Thursday, August 18, 2011

"Focus, pays off"

In the comments of Trader-X's blog, Ken left a comment that call it out -- a big wake up call for many of us who visit the site.  Here's an excerpt (emphasis by me):
...I am not trying to be confrontational, but I think your success would go up if you picked one and focused on it. I honestly don't think you can be successful looking at 2, 5, 10, 15, 30, etc. You might get lucky now and then, but I think consistent success is impossible.

I see a lot of you guys posting here, but you aren't really following the Trader-X methods. There is a high number of trades and a lack of real focus on what a good setup is, and when you execute you need to have the ability to monitor your positions and adjust accordingly. Thus, fewer and better trades. If you get down to analyzing a setup and studying the price action and bars like you should, you can't have a watchlist of 200 stocks and trade 5 timeframes. It just doesn't work that way.

Again, I am not trying to be confrontational, but I see you guys doing the same thing over and over and hoping for a different outcome that won't happen. Focus, pays off. I have not had an unprofitable week since 2010. I have an unprofitable day every now and then, but never an unprofitable week.

Good luck.

Much of this applies directly to me and probably most other developing traders.  When I asked a follow-up regarding how many setups he monitors and how long it took him to get were he is now, here was his response:
Grove, I really only trade about three setups. I only look at the 5-minute timeframe, and use a 5EMA. I don't trade exactly like X, but I use the same principles. I focus more on plotting Fib lines over bigger moves which may or may not happen at the opening range. I am looking for a failure through the retracement zone or a nice bounce off of the top of it, with solid support form the 5EMA. I like the 5EMA to be right under price lifting it (or vice versa for a short). I probably put more emphasis on the 5EMA than most readers or X himself.

I have been making solid profits consistently for almost five years, and dabbled in trading for about ten before that but not as a full-time venture.

For me it is about discipline to only take good setups and about focus to only look at a small, defined watchlist and monitor what I am doing closely. And I don't trade a lot, though it is relative. On average I probably make 3 round-trip trades a day. Hope that helps.
Since getting locked out (I consider it a form of blowing up) of my account yesterday, it put me into the penalty box today to really think about what I've been doing wrong, and how I will get back on track.  So here's the plan as I wrote on Trader-X's blog:
Since I'm currently on the sidelines, I'm going spend extra time revisiting my trading plan, and getting back to the basics.  I have the data now, so I need to focus on what has worked for me (i.e. my strengths). 

I'm going to come up with a precise game plan for next week that is focused, measurable, achievable, and then execute.  ZERO trades in a day will be completely acceptable, and perhaps encouraged. 

I'm not as worried about the P&L -- I want to make sure that I follow the plan and execute well.  All my past trades show that if I only take A & B trades, the profits will be there.
So now my work over the next few days is to complete the analysis of my trading journal, confirm which setups are my strengths, and write out my trading plan for next week.  That's the easy part.  To be contined...

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