I wish I smoked all of Q2 like I did the last few weeks but I’m extremely happy with how everything turned out and most proud of the fact I was able to quickly notice I was getting off track and took the right steps to get back on. Things aren’t always going to be cupcakes and puppy dogs, but there’s nothing better than the feeling of busting your ass and getting out of a rut only to break some personal records.
So what did I do to get back on track. After tracking 500+ trades I was able to get a large enough sample size to collect some actionable data points to see where my strengths and weaknesses were. I noticed that towards the end of the tracking I was averaging ~70% win rate on a few setups and decided I was going to solely focus on those trades. For some reason coming into Q2 I wanted to look like a rock star so I started front running my own “signals” and taking sub par trades and quickly saw my win rate drop to ~40%. The beauty of journaling was that I could see the frustration from my daily logs and even my recaps posted to the blog so instead of just waiting for something to click I took a few days away from the screens and compared my recent trading to my best periods. It really only took an hour or so to get the slap in the face and see that I was veering from what works for me.
- People often ask what I use to journal/ track with and I use Edgewonk (allows you to get very complex in your tracking but Excel can work just as well), Microsoft OneNote (multiplatform note taker that I use on my trading computer, laptop and cell phone to take notes on the day and random thoughts while out of office) and a folder that I put screen shots of EVERY.SINGLE.TRADE on so I can go back and reference almost like flash cards.
So what are a few things I picked up/adjusted from my review?
- If there are setups/trades I can get ~60%+ win rate with at least a 2:1 risk reward why am I not going full force when these set up? These may only come 2-4 times a week at best so not only do these trades need to be with big size they need to get bigger as my account grows.
- I noticed that scaling into the trades lowered my % win rate because I was front running my buy “signal” trying to catch the bottom of a pattern vs waiting for volume confirmation at the breakout point and hitting it with size and confidence. With that I have moved to an all-in/scale-out system to maximize profit on the sell side and reduce risk at the same time. If I am wrong (which I still am ~40%+ of the time) I am wrong quick and don’t even think twice about the loss as it only takes 1 good trade to wipe out a few smaller losses.
- I’m slowly trying to move from a scalper to a bigger picture trader. The biggest catalyst to this change was letting the subscription to my intraday scanning service lapse and focus on my pre selected watch list. Sure I miss trades, but I know the trigger points I’m looking for and don’t find myself shooting from the hip nearly as much as I have in the past. I’m also trying to look at charts outside of just the 1-5min timeframe I’ve done for years. Pulling back and getting a clear hourly view has helped me look for areas where I can target for more than just a few cents and get more % out of each trade.
- When reviewing my biggest losing trades I noticed 2 things
- Averaging down on trades works until it doesn’t (spoke about this on my CWT interview). Basically when averaging down on a losing trade I was able to squeeze out a small profit 30% of the time, get out even 60% of the time, but that last 10% of the time brought some serious pain and wiped out weeks worth of hard work. Seeing the losses add up was nauseating and made it pretty easy to stop avging down cold turkey. (this is simply for me and I know it an important aspect to position traders strat but no good for my intraday strats)
- I really needed to start focusing on liquidity for a few reasons
- Every so often I would get excited by a chart and jump right in with size w/o knowing anything about the liquidity of an issue. Chances are if you’re reading this you have been stuck in something where you had too many shares and no one to sell them to. These are the ones I get stubborn battling and take massive hits trying to wiggle my way out.
- It’s much easier for me to manage risk in liquid issues. My win rate increases dramatically when I stay away from trying to anticipate breakouts in low floaters and wait for a clear sign in volume that buyers will be there when I’m ready to start selling. This means I have to be more patient, but I can be more confident at the same time and increase size over time.
I was able to take what I noticed from my review and tinker with my process and trade plans to make sure I was making decisions for my best interest. The results showed in my P&L and my emotions. After the tweaks, June was one of the most relaxed trading months I have ever had. When I could take the data I extracted from Edgewonk and combine it with a review of my best trades I was able to just relax and let the process work. Trading is a game of probabilities so just learn to let them work in your favor.
Going forward I am going to continue to work on patience and increasing size to extract as much profit as I can from my system because I know very well things can change on a dime and I never want to get too comfortable.
Good luck traders and keep grinding