Tuesday, November 8, 2011

Full Lockdown in Effect

I'm sure you could almost have predicted it -- I decided to trade the live account today.  And it was likely going to be a big day -- one way or another.  So what happened?  Well, I was up $500 (5 pts/car) this morning between Renato's DS calls as well as my usual scalp trades.  I was starting to feel the zone and flowed with the trades, just like good 'ole SIM days that generated great results last month.  And at this rate, I was going to have a pretty good day.  But...

The trigger
But there was a trade on the DS alert late morning that stopped out, and for whatever reason, that knocked me out of the rhythm.  The DS is expected to have at least 2 losses for every 10 trades, so having a loss isn't unexpected.  But this was one of those trades where *I* did not set the original stop properly thinking it wouldn't get all the way down there, so I was scrambling around trying to adjust it as it started to go against me. 

After the loss, a small shift in my mindset was triggered.  The next few trades were not necessarily hit 'em out of the park revenge attempts, but the voice in my mind to make up the loss quickly was getting louder.  "You gotta go back in there and and get it back!"  This began to corrupt my discipline, made me anticipate entries, and I started to see setups that were not really there. 

A slow and gradual meltdown
Every trade I entered started to go against me almost immediately, and instead of taking this as a warning sign to regroup, I began to start looking for even more trades -- I had to get back into a trade. 

I ended up taking some breaks to cool down, but once again, all I could think was -- I needed to get back on board a trade.  The wheels started to wobble, and they finally fell off.  This ended up being one of my worst days.

The worst part
Sure, I feel embarrassed by my performance.  And sure, I feel like I'm walking around with my tail between my legs. 

But here's the worst part -- many people cared enough to take the time to send me great actionable advice and suggestions that would have prevented a day such as today, and I did not act.  I feel as though I let those people down and ignored them.  Far from it, I am a person who listens to what others say, takes them to heart, and acts on them -- which explains why I feel this way. 

Saving grace?  This game is far from over, and there is still time to implement the great suggestions.  You can count on that.

Full lockdown
As of tomorrow, my live account will be under full lockdown.  It's back to SIM, 100% for all trades.  My live account has suffered another direct hit, but I am far from being out of the game.  My decision to allocate $10k/contract has kept me well in the game.  In the past 7 months since I've started trading full time, I've experienced this a situation a few times, and knowing when to call a TIME OUT is critical. 

I'll need to work on the criteria to remove the lockdown, but it will have some element of how close are my actual executions vs. the signals from the system.

Monday, November 7
Total gross profits:  -x,xxx,xx   [Too embarrassed to disclose, but I WILL eventually]
Total trades:  29
Accuracy:  27.6%                   [Wow, very obvious how rogue trades were involved]
Contracts per trade: 2

NOTES:  Another gap up day, but one that filled the gap and continued lower to test the PP pivot, then an extended 1-2-3 / consolidation reversal pattern formed to go higher.  As the bottom was forming, the Berlusconi news popped the market higher, and then steadily crept up to close at the highs of the day.  In hindsight, it wasn't that different of a day, but my approach after a solid morning session ended up being a huge FAIL. 

Lessons learned
So it didn't work this first go around with the $ES_F, but what did I learn? 
  • Know your tilt triggers -- An oldie but goodie.  After the first loss (or first few losses) of the day, my first reaction is to go back in and try to get it back quickly.  This results in revenge trading and overtrading.  And getting in one rogue trade makes taking the next rogue trade that much easier.  It is critical that I wait for a good setup for the first trade.
  • Pulling the trigger -- I have no problems pulling the trigger after a loss.  In fact, I have a problem pulling the trigger too often after a loss. I'll need to find ways to minimize this.
  • SIM vs. live -- I knew to expect differences, and yes there were, especially with the fills.  But what I didn't anticipate was my psychological reaction to the differences.  When I see trades that hits my +2.00 ES target but don't fill, there have been many instances where I let them go to a full stop loss.   And worse of all, I did not prepare properly to determine how I would handle those situations.  This happened a lot more often than expected, and was a trigger in some cases for non-plan trades. 
  • Weekly goals - I need a very solid and crisp plan on what my strategy and goals will be every week.  I have mixed too many apples and oranges together with regards to my trading plan.  When given a specific task, I deliver, so it's time start doing this again.
  • HUGE opportunities - The more time I spend time in the DS chatroom and study the system, the more it becomes clear that DS and the variations to better suit your personality can really provide some really huge opportunities.  And as you grow, the ES market is very liquid, so the fills will not usually be an issue for the retail trader.  Therefore, the more I see this system in action, the more I realize the enormous potential.  That's what keeps me going.  
Today was one of my worst days with regards to trading.  But do I still believe?  YES, without question.


Tomross58 said...

Hey Grove,,,

I follow in the room as close as I can but am still out of sinc with everything and of course the added time to learn and get used to a new platform but what I see is very positive. Putting everything together will take time but I can see that after 2 or 3 weeks you started to get a good feel. From what I see , Rena doesnt take alot trades per day. (Meaning his money isnt at risk more than he feels necessary) He seems VERY disciplined. He says that the system rarely gets stopped out 2 times in a row. I realize he may have a wider stop loss than you and I but its still workable for guys like us. You seem very happy with the system and you are confident that it works far more than it doesnt. Looks like to me "No more chasing systems".
You learned alot of hard lessons the last few days and your decision to go back on sim seems like a good idea.
The talk show on cable TV Charlie Rose had a guest on last nite that just wrote a book on success "Good to Great" (I am not plugging the book,,never read it)and they talked about many topics about success. One thing they talked about was Luck. The Author said he studied Luck and why and how it works. (I am not quoting)But he said that Good luck does not guarentee success,,,it can help or aid but does not make a person successful. Bad Luck can ruin a person/company, and the most successful people/companies always prepare for the bad luck. One never knows when a string of bad luck will show up and set you back but the successful people are prepared to weather the storm. He said that Good and Bad luck will eventually even themselves out in the long run but its only the Bad luck that if not prepered for can put a person / company in Ruin.
I saved the interview on my DVR and will watch it again as it really rings true. I can see that Rena has great discipline in not taking his set-ups but great discipline to protect himself from the bad luck that can and will show when we least expect it. No one has to learn this more than myself but I just thought I would share it. See you in the room


Flowtastical said...

Can you pinpoint one or two things you did well during your live trading?

Grove Under said...

Hi Tom:
You're totally right about Renato's discipline. Only been there a little over a month, but so far, his discipline has been rock solid and very consistent. He often quotes patience and discipline, and he lives by example. It all seems so simple, but it's so difficult in reality.

I'll have to read that book "Good to Great" since I've heard good things about it. And it also sounds like a great interview, so I'll have to see if I can find it.

Your example also ties in well with what Flowtastical was mentioning the other week about how Risk Management trumps everything. We have to be able to get through the tough times, so that we can be around to take advantage of the good times. Totally rings true. Thanks for the comment!

Grove Under said...

Hi Flowtastical:
I always forget to point out what went right, in addition to focusing on my strengths. Thanks for the reminders, this is very important.

You are correct that there were actually many things that did go well even during "the meltdown."

One example that comes to mind is that during the morning session yesterday, it was surprisingly "easy" (note: easy can still be tough when trading, it's all relative), since my mind was clear.

Setups came to me, and I was patient. When the setups were not there, I felt free to patiently wait. It was a nice balance between my ability to patiently wait for setups, as well as my ability to act on valid setups and execute without hesitation.

So yes, many things did go right, and I will need to better focus on maintaining the mindset of when I'm successfully trading in the zone, as well as continue focusing on my what I do well. Thanks again!

Anonymous said...

Hi Grove,

I have been meaning to post a long time ago, just never got around to it. I like your blog and your writing is very, very good.

Why did you switch to Renato system from trader x? I thought you were being successful with trader x style.
thanks Hector

Flowtastical said...

Can you tell me about what exactly went right?

You noted the feeling of letting setups come to you. Can you zoom in on that more? How did it feel? How were you sitting? When the setups were coming to you, what formation on the chart would make you pounce like a lion near its prey? If that formation came again, would you say you have an edge? Be more specific on what you did well, don't brush it off because learning what you did well that day cost you $1000.

Grove Under said...

Hi Hector:
Thanks for the feedback! I'm no longer trading Trader-X method not because I don't think it works (I know it works), but because I couldn't make it work for my own personality -- I couldn't avoid taking low grade setups.

I ended up being essentially breakeven on a gross basis, but about 99% of my losses were commissions!

It requires great discipline scanning through dozens of stocks, to wait for the few really good setups a day. Some can handle that that type of system well, I couldn't. I ended up taking trades I shouldn't have out of boredom.

So a little over a month ago, when I had a day similar to yesterday's meltdown, I decided it wasn't working for me and that I needed a change. I escaped.

Through serendipity, I ended up finding about Renato and Diamond Setups. Very glad that I did, but I'm finding the same gremelins following me -- taking trades I should not. I can't escape from myself, so I still have a lot more work to do in order to get to the next level.

Well, that sure did end up being a lot more long winded of an answer than I expected!

Grove Under said...

Hi Flow:
You bring up a great point about having to go into very specific details on exactly what was going on in my mind as well as my environment, leading up to and during the moment I was in the zone.

This may be one of my big missing pieces of the puzzle, and what's interesting is that this is a topic I studied quite a long time ago (and have obviously forgotten).

The best known examples are based on the work of Tony Robbins and NLP (neuro linguistic programming). Although some consider this pop psychology or a psudo-science, I believe there are some merits to this field.

What's most interesting to me is how you can use certain NLP or other techniques such as visualization to help you achieve the mental state of "peak performance" quickly.

A great example is when you see or smell something that immediately brings back strong memories and a emotional change to your state of mind, based on a past event.

Smell fresh baked bread, and it takes you back to your first trip to France 20 years ago, unleashing memories as if it was only yesterday. Hearing a "special song" also has the same effects.

That image (or smell, sound, etc.) has been anchored (programed) into your mind to trigger those powerful changes to your state of being.

This then leads to your comment about what it was that I was doing, in great detail, that made me feel as though I was working to my strengths. Unless I can consistently reproduce this routine to get to and stay in that zone, I will never be consistently profitable.

It's obvious I'll need to think through this entire topic in much greater detail, but you've now lead me on a path that should help fill some big gaps. I'll likely write a post about this in the future. As always, a big thanks!