A wheel fell off today

Thursday, December 15

Total gross profits:  -($300.00)  -6.00 ES points
Total trades:  30  [5 scratch]
Accuracy:  40.0%
Execution score:  FAIL 
Opportunity cost: $ [Didn't bother to calculate]

Over the past couple days, it was pretty clear that the wheels were starting to wobble. Well, today, one of the wheels fell off. I'm lucky I didn't end up totaling the whole car, but I did suffer some damage.  Due to the number of trades, the commissions are a bigger factor and will bring the net loss closer to -9 ES points.

The problem was entirely mental:
* Lack of sleep - that's life, it happens. But I can choose not to trade.
* No patience - I felt like I needed to try and trade every turn on a tick chart.  I couldn't walk away and wait for a the right setup.
* Rattled mindset - instead of being relaxed, I was way too rattled and scattered.  Lost focus of my plan.
* Focus on profits, not process - mental chatter was "gotta get some profits!" vs. "must follow process"

From the very first trade, I had a mindset that I needed a winning trade. When the first couple ended up being breakeven trades, I tried to press harder, resulted in a full stop loss, resulting in the need to make it up. 

I was constantly looking for setups that weren't really there or clean.  Upon my trade review, I even noticed that I even became fixated on a particular pivot level that was not very relevant throughout the day (which resulted in a few bad trades). 

This type of mindset carried on through the entire day and the performance figures speaks for itself. My usual stats are relatively consistent, but today, they are very much out of the normal range.  When I focus on profits instead of process, it's clear that I can get into trouble.

Sure, the market was perhaps a little slower and choppier, not so unusual as we approach opex and the holidays. But I can't blame the markets, I take sole responsibility for my actions. 

I will regroup, reset, and adjust my frame of mind -- learn to slow down, focus, and match the conditions of the markets.  Focus on process NOT profits.  Failure to do so will result the other wheels to wobble and fall off, possibly leaving me stuck in a ditch!

Not so perfect execution day

Wednesday, December 14

Total gross profits:  $200.00  +4.00 ES points
Total trades:  19  [5 scratch]
Accuracy:  57.1%
Execution score:  FAIL 
Opportunity cost: $387.50  +7.75 ES points

Yesterday, the final sentence in my update was: "Now the tough part is to maintain focus and consistency to stick with the plan."

Well, that didn't last very long.  Today, my execution score = FAIL.

After a morning with: (1) several trades that went +1.50 before getting stopped out at breakeven, or (2) not getting fills on trades (that ended up working), or (3) gritting my teeth while avoiding great non-strategy setups (that ended up working), I thought I was taking everything in stride.

Here's how it started
There was one trade I took after lunch that I knew immediately prior to pulling the trigger, was rogue.  Terrible feeling.  I exited a little early with a reduced loss, but the damage was done.  A crack was formed in the foundation.

Later, after I entered a trade with a short position that should have been a long, I immediately exited with a -1 point loss, but the crack in the foundation grew bigger.  The erroneous short would have worked just fine, had I not caught the error, but instead, I got a full stop loss with the "correct" long trade.

Revenge!
This flustered me, and my mind went into partial REVENGE mode to try and quickly correct what went wrong.  I had to get it back, and more!  From this point forward, my sense of control was partially gone.  But upon review, the biggest loss of control was not in stock selection, but in my trade management.  Upon entry of a trade, I threw my +2 target down the chasm which used to be just a crack, and started seeing every trade as a potential runner for +10 points.  Shame on me.

Don't I get it?  If trading just 1 contract, stick with a +2 target!
In my trading log, there were 3 trades during the forgettable afternoon that I entered properly per my trading plan, but I decided NOT to take the +2 profit target (instead, I moved my stop loss to breakeven and let it go for the big runner).  The opportunity cost for those trades was +$300.00, or +6.00 ES points, out of a possible $387.50. 

 

I'm sounding like a broken record this week, but today should have been a 10+ ES points type of day.

On the bright side
At the end of the day, it felt like I was just involved in a day where I had lost -20 points.  But due to the combination of the Diamond Setups methodology along with the experience I've been gaining over the past 9 months, I feel as though I've hit a milestone of sorts - if I can continue to minimize my "bad" days to small losses or at breakeven, this will truly be a significant accomplishment.

I also felt that even with these tricky markets, I'm starting to gain a better feel for the constantly shifting conditions of the markets, as well as reading the quality of the setups as they take place.  Although I believe I'll always continue to make adjustments to my trading plan, I feel as though I'm finally getting in the ballpark with a trading plan that works for me and my style.

And lastly, similar to how I ended my entry yesterday, I will need to prove to myself that I can maintain my focus and consistency so that I can earn the right to trade bigger and expand my trading plan.  Focus on the present...do what's right.  And soon, those 10+ ES point days will become a reality.  I really can sense it.

Perfect execution day

Tuesday, December 13

Total gross profits:  $225.00  +4.50 ES points
Total trades:  3  [0 scratch]
Accuracy:  100.0%
Execution score:  100% 
Opportunity cost: $0  +0 ES points

The FOMC minutes news release seemed to stall the markets after the lunch hour began, and 30-45 minutes after the release is when the markets really started to move. All my trades were in the morning.

Perfect Execution
I only had 3 trades today, but achieved a 100% execution score of those trade. I couldn't have done any better to follow my trading plan, so this is a nice successful day based on that metric.

But...
However, there were several trades I missed either because they didn't quite fit my trading plan; I wasn't around; or I simply froze.

For example, Renato's final alert of the day at 15:33 was to buy as low as 1213.00. And the low of the day ended up being 1212.50 about 3 minutes later.   At the time of the call, it felt like the ES was a runaway freight train headed to 1000.00.

I froze
I froze, and couldn't pull the trigger.  Not usually a problem, so it's a mental challenge I need to work on. Time and time again, Renato uses the Diamond Setups method to give timely and gutsy alerts that end up catching big turning points. It's very impressive to see.  So why is it so hard to just execute the alerts?

Coulda shoulda woulda - missed trades
I'm made it a point not to include missed trades in my opportunity costs or execution score, because in the big scheme of things, I will always miss trades.  But today was a day that I can't help but think of them.

I guestimate at least +4 to +6 points that I left on the table.  Maybe it was the higher level of conviction I had with these missed that made me dwell about them more?

On track / plans for next month
But from the big picture perspective, I believe I'm slowly but surely headed in the right direction, especially based on my goal of maintaining discipline to strictly follow my trading plan.

If I close out this month and score well to maintain my discipline to follow my "highly focused" (i.e. restrictive) trading plan, then I will consider loosing up my plan ever so slightly to include other setups starting in January. 

Now the tough part is to maintain focus and consistency to stick with the plan.  

Was this a difficult trading day?

Monday, December 12

Total gross profits:  $87.50  +1.75 ES points
Total trades:  12  [4 scratch]
Accuracy:  62.5%
Execution score:  75% 
Opportunity cost: $350  +7.00 ES points

New metric:
Execution Score.  % of trades that followed the plan based on: 1) trade selection and 2) trade management

NOTES:
I'm sure there were other folks out there that just shorted this market early and rode the wave down.  But for someone who is generally trying to scalp +2.00 ES points, today seemed to be a lot more difficult to find good setups that worked.  Somewhat surprising, especially for what appears at first glance to be a nice 18 point down trending day. 

When I did get into a trade, there were at least 5 of them that either went +1.50 or +1.75 and then stopped me out at break even/couple ticks profit.  Or, I made sloppy mistakes such as bringing down my trailing stop too soon, thereby stopping me out before my +2.00 profit target was hit.

When I calculated my opportunity cost today, I realized that there were 3 trades that accounted for total of +7.00 ES points, so I was quite surprised by this.  2 of those trades were scratched or had a small loss due to bringing in stops too early (or I panicked), and those could have had +2.00 profits each.  And the other trade was one where I entered the wrong order, got filled, realized the error, but decided to let it ride to a full stop loss.

It's interesting how these seemingly one-off trades can really make or break your day.  I'm just thankful that my day didn't end deep in the red.  Because these are the types of days that can test ones patience, and eventually make you take careless actions that you later regret.  In the past, I would have been chopped up by this market.  But now, I'm better prepared to mentally handle these types of days, although I'm far from perfect and still have a lot of room for improvement.

One big factor that helps me deal with these challenging days is by being in contact with the community of traders and with Renato in the Diamond Setups chatroom.  This has been huge.  In the past, it felt as though I was trading in isolation.  But now, if feels as though we're all working together towards the same goal.

Tomorrow's a new day, and I'll be ready, a little bit wiser.

Rogue trades appeared, but luck was on my side

Friday, December 9
Total gross profits:  $262.50  +5.25 ES points
Total trades:  15  [2 scratch]
Accuracy:  69.2%

The morning started strong and had I just stuck to my +2 profit target mentality, I could have had 5 winners with +2 in a row, before getting my a full stop loss.

But I believe there was a bit of greed that came into the picture, since the trades I tried to let run were Diamond Setups chatroom alerts (they often run for much more than +2), and so with lack of sleep the night prior, I was not as mentally strong to stay disciplined to my plan.

Of the 15 trades I took today...
1 was an error I didn't expect (confirmation was accidentally off on my DOM)
1 was a decent setup, but in hindsight, not according to my plan
2 were flat out rogue trades. These were most disturbing to me.

Without those erroneous trades, I would have had about 11 trades, which seems like a nice sweet spot for my personality and style.

I broke down
I was doing so well this week with my discipline of sticking to the plan, but after a full stop loss during the lunch hour, I entered a couple rogue trades, fully aware that it was not a part of my plan. This was disturbing.  Old revenge habits came back.  But I became aware of it, and stopped before it got out of hand.

Lack of sleep combined with end of week fatigue is not a good combination. Perhaps  I'll need to consider ending the trading early on Friday.  And if tired from a lack of sleep, I will need to find a way to walk away and avoid trading.

My opportunity cost
+6.50. If I would have simply exited at a profit target of +2, I would have made +6.50 more to my +5.25 day.

So, +11.75 is what I could have made today had I been more disciplined in simply exiting at my primary target of +2.

Lucky
What's very surprising is that my rogue or trades taken in error were actually either breakeven, or even had an opportunity for decent profits. This is unusual, since in my experience, they usually hurt you a lot. I will credit luck.

But overall, this wasn't a bad way to end my first week back trading live.  I'll take it.