Sunday, September 30, 2012

September update and new October goals

One of my primary goals for September was simple -- gain control of my overtrading by minimizing the number of trades per day.  The successful control I had through most of September surprised me (to average about 3 trades/day).  But as we approached the final couple days of the month, I let my overconfidence get the best of me and ended on a bad note. 
I was in "single parent mode" during the final days of September, which usually results in sub-par performance.  Add to that lack of sleep and being under the weather.  These were all major willpower weakeners.  I should have known better.

More significantly, I believe the minimal number of impulsive trades I had for nearly a month made me think I finally overcame my biggest challenge, I became overconfident and started to think the forbidden -- I now deserve to crush it and end this month with big profits.  Yeah, I started thinking about the P&L.

The only thing that got crushed was my psychological capital. 

October goals

In September, I had minimal regards for P&L since the goal was all about minimizing the number of trades per day.  So with the limited number of "bullets" per day, when I finally got into a trade, I found myself swinging for the fences more often than not, getting stopped out at breakeven many times even after being up 2 or 3 points and more.  It was a bit hypocritical, saying P&L was not important and yet still holding on for big moves.

So for October, I'm going to add on another simple goal -- every trade will have a +2.00 ES profit target, no more.  I may exit earlier if conditions warrant, but I will NOT be holding for the big winners.  That will happen in the future once I start scaling out of entries with multiple contracts, and then letting a runner run.

Therefore, I'm going to continue to keep my goals simple and easy to track for compliance: 
     1) Average about 3 trades a day (focus on solid setups)
     2) Profit targets at +2.00 or less (lock in higher probability profit targets)

In the big scheme of things, I feel pretty good that I was able to maintain control for a decent (at least for me) stretch of time.  So now, it's time to just step it up and execute.  Let's do it.

Thursday, September 20, 2012

ZERO = progress

The month of September has been groundbreaking in that my propensity to overtrade seems to have slowed considerably, almost overnight.  It reminds me of the time when my son was almost 3 years old.  He constantly sucked his thumb and no matter what we tried, we couldn't stop him.  So we eventually gave up. 

But then not too long after we backed off, we realized that he had stopped, cold turkey, kaput.  I had fears of a relapse, a fakeout phase, but no, he never sucked his thumb ever again. 

I can only hope that I have the same experience with my history of rogue/revenge/over-trading, but I'm pretty sure it'll be something that I'll need to work on for as long as I trade.  But as of now, here is how I'm doing from the perspective of number of trades per day:

====   ========
5/5       5
5/6       1
5/7       7    <- 4 rogue trades, narrow range day
5/10      1
5/11      3
5/12      3
5/13     ZERO  <- Big trend day, but no trades     
5/14      9    <- Went overboard after ZERO day

5/17     ZERO 
5/18     ZERO      
5/19     ZERO      
5/20      3   

AVG/DAY = 2.7 trades   <- Big success, last month was 7.3!
GROSS P&L = +7.75      <- Big underperformance, but this metric 

                          is currently irrelevant

I started the month of September back from vacation with some of my old habits in place.  But on a good note, the trend in the number of trades per day has continued to decline steadily.  I'm quite surprised how many ZERO trade days I've had.

After sitting out of the big trend day on May 13th, I probably felt like I missed out and ended up going a bit overboard the following day on May 14th.  Shame on me.  But then I stepped up, and there were 3 ZERO days in a row -- I don' t think that's ever happened before.  Patience is working.

Interestingly, I haven't experienced withdrawal symptoms from reducing the number of trades.  I'm sure the chatroom I've joined as of this month has been a big factor.  I'll write more about it at another time, but the key has been the similar outlook and style that the moderators and many of the members have with my own.

I've also tried my best to increase the level of awareness regarding how I am feeling, and more importantly, removing myself from trading when I get those feelings of revenge or from bored twitchy fingers.  Constantly being aware of my overall psychological and physical state is something I've been working on for the past few months.  But it seems as though I am now better able to take action.  That's a big step.

One internal dialog I've started is to ask myself "How will I feel if I get stopped out of this trade?" before entering a trade.  If I know I'll be completely at peace with the outcome if I get stopped out, then I know it's a decent setup.  Otherwise, I'll pass up on the trade.  And if I impulsively entered a trade, I will exit it immediately.  I haven't counted the number of times I've avoided an entry this month, but it's significant.  That's good sign of progress.

All in all, this focus on considerably reducing the number of trades and becoming much more selective with my trade selection feels good.  As least to me, those days of ZERO trades indicate big progress.  I'm know I haven't been behaving this way long enough to turn it into a habit, so I'll continue to focus on: 1) minimizing number of trades, 2) maximizing trade selection quality, and 3) minimizing attention to P&L.

So ZERO = progress.  My behavior is changing for the better.  But I still have a lot more work to do...

Monday, September 10, 2012

Still chasing success, but...

Summer is over.  And I admit, even with my limited time for trading over the past couple months, I not only did some SIM trading as expected, but also had some real live trades on and off through July and August.  Yes, I shouldn't have, especially since I was experimenting with various trading methods, and ended up trading live a whole lot more than I should have.

Recently did a review, and I see I ended up down around 40 ES points at one time, recovered around 40 points, back down around 40 points, and back up a bit, for now, on mostly one contract trading.  Quite a roller coaster ride that I'm not proud of.  Ugh.

Why did this happen?  I admit, I'm still chasing success.

Taking the last week of August off for our family vacation helped to slow and settle my mind to reflect back and understand what (and why) I'm doing what I'm doing, which can often feel like I'm banging my head against a brick wall.  I'm still looking for something that works for my style over the long term.

Although I usually feel that I'm getting closer to that elusive consistent profitability, I often step back and realize how long I have been thinking that way.  I'm going through various stages of development such as the lingering "Trough of Sorrow", then there's the "Crash of Ineptitude" which happens too frequently, all the while getting faked out by the "Wiggles of False Hope."

I know there are more disciplined and effective ways of learning and improving. But for me, based on my past paths to success in other endeavors, the not-the-most-efficient-shotgun-and-grind-it-out method seems to be how my journey will continue.

Turning over stones

I will need to turn over as many rocks as I can, until I get to the stage where I feel I've done all that I can.  It reminds me back to my much much younger days of visiting the local 7-11 convenience store after school.  I would see so many different kinds of candy for sale and would spend an inordinate amount of time looking at each one, trying to figure out which one to buy.

Now days, if I even want to eat some candy, it only takes a few seconds to select it, and I'm done.  Unlike my trading, I've already turned over many stones over the years, and I'm done searching. 

I also used to spend hours in the record store every week, endlessly looking at both current and old albums from all various genres, learning about the various artists, figuring out how to best spend the money I made from my paper route.

Now days, my desire for music is much more muted, although my taste in music is better focused.  So with sites like Pandora, it no longer takes me a very long time to select something to play and just move on.  Although there will always be some new stones to turn in the world of music, gone are those days when I would obsessively spend many hours a day/week focused on turning over those musical stones.

And my biggest "chasing success, success story" is that it took many many years of turning over many stones before I met my wife.  But that journey is thankfully over and has resulted in a family with 2 great young children (as long as they are behaving!), for which I am very lucky and thankful.

Now days, the amount of work and effort to maintain my relationship with my family is greater than ever before, and continues to grow at a breathtaking rate.  So although I'm done searching, the real though work has only just started, and seeing the positive return from my efforts, watching my children grow, is something beyond measurement.

So back to trading -- I often see many people who are very successful in other fields say trading has been one of their most difficult challenges to master.  Taking my current path of experimenting/chasing success/turning over as many rocks as I can to become successful with trading is an expensive way to learn, both from a financial and psychological capital perspective.  But I'm not sure if there's any other way, based on how I operate. 

On a good note, I do think the rate of "turning over stones" is starting to decrease.  So maybe I'm starting to settle down.  Maybe I'll stop searching so hard and settle down with a specific trading method.  And maybe I'll finally start putting in much more effort to maintaining a successful trading process.  This will be a key "tell" that I'm moving in the right direction.

The importance of environment

But here's one missing piece I've recently overlooked.  I have discovered that my trading environment is a big factor in my ability to remain disciplined in successful.  When I was doing some random trading over the past couple months, I was pretty much on my own, operating with minimal structure, exhibiting a lack of self discipline.  Recipe for disaster. 

I now realize that I've done better in the past when I'm a part of a group all trading a similar methodology.  So for now, I need to be a part of a team again.  The best environment for me would to be physically on a trading floor with other like minded traders.  But since that's not realistic at this time, the next best thing is to be a part of a chatroom.

So here's my new plan based over the next few months:
  • To continue daytrading the ES, I've joined a chatroom which has a live streaming audio and video feed of the charts.  Most importantly, there is a full time moderator using a methodology that I've recently evolved towards and have been exposed to quite a bit since earlier this year.  Based on attending for only about a week, this seems to have instilled a new sense of confidence and discipline.
  • I've also joined a swing trading service for stocks, just to see if this timeframe might be better suited for my personality.  I've opened up a new equity account just for this purpose and will slowly ease back into stocks after taking a break from equities for nearly a year.
  • I will also continue to monitor the forex markets for swing trade opportunities.
Will this direction be yet more random turning over of stones and a continuation of chasing success?  Or will this lead me to more focus, more self discovery, and ultimately, bring me closer to becoming a consistently profitable trader?

We shall see.  I still believe.  The journey resumes.