After having a really solid month it seems like a good time to step back and review how my overall trading is going. Monthly review will be coming shortly, but ultimately this month was a "breakout" month for me.
I think there is a natural tendency to focus on improving weaknesses, but at the same time it is just as important to maximise strengths. That being said, I think I do a good job of that.
For each strength and weakness I will go through and give myself a summary on how currently doing, a plan of attack for the future, and a level of how important it is to attack this course of action.
Strengths:
(1) Using bigger picture to generate a short term trading idea.
- This is probably one of the harder to measure things. But in general I feel like my bigger picture ideas usually work pretty well; and they are quite often held back by my poor/lacking execution on the lower timeframe. For example: If a stock looks strong and I want to be long on a break over a key level; but it fakes out I will lose money on the long idea, whereas I should have waited for it hold. Or another example (although I'm getting better at this one), I think a stock is a short based of bigger picture, then it goes down all day and I somehow lose money on it.
Having a good read on the bigger picture seems to be extremely handy for developing a high conviction idea (one of my other strengths).
- This is something I would like to work on for, and the logical step seems to be to begin swing trading. However, I don't feel that moving to swing trading is needed given my current focus on intra-day consistency.
- Therefore I have no interest in beginning to pursue this further. But when I do, I will be sure to keep it deliberately separate in a different account to ensure that I approach it differently and that it doesn't draw attention away from my main focus (that is, consistency from day to day).
(2) Trading small normally and then switching modes and hammering a "conviction setup" with massive relative size.
- I think part of the reason I do this so well is because of the emotional disconnect between my main account and my back account. In order to maximise this I need to focus on the 3 identified weaknesses.
Weaknesses:
(1) Developing an idea and going full size straight away or very quickly. This particularly causes trouble when trying to trade size (naturally), but it also harms normal trading significantly as well.
- I have definitely improved on this a lot. The improvement largely resulted in the improvement of consistency this month. Part of the benefits from going partial size at a time is to control risk by ensuring having the largest size on while the trade is working and the smallest while the trade isn't working.
It also helps dramatically improve the probability of success, dramatically helps getting size on responsibly, and helps tame fomo.
Looking at the largest losses I have taken recently they have all been connected with getting the size on too quick. This also applies to the losing days in general because of the large number of losing trades and magnitude of them when I blunder in with full size.
It is important to note that the days I am mindful of this are my best days and on those days I would almost consider it my strength because quite often a trade idea hasn't worked but I have managed to squeeze a slightly profitable trade and/or breakeven trade out of it.
Another note about this is that quite often I will get to full size and there will be a very obvious add point later on in the trade but alas I am already full size. Or a breakout (or whatever) will fail and I decide that should have waited to get full size.
- For the future I just really need to continue to develop the habit of not going in full size. I think this goes in line with the focus on consistency as well as well as controlling emotions and maintaining patience. Getting into the habit of locking some in before going full size is a good habit to create as well.
- I see improving this as one of the most important things in my trading. It helps avoid the really bad days completely, helps improve the moderately bad days, helps stimulate patience, and seems to help consistency a lot! It also encourages waiting for the prices/price action that I want.
(2) Not paying enough attention to conviction setups.
- My big money is made on the conviction setups. Accordingly can't really afford to miss them while stalking something else. It is important to develop the skill of not trying to hit a home run every day (which is another reason having back account for size is important), and instead focus on hitting singles and doubles, then changing attitude when the moment presents itself for further opportunity.
This somewhat goes hand in hand with not going full size straight away for two reasons: (i) a conviction play develops over time into a conviction play, and (ii) a conviction play won't necessarily work straight away, it is just as important to pick spots, pick prices, lock some profit in, re-add etc. When I do pay full attention to them I get full size far too soon.
- For the future I see myself expanding my "conviction setup plays" list. Working on early identification and determining price action that will turn it into a high conviction trade. And working on size and proper management of conviction plays.
- I consider this to be pretty important. Particularly the early identification, which should lead to better management. High conviction trades would have made my year this month, were it not for weakness number 3. Continuing this trend is therefore pretty important.
(3) Giving too much back.
- This applies to intraday and to longer term (week or longer). However, I am really only concerned about the longer term because the magnitude of the give-back, and the steps to control it are so much easier.
I think it's important to distinguish between pushing it quite hard when trading well and overdoing it. I would define overdoing it as more specifically whenever there is a risk of giving back more than one really really solid day/huge trade.
- I haven't managed to shake this. However, on my main account keeping my account to the $25k mark has very simply solved the problem in my main account. Therefore I need to do the same in my back account. There is a slight complication in having to wait for the profits to clear, but I think it is well worth literally just not trading once I decide to do a withdrawal, on the basis that; sure I could make more money, but my historical tendencies have shown that I tend to get carried away with the substantial increase in balance available.
Another two steps to solving this is scaling in (as mentioned above), but also setting a max size for the account given it's current size, and given the optimal share price of the conviction play.
- This is so important that I believe the day I lock in a big profit on my back account (aka 10k or whatever) I should simply not trade the next few days to ensure I get it withdrawn). Stepping forward further into the future this means that increases in sizes will be done in a controlled manner (e.g. keeping 1/8th of profits in the account or whatever).
(4) Scalping short term price action.
- It is without a doubt that my strength is understanding where the stock is going (i.e. the bigger picture move). However I lack the (execution) skills to execute scalps to position myself in the direction of the move I want to catch. For example as a stock makes a lower high and I want to short I have no difficultly reading that price action but struggle to execute on it.
I feel like I currently negate this weakness by controlling size and only putting it on in certain spots. However, that isn't the be all and end all solution. Improving my scalping will ultimately improve my consistency and help with putting size on responsibly.
- For the future, getting my hotkeys setup so that I have an a stop-loss order preset, just so I can speed up that part, which will open up a whole range of plays, e.g. momentum scalping etc.
- While important I don't think this is a priority, it is more a natural development/progression.
Ultimately this list isn't all inclusive, but I feel it covers some good points and covers what went well this August versus other months. So I will try and do this more often!
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