- From his blog: "Remember, the top three priorities in trading: First, is preservation of capital. Next is consistency in executing your plan. When you have these two things mastered, you can then pursue the third, which is superior performance."
- From his tweet: "To be a master trader you MUST face and realize your own destructive capacity... through this realization you attain longevity"
- Preservation of capital...or lack thereof
- I have been both unfortunate and fortunate regarding my ability to preserve capital
- Unfortunate - in that I am down over a quarter of my initial trading capital. I've heard from some that this is a normal part of a developing trader and that it's to be expected. But for me, this is not acceptable, and shows the lack of risk management discipline I've had in limiting my losses during the early stages of my learning curve.
- Fortunate - that the absolute dollar amount is not significant. I
started my account with an amount very well below my means, so this is
not something that will impact my lifestyle. And to think of it another
way, a semester of college would have been much more expensive (and
- My consistency of executing my plan...has been inconsistent
I have not yet settled on a trading style that works best for me. I'm
still 5 months into my trading career, so I have not even been able to
consistently execute a plan over the long term.
- There are times when I wonder if I even have the discipline to follow a trading plan.
- However, I believe the first bullet point is generally correct. Given a specific goal for a week, I have been able to successfully follow a trading plan. And I know through review of my actual trades that I can see and take good quality trades...I just need to avoid taking the sub-par setups. The true test is to be able to follow a plan consistently over the long term.
- I believe when my discovery process is over, I will eventually settle on a trading style and plan that works best for me. At that stage, I will likely have that "been there and done that" frame of mind, so I will be less likely to consider other trading styles.
- Superior performance...will be achieved in time
- I am far from there, but I am getting closer. My goal is by the time the Fall season is over, I will have settled on a trading style and plan that fits my personality, have demonstrated considerable discipline following that plan, and at a minimum, be a consistently breakeven trader.
- At that point, I will have the ability to start focusing on mastering my particular trading style to become a consistently profitable trader.
- Only then will I be able to get on the path of becoming an elite trader.
- Destructive capacity...where do I begin?
- All traders possess some sort of destructive capacity that
you must find a way to keep under control. I have skeletons in my closet
that like to come out all too often to spoil the profit party. So I've
recently placed some highly secure locks and doors to the closet so they
stay locked up. We'll see how well they are contained.
- Through careful research of my prior trades, what has been destructive to my profits have been trading in choppy markets, revenge trading (especially after first couple trades are losses, or when my stop is too close and I'm stopped out by a tick), and rogue/non-plan/sub-par quality setups. This usually leads to overtrading, which I define as taking more trades than what your trading plan defines. Nothing new with regards to challenges other traders face.
- However, I believe the most potentially destructive capacity I have is right now is trading beyond my daily account loss limit. There have been many instances when I have traded my way back to breakeven or profits (although there have been a few times when it has ended terribly). This may have engrained a bad habit that may very well come back to haunt me. I will monitor this situation very closely to determine if I need to make some further adjustments to my trading plan.
* * * * *
Speaking of overtrading and going beyond my daily limit down, I was once again nearly limit down on my losses for the day on Friday, Sept 9th. And once again, a key trigger was a loss from a decent quality setup.
But for whatever reason, I chose to make a foray back into TNA & TZA (the lure of fast profits?) and unlike the last time, I was able to scalp my way to a small net profit. I didn't take 103 trades as the prior attempt, but took less than 40 (still a lot), so it wasn't efficient trading by any means -- my commissions ended up being nearly 20 times my profit. Once again, TradeStation should be sending me some customer appreciation award.
And this time around, I was better prepared to deal with the cadence and rhythm of TNA & TZA, which at times seems akin to dealing with an angry swarm of bees. There were times when I could "feel" when the price rotations were about to take place, and/or when prices were going to move in my favor (or not). However, this style is trading is very mentally exhausting and it's something that I don't think I could do on a daily basis (although I won't say never, you just never know).
Chalk this up to another trading day where on the one hand, I was successful, but on the other hand, the day could be considered a dismal failure since I went on an unplanned tangent. But in the end, the discovery process continues and I am a bit wiser, confident, and knowledgeable.