and reclaimed my earlier loss. Though I had to endure some MAE, I was not too worried as it was liquidity hunting to shake out weak shorts. In fact, it made me even more confidence of this mean reversion trade. I'm glad that it's not a revenge trade. Though I could have pushed my shorts aggressively, I realized that this sort of price action and environment with month end moves is not my strength and hence calling it a day. Be safe out there. Happy weekend.


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Weekly review.

Though my long term goal is to increase my daily risk tolerance to 2000 USD (and I was getting there), I noticed significant increase in vigilance when I shifted from MES to ES. I also struggled to scale in, which is 'the magic bullet' for long term success, in my humble opinion. Hence, I decided to focus on my execution for the last 2 weeks and went back to micros this week.

What have I achieved so far?

1. I'm no longer adding to my loser. This is huge for me. Massive really. Since I start with 1/4 size, it guarantees that my losers are going to be small compared to my winners.

2. Adding to winners, as soon as I get confirmation that my trade idea is working. i.e new swing high or low in my direction. My aim is to try and scale up max size before I consider taking partial profits.

3. Always, always focusing on 'I'm wrong' price level. I'm using hard stops almost 80% of the times now. It's 100% if I'm counter-trend, judged by EMA clouds. It lot less frequent if we are in a chop/range especially when I suspect liquidity hunting with low relative volume. Mental stop works better then.

4. Much less attention to targets or profits. I still think about key levels like Y-H or Y-L to scale out but usually they are quite far from my entry levels, often >70% daily ATR. Hence, it automatically forces me to think about the above 3 points first.

5. Finally, I'm hopeful when my position is in green and nervous when it's in red. I no longer pray for a V recovery when I'm in a losing trade.

I feel like my thinking has been 'flipped' the moment I started focusing a lot on managing my losers. I no longer look at my P&L intraday except when I'm in a losing position. This is to simply make sure that I'm only holding the micros, NOT mini or full size contract.

DAX lesson.

Another good day of execution. Though it's a profitable day so far, I want to reflect and elaborate on my risk management strategy.

DAX opened with a big gap up, above Friday's high. I started the day with bullish bias, based on stats, but the risk reward only favored shorts. Hence I took a tentative short, AFTER seeing big sellers @high. Once price moved in my direction, I scaled in 1 more and took my profits @ pre-defined area. Risk was well defined at HOD. 100 points without breaking a sweat. So far so good.

Then the interesting part. Since price is down at 20 DMA, my initially preferred spot to buy, I went long. However, I was way too early for the party. Sellers kept pushing it down with ease and hence I bailed out @ break even during the rebound. Then tried again with no luck. Another lower low and hence bailed out @ break even. 3rd timed seemed to work and I even scaled in. But sellers were relentless and pushed it down again to another lower low. Got out breakeven/small loss again.

The reason I wanted to post this is to highlight the risks and benefits of 'hard stops'. Since I have the higher time frame trend behind my back, and lower relative volume, I felt reasonably confident that price was going to be choppy. Hence, I can get away with 'mental stop loss' and I did. The key here is to stick to the plan and get out at favorable price after the mental stop loss price is hit. Obviously this could have backfired spectacularly but I also have a 'must get out hard stop' well outside the noise and also kept my position size to just 1/4 of max to prevent structural damage to my account.

I must add that my 3 long attempts were BEFORE I received any long signals. This was partly due to my long bias from pre market prep and trying to be smart and 'jump the queue'. Another factor was my confidence in earlier success in picking up the top. I thought I could do the same with the bottom too. Will be more mindful in the future.

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