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Then Don't Trade

I've been reading a lot of blogs lately and the common theme I am hearing has to do with confusion. People are unsure of what is going on in the market, are we in for a deep correction, will the market continue to climb, is the recession over, etc. For many there seems to be more questions than answers.

Unfortunately, I've also noticed that many people continue to trade even though they have so much uncertainty about what is going on with the market and many are losing money as the result. Some even continue to hold on to long positions even though the market seems weak and prices are continuing to fall as the result. Now is the time when poor investors and traders alike are prone to get poleaxed. Smart and unemotional traders are doing three things right now:

1) Closing out of weak positions, regardless of their P&L. Based on technicals and/or fundamentals, some positions need to be liquidated if they are not working out as originally planned. I am not saying to jump ship too early but if your original thesis for entering the market is no longer valid based on current indications then only a fool would keep the position on. In other words, cut your losses short.

2) The brave and equally intelligent traders are taking small positions in strong names that have a high probability of taking off should this turn out to be a mild pull back from recent highs. However the wise are not building their positions at once. Instead, they are carefully scaling in to their positions little by little, as per their PLAN while remaining willing to quickly admit if they are wrong by selling said positions before taking any large losses.

3) Many traders are simply sitting on the sidelines until they get a better sense for what is going on.  There is nothing wrong with not doing anything when you are unsure of yourself and/or the market. Protect your capital and simply don't trade; just wait it out a while.

The following chart of the VIX will suggest that while fear and volatility are increasing, there is still more room for it to get worse before it gets better. Again, perhaps it is worth waiting it out a little bit before putting any money at risk

As for me and my day trading, I am trading cautiously by trading light. As an intra-day trader focusing on a 3 and 15 minute chart, I am not all that concerned with the big picture. I am aware of it of course but I am not overly concerned by it since it does not directly impact my trading time frame. However I am trading light and conservative in the event I enter a trade that goes hard against me. 

My longer-term portfolio is in cash at the moment other than a few option trades that I am taking that can turn a profit regardless of market direction.  I just need enough volatility in price to get through my break-even zone but I am willing to take that risk in this environment. Otherwise, I am not choosing a direction at the moment because I am personally unsure of what might happen. But this is just me.

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Testing Different Time Frames

Patience is not currently one of my strengths although I am getting much better at it. When it comes to trading, I believe you've got to have a lot of patience and discipline to remain consistently profitable, if profitable at all.

For the last few months I've been back testing and practicing my strategy on longer time frames to see how it performs in comparison to the three minute chart, which I've always traded. What I've noticed is that on a gross basis, my strategy tends to perform very similar on a 3 minute and 15 minute time frame.  However the 15 minute chart is much more profitable on a net basis because it is not taking nearly as many trades and it is also holding longer so the average profit per trade is much bigger, even compared to the average losses.

The challenge for me however is that a longer time frame requires much more patience and this is something I have to get used to. In general, the longer the time frame, the better my strategy performs so over time it looks like it will pay if I can learn more and more patience with my trading so I can maximize my profits.  This will take some time but the numbers are convincing so I am willing to work on it.

Today required a lot of patience.  I only placed two trades using the 15 minute chart but my strategy performed almost as good as 14 trades did on the 3 minute chart (I didn't take any of the 3 minute trades). However, forcing myself to wait by sticking to one time frame (as per my plan at the beginning of the day) was a good exercise for me and I believe more days like today will not only help me become a more patient trader but also a much more profitable one in the long-term. 

The point is, patience is good as long as you actually execute at some point.  Just like most things, it takes practice to develop. Secondly, if you haven't already, take a look at some other time frames and see how your strategy performs. The results have really surprised me so perhaps they will you too.

Cheers!

Trading With Patience & Discipline

I finally allowed myself to trade live today after having spent the last several weeks working out some kinks on the simulator and it felt great to get after it again.

I definitely feel like all of the training and practice really paid off today because the market certainly proved to be a challenge in terms of establishing a direction and then sticking to it. I played my favorite reversion to the mean strategy and was able to stay out of trouble, which was tough considering today's pace, or lack thereof.  Had I been more aggressive, my strategy would have lost money for sure but I still haven't determined by how much.

For me, I traded very selectively and quite conservatively, which was the plan going into the day and will remain the plan for quite a while.  As such, I took two trades that netted just under one point.  Nothing to write home about but considering today could very well have been a losing day for my strategy, I will happily accept the outcome. I did take profits much earlier than my target had called for but I didn't want to press things due to the leverage on the TF and my current account size.

Overall, I grade myself an A- for staying on my game and sticking to plan.  Today required a lot of patience and discipline and I achieved both.

As for the market in general, can we please just head lower and get it over with?! Today's open and close formed a doji from a candle pattern standpoint and the entire range fell within Friday's trade. Doji's often times hint at a pending reversal so it will be interesting to see what happens this week. Technically, the market is still bullish.  I'm waiting for a close over 481.70 to mark the onset to another possible run or a close under 461.40 to signal that the bears are going to take over again.

As always, I don't care too much about the long-term direction of the markets as I'm more concerned with daily and intra-day trends. However the rest of this week is going to be interesting for sure because there are some big reports coming out.  Who knows how the markets will react at this point?

Stay sharp and good luck!

NQ vs. TF - TF Wins!

Today I tried trading both the NQ and the TF. I like the lesser amount of leverage the NQ offers but I really don't like how it trades, at all. 

I ended up taking out $115 from the NQ but it was a constant struggle for me.  Then I switched over to the TF and took another $160 for a total of $275 on the day. 

I've tried trading the NQ several times in the past but I just don't like it and instead of forcing it, I am going to stay with the TF and simply try to take conservative profits while cutting losers much faster than in my past. I am confident that this will offer sufficient protection as I continue to work on becoming a perennial trader.

The profit I took out today pulled me over a new equity high on my sim account, which was my goal during the last few weeks. So it is time to go live again to see if I have sufficiently learned my lessons well enough to prevent another near blow up.

From mid February to mid March, I was able to trade up my account equity by just over $7K, which  more than doubled my cash.  I know I can do it again but this time around I am not going to allow myself to lose it on a few stubborn trades that I refuse to let go of before I wipe out a significant chunk of equity. Classic rookie mistake I suppose but I can't let it happen again. I won't let it happen again.

During today's session I did a better job with trade selection and I was able to keep myself out of trouble. I felt myself start to get a little impatient but I fought through it and was able to close out the day with a profit.  The market put on a nice short squeeze during the last hour of trading that would have certainly caused some damage; it happened to look very similar to a squeeze that sucked a few grand out of my account several weeks back. I stayed out of it, which I see it as progress and I credit good trading rules and the discipline to follow them.

I'm live tomorrow and I can't wait!!

Here's the TF chart:

Failed the Perfect Test

I've been patiently waiting for a big test from the market to see if I could handle a trade well in the face of adversity.  I finally got my chance today but I blew it - again! Historically, I've allowed my biggest losses to occur on specific set-ups that end up causing a great deal of damage to my account and psychology. 

For those not familiar with my strategy, I trade reversions-to-the-mean but sometimes price doesn't revert to the mean in time to offer a sufficient exit (for gain or a manageable loss).  Often times my strategy calls for multiple entries on dips and bounces that are away from the prevailing trend so when I get caught in an actual trend reversal, I've usually put some size on in the meantime, which makes it even more dangerous.  I am very aware of the pitfalls of my strategy but I strongly believe there are ways to improve instead of simply abandoning the strategy all together.

So I've spent the last several weeks back testing various strategies that I could implement to better protect me in the event a trade is setting up to go hard against me.  I've made a lot of progress in this endeavor but I haven't really been tested for a while so I've been anxious to see how my updated strategy and I would fair in real time.

Today I got my chance twice but on the first go around I failed miserably by ignoring my rule AND my instinct by staying with the trade only because I fooled myself (during the trade of course) into thinking that because I was trading on the sim, I could take the risk.  That is stupid and I know better.  This poor decision to stick with the trade specifically had two negative consequences:

1. It lead to a big loss and even though I'm on the sim, I still care and to ensure I care, I've set a profit target I have to reach before I can go live again. I was close to hitting my target but this trade caused another set-back.
2. I'm teaching my subconscious to allow myself to make exceptions to my rules, which is also making my discipline inherently weaker instead of stronger. 

After breaking my rule by holding the trade too long,  I was irritated with myself but I tried my best to re-learn from the experience so I can perform better the next time, because there will definitely be a next time!

From that point forward I decided to trade in lots of threes, which is much bigger than I would trade with my real account but appropriate for the size of my sim account (+$100K).  Of course trading bigger means the profits would also be bigger but so would any losses so it forced me to re-focus and stay on my game to avoid a bigger set-back.

The good news is that I was able to climb out of a $2,000 hole and end the day positive with a net gain of $379.20.  I am very proud of myself for hanging in there and trading the rest of the day according to plan. However, I've still got some more practicing to do.

Another bright spot for me was that I was tested again in the last hour of trading when the bottom fell out from under the market. I of course didn't know the severity of the pending trend reversal (3 min. chart) but I recognized enough to stay on the sidelines and not risk the gains I was able to take back.

Perhaps I finally learned my lesson? 

The Mindset of a Successful Trader

This morning I was surfing the web while waiting for some entry signals to come along and I came across a great article/list on Trading Markets written by Bennett McDowell titled, "This is the Mindset of a Successful Trader".

I will let you follow the link to read the article yourself but essentially it talks about trader psychology and I found it really interesting and pretty helpful. After reading it, I decided to use it as a self-assessment to determine which areas I need to work on and those that I am doing well with.  So here is my dirty laundry for all to see...

The following lists are taken directly from his article but I have added my own comments in red:

Here is a list of common psychological trading issues and their causes:

1- Fear Of Being Stopped Out Or Fear Of Taking A Loss: The usual reason for this is that the trader fears failure and feels like he or she cannot take another loss. The trader's ego is at stake.

I definitely have this fear though I am getting better at controlling/eliminating it. But it isn't as much of an ego thing as it is a longevity issue. I am not well capitalized (better now that I'm trading the NQ) so I fear taking losses that could ultimately drive me out of business.  I also fear set-backs, although most if not all only represent temporary set-backs that can be used as learning experiences and if I did happen to drain my account due to my dumb-ass-ness (this is a real word!) then I could fund more cash but that's not a very fun sounding scenario.

2- Getting Out Of Trades Too Early: Relieving anxiety by closing a position. Fear of position reversing and then feeling let down. Need for instant gratification.

I do frequently feel some anxiety when I am in a position because I am worried that it is not a pullback but a trend reversal that is going to move hard against my position and cause me some tough losses (see point 1 above). I admit, it is a great feeling when a position is closed out, especially after a nice profit, though I recognize that if I truly believe in myself and my strategy then there is no need to worry. In my head, I continue to use the excuse that when my account is bigger then I won't be so sensitive to losses but this is not a good excuse. First, it conditions my mind to think and behave as if trading can become more relaxed or even sloppy with more money in the bank, which doesn't make any sense, especially if a conservative approach is what grew the account size in the first place. Secondly, with a bigger account there is more opportunity to trade with more size which will keep the risk and reward ratio in line with the account size.  Therefore, if I am appropriately taking advantage of a bigger account, my position sizing will require the same cautious trading style that should always be relied upon.

I am not too concerned about the position reversing and I am not worried about instant gratification either since I try my best to approach trading with a long-term perspective.

3- Adding On To A Losing Position (Doubling Down): Not wanting to admit your trade is wrong. Hoping it will come back. Again, ego is at stake.

I do not have a problem doubling down to losing trades however I do use a reversion-to-the-mean strategy that calls for additional entries even as price is moving opposite my trade direction.  This is part of my strategy unless it is clear that I am no longer trading a pull-back but instead a trend reversal. In the latter case, I would/should get out.

Instead though, my challenge in the past has been NOT taking profits soon enough. I've stayed in positions too long while I've waited for price to revert to the mean and I ignored various opportunities to take profits along the way because they didn't perfectly satisfy my strategy.  I have since modified my strategy by adding a rule to take profits earlier while using a trailing stop strategy to help take advantage of additional price movements in my direction. So far, I feel good about this strategy and while it still isn't perfect, it absolutely offers more protection.

4- Wishing And Hoping: Not wanting to take control or take responsibility for the trade. Inability to accept the present reality of the market place.

Once in a while I find myself talking to the market via my computer monitor, calling it four-letter names, damning it to hell, demanding that it stop acting so irrational, that sort of stuff. However, I NEVER place a trade simply hoping and/or wishing that it will work out because I already know I have a +70% chance that it will and the other 25%-30% is simply part of the business and I can't control that.  Though it never hurts to wish that right after you enter a trade, price shoots 10 points in your direction in a split-second, but I'd never count on that! :)

5- Compulsive Trading: Drawn to the excitement of the markets. Addiction and Gambling issues are present. Needing to feel you are in the game.

This used to be a problem I had early on but fortunately, I learned that this was a sure way to lose money. I actually do have a written plan with specific rules and strategies that I follow when trading. I would grade myself an A+ for requiring my entry rules to be valid before entering but only a B+ for following my exit rules to a "T" though I am getting better with this every day.  So I can definitely say that I do not have a challenge with compulsive trading.

6- Anger After A Losing Trade: The feeling of being a victim of the markets. Unrealistic expectations. Caring too much about a specific trade. Tying your self-worth to your success in the markets. Needing approval from the markets.

By and large I can say that I do not get mad after a losing trade.  If I do, it is typically out of frustration with myself for not following my exit rules well enough but even then, I am more disappointed than mad.  However I do admit, after a couple of my big disaster days, I was pissed at myself and the world.  The market effe'd me and she knows it but that's just the way it goes sometimes! In short, I rarely get my panties up in a wad after I experience a losing trade.  Besides, that would be impossible since I always wear a turquoise thong.  KIDDING!

7- Excessive Joy After A Winning Trade: Tying your self-worth to the markets. Feeling unrealistically "in control" of the markets.

There really isn't any time for this because the next set-up should be right around the corner.  But back to point number 2, I do feel relief when I get out of a trade, not in a huge way but in some way, yes. Winning trades feel good, especially when I won because I did everything right.  It is motivating, calming, assuring, etc. I think those are good emotions. However I never feel like I can't be beat or any of that nonsense.  Arm wrestling, fortune-telling, staring contests - those are all different stories!

8- Limiting Profits: You don't deserve to be successful. You don't deserve money or profits. Usually psychological issues such as poor self-esteem.

This is retarded. No, I do not have this problem; I deserve millions and dammit, I am going after it until I get it all! 'Nuff said.

9- Not Following Your Proven Trading System: You don't believe it really works. You did not test it well. It does not match your personality. You want more excitement in your trading. You don't trust your own ability to choose a successful system.

Not true for me. I really like my system and it fits my personality well. It will make me millions some day soon. Seriously, it will.

10- Over Thinking The Trade, Second Guessing Your Trading Signals: Fear of loss or being wrong. Wanting a sure thing where sure things don't exist. Not understanding that loss is a part of trading and the outcome of each trade is unknown. Not accepting there is risk in trading. Not accepting the unknown.

I am somewhat guilty here.  I know sure things do not exist in trading but sometimes I ignore an entry signal because I am nervous the trade will go against me based on certain technical factors.  This isn't necessarily a bad thing if it is based on some logic but if it causes me to miss too many profitable trades then it certainly can turn into a negative issue. 

I simply need to have more confidence in my ability to recognize a deep pull-back vs. a hard trend reversal. If it is just a pull-back, the odds are strongly weighted in my favor but a trend reversal can really hurt me if I don't recognize it soon enough, which is what has caused much of my pain so far. I am working on it...

11- Not Trading The Correct Position Size: Dreaming the trade will be only profitable. Not fully recognizing the risk and not understanding the importance of money management. Refusing to take responsibility for managing your risk.

When I was trading the Russell with a few contracts on at once (always entered individually as my strategy called for) and with only a $5K to $10K account balance, this probably wasn't the smartest thing but I was able to manage it well most of the time.  The problem is that when those outliers got me, they killed me. I have since gone back to the NQ where I will stay for a while until my account is sufficient to trade the TF.  I don't know what that magic number is yet but likely at least over the $10K mark.

12-Trading Too Much: Need to conquer the market. Greed. Trying to get even with the market for a previous loss. The excitement of trading (similar to Compulsive Trading).

I do not have this problem. I trade when my strategy calls for it, period. One of the reasons why I like my strategy is because it typically generates plenty of signals throughout the day.

13- Afraid To Trade: No trading system in place. Not comfortable with risk and the unknown. Fear of total loss. Fear of ridicule. Need for control. Fear of another loss. No trust in your trading.

I have some fear though not really for any of these reasons. Probably better defined as anxiety but once I get going it usually subsides quite a bit.

14- Irritable after the Trading Day: Emotional roller coaster due to anger, fear, and greed. Putting too much attention on trading results and not enough on the process and learning the skill of trading. Focusing on the money too much. Unrealistic trading expectations.

On days when I get slaughtered, which aren't many but enough as it is, I am usually irritated with people and things and general but my wife does a great job with keeping me in check! :)

15- Trading With Money You Cannot Afford To Lose Or Trading With Borrowed Money: Last hope at success. Trying to be successful at something. Fear of losing your chance at opportunity. No discipline. Greed. Desperation.

I understand this point and I've heard it often though I can't imagine a day when a few thousand or more won't hurt/matter. If I lost all of the money I am currently trading with my life would go on, my standard of living wouldn't change but it would still suck.  In short, I am not using any debt nor am I putting my ability to pay bills in jeopardy by trading my account. 

Below is a list of what one feels after acquiring "The Trader's Mindset."

1. Sense of calmness

2. Ability to focus on the present reality

3. Not caring which way the market breaks or moves

4. Always aligning trades in the direction of the market, flowing with the market

5. Not caring about the money (I will always care)

6. Always looking to improve your skills

7. Profits now accumulating and flowing in as your skills improve

8. Keeping an open mind, keeping opinions to a minimum

9. Accepting the risk in trading

10. No Anger

11. Learning from every trade

12. Winning and losing trades accepted equally from an emotional standpoint

13. Enjoying the process

14. Trading your chosen approach or system and not being influenced by the market or others

15. Not feeling a need to conquer or control the "market"

16. Feeling confident and feeling in control of "yourself"

17. A sense of not forcing the markets or yourself

18. Trading with money you can afford to risk

19. No feeling of ever being victimized by the markets (but sometimes she's out to get me!)

20. Taking full responsibility for your trading

When you can read the list above and genuinely say that's me, you have arrived!

* * *

Good stuff. This was a great mental exercise for me to go through and I will work hard to see that I personally continue to improve so that I can read the last list of 20 and say "that's me". I'm certainly not there yet but I can definitely see that I am getting closer.

Happy trading!

Seven Mistakes I have To Correct

1. Not recognizing a bad trade soon enough

Simply put, I am frequently too stubborn to admit when I am in a bad trade.  I tend to think that price will eventually come around to my profit target, which it does often but certainly not always. Regardless, if/when it looks like a trade is going against me; patience is no longer a virtue and it is time to exit.

Lesson: Objectively analyze the technical picture during every trade and if the reasoning behind my entry becomes invalid, get out, regardless of the gain or loss.

2. Failing to set an appropriate stop loss

This is similar to the first point and is just another safety net to protect me in the event my better judgment doesn't close the trade first.Historically, I've used an exit signal to take me out of a trade but once in a while that signal comes too late and I need to rely on a stop instead. Prior to entering any trade, I have to know where I will exit if the trade goes against me.

Lesson: Never negotiate a stop loss during a trade. No trade is worth sacrificing your account for, so take the loss and wait for a more favorable set-up.

3. Being overly competitive

I hate losing money but ironically this illogical emotion has cost me more money than just accepting small losses along the way. I often times push a trade too much just so I can make money or get to break-even when in fact, I should simply get out. Typically, the best set-ups hit the profit target with relative ease and those that just don't seem to move are the ones that end up going against me.

Lesson: The market can always win. I am not competing against the market but against myself; trade accordingly.

4. Paying too much attention to my equity curve

I've been impatient for equity growth and I've been overly concerned about my account balance. It is motivating and comforting to make money but if I pay too much attention to it, my focus will not be on execution, where it should be.

Lesson: If I focus solely on execution and risk management, profits will take care of itself. Exercise discipline and self control by checking my account balance much less frequently.

5. Allowing profitable days to turn into losers

Every time I've had a losing day, I first had profits locked up and I easily could have exited certain trades just to protect what I had already booked on the day. Instead, I used those same gains as a false sense of security, fooling myself into holding onto a position longer because I was willing to bet my gains that the trade would work out.

Lesson: Stop treating intra-day gains as free money while I gamble it on less favorable trades. Once I have gains in place, I should automatically implement a daily trailing stop to ensure I end the day positive.

6. Trading with too much emotion

I have to control my emotions, specifically greed and fear. I've lost too much money by trying to make more and I've also lost too much money by worrying so much about losing.

Lesson: Just trade my strategy as it is written. My stops are in place to protect me so there is no need for fear and my targets are conservative enough to frequently turn a profit. I will rarely, if ever, take every last tick a set-up offers so stop trying.

7. Letting previous results linger too long, good or bad

When I am on a winning streak I feel like I can't lose. When I have just suffered a big loss, I feel like I am doomed sooner than later. I have to stop thinking that past performance is indicative of future results because that is not the case. Just focus on the moment and stop putting too much emphasis on historic performance.

Lesson: Learn from both my successes and failures but also recognize that every set-up is unique and as long as I am trading to plan, everything will be okay. If I need to re-asses my plan, do it when I am out of the market to ensure any decisions are based on logic and not emotion.

# # #

I know what I need to do, now I just need to do it!

Carry on.

Back At It Again

After yesterday's debacle, I was really anxious to get back to trading so I could prove to myself that not only can I still trade well but that there is also a great deal of potential ahead of me if I can but work out a few more kinks.  I was tempted to go live again to really make that point clear using my own cash but in the end I decided that I should follow through on the commitment I made to myself earlier and instead trade on the simulator.

I am still trying to work on creating a better risk management strategy but for now it definitely includes only trading the mini NASDAQ (NQ) given the lesser amount of leverage it offers.  I really like trading on the TF but I've got some work to do before I can continue trading the Russell and for now, the NQ is much better suited for my little account, now $4,600ish. Damn...

Another improvement to my trading strategy is to take profits much earlier.  This is going to take some getting used to because often times it will mean missing out on a bigger move in my direction but my main concern is to protect what capital I have left. I will try to get in on some of those extended moves using a trailing stop but I am still working out the details behind that strategy.  Taking profits earlier will also help me keep my size management in check since I will not be adding to a position as often as I did in the past. Whereas before my average sizing would equal 5-6 contracts, now it should average 2-3 but only as the opportunity dictates. My preference is to trade just one contract at a time but this isn't always possible, or at least, I am choosing not to make this a hard and fast rule for now.

Finally, I will implement a daily loss limit but at this point I am not sure what that amount will be, probably around $500-$600, which I would expect to be a worst-case scenario like yesterday. I won't go live again until I decide for sure but that is definitely one stop loss rule that I've got to have in place.

So without further ado, here's what happened with my trading today on the NQ: 9 trades, all winners and for a total net gain on the day of $203.40:

1. $10
2. $25
3. $85
4. $25
5. $15
6. $10
7. $10
8. $35
9. $10

All things considered, that is a fairly handsome trade for the day, also keeping in mind that this is after THE worst day of my career so far. So I am pleased with it but not satisfied.

None of the trades were too tough to manage so my risk management strategy wasn't really tested like it would have been on a day like yesterday.  However having said this, I was watching the 15 minute chart closely and to me, it looked like price wanted to drop some more in the late afternoon session so I decided to stay on the sidelines and preserve what gains I had already locked in place.  This obviously counts as a risk management strategy by cautiously staying out of the market when the risk/reward balance seems off.

I will trade on the simulator again tomorrow but this time around, I am going to target every trade set-up I see to make sure I can adequately manage my trades even if I get caught in a tight spot. I will keep everything as realistic as possible as I did today, e.g. no extra size, no extra waiting just to see what happens, no trades that don't meet my criteria, etc. Hopefully tomorrow offers a few heart-pounding set-ups that will really test the adjustments I've made in addition to my ability follow the rules. If everything passes the test then I will consider going live again on Monday, otherwise I will stay on the simulator until I have the confidence that me and my system can survive another tough day on the tapes.

Until then...

Rule #1: Don't Break Your Rules!

I am an idiot!

I took another big loss today because I failed to follow my rules. I got greedy. I thought I knew what the market was going to do next and I was wrong. After I lost a bunch of money on Wednesday I wasn't really that upset because at the time, I was following my rules based on reasonable analysis and I was simply wrong - it happens. Furthermore, at the time I wasn't prepared well enough to protect myself from a trade that went against me in a big way. Of course it hurt and it set me back a week or so but I wasn't upset with myself like I am today. After Wednesday's trade I made some tweaks after listening to the great feedback I received in the comments and after analyzing what I could have done differently. As the result, I vowed to be more conservative, improve my exit conditions and simply carry on.

So today comes along and I get caught in virtually the exact same scenario as Wednesday, so in theory I should have been able to manage like a pro but instead, I managed it like the rookie I am. This is why I am so disappointed in myself. First of all, I did not trade as conservatively as I should have and instead I kept on waiting for price to push a bit more. This is where I got greedy and stupid. Secondly, I ignored not two but three exit signals that would have taken me out of the trade with very little if any damage, and quite possibly some nice profits.

Now I head into a painful weekend after experiencing a very avoidable loss on the day. I traded 11 times, took six for loss and end the day down -$760.

Ending account balance is $8,274 and I stared the week with an account balance of $9,325, and I even took it up over $11K at one point on Wednesday. I started off today with a balance of $9,060 and I was on my way to ending the week slightly positive. Instead, I have gone backwards in a big way.

I wish I had some excuses. I wish I could put blame on using the wrong strategy for the wrong market conditions but the absolute reality is: my strategy easily could have yielded 5/5 positive trading days on the week if I had just been more conservative and followed all of my rules. Being conservative would have kept me out of trouble all together on Wednesday and following my exit rules would have kept me in the black today. All of the blame falls squarely on my shoulders and if I want to avoid ending up out of business in the coming days or weeks, I've got to pull my head out and get back to the strategy that started to get me ahead in the first place: conservative trading and absolute adherence to all of my rules, period.

This is going to be a long, anxiety-filled weekend with a lot of regrets. I simply should have, could have but didn't. You are all welcome to laugh and scoff in the comments. It will piss me off and make me hate you (temporarily) but something has got to fire me up and apparently Wednesday's loss wasn't enough!

Here are today's charts followed by this week's equity curve:

Out.

Discipline Pays Off

Today my discipline to follow my rules paid off in a way that I normally would not have expected. I have a rule that states when ever I break a rule or feel myself make decisions out of fear and/or greed, I have to stop trading for a while, if not the rest of the day.  Well today was one of those days. 

I got caught shorting into an upward swing that lasted a while and it made me get really nervous because it was taking what seemed like forever for price to revert back to levels where I originally expected it to trade.  When it finally did, I ignored a couple of exit rules and stayed in the trade to avoid losing more money than I thought I should.  Fortunately, I was right and when my last exit signal was finally hit, I exited the trade for what turned out to be a nice profit.  It also turned out to be bottom of that particular leg.  Lucky me!

I "should have" exited the trade a few ticks earlier but instead I waited for one last push.  While this didn't necessarily qualify as a broken rule (per my books), I absolutely felt like greed and my stubbornness to lose kept me in the trade longer than normal.  Again, it worked out for my benefit in the end but it very well could have backfired causing me to lose any gains I could have locked in earlier, not to mention causing a loss all together.  So I decided to live up to my rule and stop trading, even though I saw more subsequent opportunities to trade.

There was a nasty run in price on the mini Russell that pushed up nearly 10 points as a few Fibonacci levels were tested before it ultimately came crashing back down, like it always seems to do these days. So what is fortunate about this whole scenario is that the rule that required me to stop trading and my discipline to follow the rule actually kept me out of what would have been a really tough trade to manage, and one that definitely would have resulted in a loss and potentially a big loss.

So as they say, "sometimes good things even happen to assholes!" Indeed. :)

I only traded four times today and three were profitable for a total of 5.1 points on the $TF.

1. -$50
2. $100
3. $190
4. $270

Hoping to stay out of trouble again tomorrow!