Sunday, January 22, 2012

Should maintaining discipline = feeling complacent?

One realization I had this weekend was how much impact I believe Mark Douglas' book, Trading in the Zone, has had on my recent performance to execute my trading plan with discipline.  It's as if there was a switch got turned on in my mind to just let go of everything, other than to just stick with my trading plan for every trade. 

Here's an excerpt from Douglas' book that really hit home: know that your edge places the odds of success in your favor, but, at the same time, you completely accept the fact that you don't know the outcome of any particular trade. By making yourself available, you consciously open yourself up to find out what will happen next...
And here's the part that I can now read and say, YES, I now truly understand and feel this: 
Adopting this perspective leaves your mind free of internal resistance that can prevent you from perceiving whatever opportunity the market is making available from its perspective (its truth). Your mind is open for an exchange of energy. Not only can you learn something about the market that you previously didn't know, but you also set up the mental condition most conducive to entering "the zone."
Therefore, assuming I have a system with an edge and entered and managed the trade based on my rules, the outcome of any single trade doesn't really matter.  The trade will be one of many tens of thousands of trades I will take in my lifetime, a portion of which will be losers, so why stress out over this one trade?

In a strange way, I feel as though I've become almost too complacent with my recent success to follow my trading plan properly, to the point where I'm thinking, shouldn't following my plan be tougher?  Shouldn't I be feeling a lot more angst, stress, anxiety, etc. before, during, and after a trade? 

I'm also starting to think, am I becoming too overconfident, too soon?  It's not as if I've been achieving a high execution score for an extended period of time.  Nor I have really executed as well as I can from all my missed trade opportunities (i.e. I've left a lot of good trades/$'s on the table). But at least I've pretty sure I've become a consistently net break-even trader, which leaves a lot of room for improvement.

So now what?

Run before you can walk.  Prove that I can maintain strict discipline for more than just a couple weeks.  Earn the right to trade with more contracts.  Continue tracking missed trades and how I can catch more.  Track my discretionary what-if type trades to see if my "subconscious trader" is truly becoming a positive factor. 

In other words, I just need to stay in the moment, stick with the plan, and keep my intensity level high.

* * * * *

Friday, January 20, 2012

Total gross profits:  $200.00 +4.00 ES points
Total trades:  4  [1 scratch]
Accuracy:  100.0%
Execution score: 100.0%
Opportunity cost: +$0  +0 ES points

Friday was one of those days that was either one of the most uneventful narrow ranged opex days in recent history, or a near perfect range-bound day to grind out scalps.  In hindsight, if simply bought at the lower channel and sold at the high, targeting +2.00 while using a -2.00 stop, you could have booked nearly 28 points with no losses.  Ping pong trading.  Again, fun to see in hindsight, but not realistic at all.

Example of a great ping pong trading day
So based on the market conditions, I believe I was fortunate to capture +4.00 for the day.  It was also a day with more stop and reverse signals than I've ever experienced before, due to the range-bound conditions, so that was also a good learning experience.  But I also deliberately missed a trade or two (a lot for me), one of which ended up being a full stop loss.  Which brings up an interesting point...

It seem as if I've capitalized on a loophole in my "execution score" calculation -- since I don't include missed trades in my execution score calculations, I don't get dinged for not taking proper setups.  This will be something I'll need to track further to make sure I'm not cheating myself.

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