Sunday, January 15, 2012

A 94% execution day and still lost -11.75. HUH?!?!

Total gross profits:  $-(587.50)  -11.75 ES points
Total trades:  9  [0 scratches]
Accuracy:  33.3%
Execution score: 94.4%
Opportunity cost: +$200  +4 ES points / Or +16 ES, see more under * section

For the record, I actually felt VERY GOOD about my execution on Friday the 13th.  The market structure after the morning range started to make a lot of sense as the day evolved.  And the volatility and movement seemed very ideal for trading as well.

I did NOT overtrade (had 9 total trades) nor did I take any revenge or rogue trades (zero!).  And if it wasn't for the mistake of not exiting my first long trade at breakeven (instead of getting a full stop loss) the reversing and going short (which means I missed a +2.00 trade), I would have had a perfect execution day.

After a couple days to let the dust settle, I'm still feeling very good about my execution.  But with a double digit loss, here were/are still some of my thoughts:
  • Is the system broken? 
  • Am I delusional and only thought I did well?
  • Did I blackout, do bad things, and forgot what I did?
  • The aliens decided to get me on Friday the 13th
  • And so on...
Here's what I believe it came down to -- bad luck.  Oh no!  Not that lame end-all excuse category that's a dumping ground for everything that can't be explained, or for cover-ups! 


1 tick made a big difference, again
There were a few trades where it touched and triggered my stop loss on the nose and eventually went for +2 profits.  I also had a few trade entries missed by 1 tick (e.g. touched my limit price but not filled) that went for +2. 

* The asterisk section re: opportunity costs
Believe it or not, after reviewing my trades objectively and in great detail, the unlucky "tagged to the tick" stops and other "unofficial" missed opportunities that don't fit my usual criteria accounted for about +16 points of opportunity costs.  Wow.  So had it not been for the "bad luck", I would have had around a +4.00 type of day, which in all honesty, was the type of day it "felt" like to me, even as I looked at my P&L in disbelief.

It was a breakthrough day
There was never a time during the day when I seriously thought about breaking my trading rules, even late during the Friday afternoon as my losses mounted.  Throughout the day, my mind was in the zone and focused on my goal, which was all about proper execution, regardless of P&L.

Never did I consider entering a rogue or revenge trade, it was always "what's the next proper setup that I need to be prepared for?"  And never did I consider taking profits beyond my planned +2.00 per trade -- just to try and swing for the fences to make up my losses.

So even as the P&L side of the day was melting down, I did not deviate from my plan.  I kept my focus on the long term discipline and consistency as my primary target.  This behavior was a breakthrough and as long as I maintain this discipline consistently, I am positive it will bring good results over the long term.

What would have "Rogue Grove" done?
This can be a fun question now, since I have been able to compartmentalize "Rogue Grove" pretty well lately.  And I'm sure I can continue to learn from him, since it reflects my deep inner consciousness of all the learning, beliefs, and values I have regarding trading and life.

If unleashed around lunchtime, I am positive Rogue Grove would have broken even or had gotten profitable by the end of the day.  Maybe I'll make a separate post about this, but based on my observation notes throughout the day (and yes, also hindsight), I would have been biased on the long side after 11:00 AM.  Then maybe lost on a trade between 1:00 PM and 2:00 PM by switching to the short side.  But I would have been long and strong from 2:00 PM until the close.

Obviously, these are hypothetical comments, but based on all the comeback days from I've had from deep in the red, I'm pretty comfortable with saying a breakeven or profitable day was possible based reviewing my real time journal.

Bottom line
I found this trading day somewhat similar to following your GPS driving directions, only to run into a perfect storm of adverse weather conditions, road closures, construction, bad traffic, incorrect GPS data, and let's also throw in some mechanical issues with the car.  What should have taken an hour to arrive at my destination, took 10 hours.  Sometimes, these things happen, it's life, and we just have to move on.

For over 95+% of the time, I know that staying disciplined and prepared will generate much better results.  Therefore, simply one "bad weather" day such as this will not make me deviate and change, especially based on all that I've been able to accomplish with my mental game and discipline.  In fact, this day gives me an even stronger resolve to stick with the plan.

One "bad day" down, many more good days ahead!


Benny said...

Your current thought process is focused on all the wrong things. A good trader uses his system as a guidance, not an absolute rule. Good traders know when to break their own rules because through experience, no rule works all the time in all conditions in the market.

Grove Under said...

Hi Benny,
You really have a great point, and something that I've struggled with. One example, there are times when I sense that taking +1.50 profits makes more sense vs. +2.00, based on market conditions.

What I'm really trying to control at this time by being so "rules rigid" is to keep "Revenge Grove" from ever coming back into the picture. He's quite destructive.

However, I believe "Rouge Grove" (might need to change his name, bad connotation) isn't really so bad, and will likely provide valuable insight in the future as when I should break the rules or take a non-strategy trade.

Problem? I'm not yet mature nor experienced enough to differentiate the messages between Revenge and Rogue well enough.

But I'm going to better track their voices in real time, and through time, I should be able to tell them apart.

Thanks for the great insight, much appreciated!

Anonymous said...

Benny - that's great if you know when to violate your system but then you don't have much of a system if you break it, right? If your system requires intervention or rule breaking, maybe your system isn't as robust as you think.

The other side of the coin is that if your system is good, you trade it and don't need to decide when to break it and do something random.