Monday, December 19, 2011

Deja vu?

Monday, December 19

Total gross profits-($175.00)  -3.50 ES points
Total trades:  10  [0 scratch]
Accuracy:  40.0%
Execution score:  65.5%
Opportunity cost: $ -5.75
(yes, my rogue trades actually benefited me)

Today felt like Friday, right when the markets started to tank in the late morning before the lunch hour.  And once again, I started to buy at various levels on the way down.  But this time, I was better prepared.  I kept telling myself how this feels just like Friday's action, and used a little more caution.

But in the end, I still ended up having 5 full stop losses out of 10 total trades (1 of them was a rogue setup).  The markets the past few days seem to have been very tricky, and so this must be the whole "thin volume holiday trading" condition everyone talks about.

Bad execution score / favorable opportunity cost?
My execution score was 65.5% (3.5 non-compliant trades out of 10), so I didn't do very well from that perspective.  But what's more surprising is that the related opportunity cost was a favorable -287.50 or -5.75 points.  This means that had I not taken the rogue trades, I would have had a bigger loss today.

But to be more clear, it was a single rogue trade I took at the end of the day that ended up making +5.75.  If you were to add up the opportunity costs from the other 2.5 trades, they washed out.  So I'm not sure how to take this.  On the one hand, I had a smaller loss than I should have.  But on the other, isn't this one step closer towards consistently undisciplined behavior?

And what if?
And this brings up an interesting question.  What if my opportunity costs start to become consistently negative?  Essentially, this means that my rogue trades or "mistakes" are actually net positive for the bottom line.

More tracking to do
I've struggled with avoiding trades that I know have a decent chance of working, since it's not part of my trading plan.  But this "opportunity cost" metric might be another way of tracking to see if there are certain setups that I "mistakenly" take, but have a good probability of working well over time.

Why fight it?
Because if the setups that I struggle with avoiding are truly valid, why fight something that screams at you from within your soul and works in the long run?  If that's the case, then I'll modify my trading plan so that I can take the trades and be at peace with myself.


Tomross58 said...

Hey Grove,,

I am in the process of doing my trading plan and it wont be very different from yours but I do think that to give it a fair shake we need to follow the plan as well as we can. I think we will tweek the plan from time to time and maybe forever during our trading career but the basics should remain. I just want to bring this point up as whenever I struggle I go back to the basics. Just a thought.

I have been following Rena's calls and try to anticipate them before he calls them out ( not everyone yet but a couple ) and what I am finding out is that after widening my stops on MAIN res or MAIN sup trades I leave so many points on the table after I exit with 2 pts or so ( and make $100 or $150 and think I am the man ) I sit there and watch it continue to rack up points. I am still on sim but have decided to use 2 contracts as of Monday. And yes I was short from just about the HOD and rode that leg down. I nailed a huge 1 pt on 1 contract and 2 pts on the second contract and sat back and watched it go down about 12 pts.
I am starting to be a true beliver in the mind set that you ( ME) dont need to make alot of trades just a couple really good set-ups and then its all MONEY MANAGEMENT. I am not talking about being a scalper or swing trader,,,,just a day trader looking to make a living. DS4-5-6-7 traded properly can be very rewarding. That seems to suit me well. Then I need really good money management rules in place. Its there. Every day.
Rena is in the charoom on Fridays and doesnt trade himself as he is also calling out trades but also he says he is watching and learning himself, I guess we are always learning. Sounds like you are learning out alot about your plan and thats a good thing. He is really an inspriation. Keep up the good work and so will I and we will find our spot.


Grove Under said...

Hi Tom,

Great to hear you're getting ready to write down the plan. For whatever reason, it took me a while to take the concepts from DS and put them into something more tangible especially for me. But after a couple weeks, I know there are a few areas that I'm going to adjust. But as you said, I totally agree that sticking to the basics is key.

I think your decision to go up to 2 contracts is a really great idea. Scaling out adds a big advantage to your overall performance, so it's good to see you're moving in that direction. I'll probably start focusing on this soon.

I saw from the transcripts that you really got a big move today with your runner, great job! Thanks for the feedback, and keep pushing forward.