Friday, January 30, 2009

A Dissapointing Week

Well there is no other way to say it other than to say it - this week was really poor. Yea we made money but we made a number of mistakes that simply can't be allowed in the future. You know that rule change I made yesterday? I was looking at my actual rules about the Double Bottom setups today and I realized I had already written a rule into my standard setups that would automatically disallow any reversal. I couldn't believe it. I had been mistrading my own trade plan. Disgraceful. So lets talk about the profit our mistakes cost.

  • Missed trade Tuesday due to emotions: -150.00
  • Reversal out of Standard setup on Thursday: -250.00
  • Total Cost of Mistakes: -400.00
As you can see these things can make or break a trader. They were the difference between hitting my next equity objective and falling short. And that is why I take each mistake so seriously. Because it is a very real and very serious impact on my bottom line. Each mistake is like losing a client, a customer, a referral. Good business owners don't let that happen. It is no different for a trader.

And as far as our new setup. Traded this week correctly it had a 88% win rate (I caught the only loser yesterday! lol!) and +450.00 in profits net. I don't consider that lost profit however because that wasn't in my trade plan until yesterday. But that one setup alone has been good for about 80% win rates and over +1700.00 in profits over the past three weeks by itself. Its going to be a great addition to my arsenal.

So lets talk about where we go from here. Obviously next week we are going to aim at achieving that perfect execution week. Employing all of our setups, taking the correct ones, and most importantly - managing them correctly. I have one last week before the first month of trading is over and my goal of making $2,000.00 in profits is a pipe dream at the moment. Traded correctly? That goal would not only have been met right now, but exceeded. I conservatively estimate that i've left over $2,500.00 on the table this month so far from mismanaged trades, not taking +1 ticks to cover commissions, incorrect signals being taken, and my two new trade setups I added this month. But what we have to realize is that the past is the past and you can't do anything about it in the present. So we are moving forward. But if you think for one moment I don't believe that goal of $2,000.00 by February 6th is still possible from my actions next week you would be dead wrong. We are going to get there or do our damnedest failing to do so.

My weekend project is simple - find out if trading prior to 9AM trading only my support and resistance setups in the market would be worth it. Today for example there was an easy +5 points available. On the 22nd there was an easy +4.5. All textbook DB/DT or You're Screwed setups that I pass on due to the time. I still contend some of my other setups should not be traded in those time periods but the support and resistance setups seem to be very consistent there. So i'm going to do some extensive backtesting and see what the probabilities are for allowing those two setups to trade during that time period.

And despite all of this. We made money this week. We're doing something right, even if we are still doing some things wrong.

Trade Results:

No Trades Taken.


E-Mini Player said...

Props on a net positive week. Trading is all about continuously learning and improving, so you're on the right track.

I'm gonna hit up the TF on real $ next week and see how it goes. Up $600 today on Sim with a 85+ % hit rate

Michael said...

Matt, Your going through EXACTLY what I went through, the last several years. Developed a system, back tested it, paper traded it, and the conclusion was , I had a great system. Now, as soon as I traded live I had exactly the opposite results. Then I spent more years than I care to admit to, adjusting this, adding that , and tweaking the system every which way, thinking this was the answer. It wasn't, and probably is not the answer for you either.

If you back tested your system properly, and honestly paper traded it, meaning you didn't throw out bad trades you took or included some you wouldn't have been able to catch, then your system is fine, leave it alone. What you should focus on (which I learned from an article I read) is what made you miss the trades you missed and what made you make the mistakes you made. In other words "what the hell where you thinking", what was the thought process which made you make the decisions you made. That's where you'll find the solution that will help you have a better month next month. I'm telling you, this is coming from years of experience chasing my tail like a retarded dog. This is a trading psychology issue, that's the path you need to go down to solve these problems.

Don't make the same mistake I did, or you'll have to change the name of your blog to "By Age 33", I don't think you want to do that.

Trust me, take some time over the next couple of day's, and don't place another trade till you do this, and get inside your head, be your own shrink, think back what was going on in your head that made you make the decisions you made. You'll be allot closer to resolving your problems doing this, than you will if you start tinkering with your system.

It was Ari Kiev who said, the difference between winning and losing traders was "introspection".

Good Luck, you CAN do it!!!

Matt said...

Michael - I know all too well what you're talking about. I too have spent the past two years of my life doing exactly that. Tinkering with systems, changing this or that thinking it will make a difference. (And as you point out - its the wrong thing to do).

I want to make a couple things clear because I think my blog post gave the idea that i'm really shaking things up and trying to rewrite my book - i'm not.

I like what I have, I know it works. The two "setups" i've added are setups i've not only been backtesting for months and months but I simply didn't want to add them live until I had adequate "forward testing" and they proved themselves (and they have so I have added them).

I'm anal when it comes to backtesting results, I don't "curve fit" the results for the outcome I want and things are done to the TICK.

I guess I just want to reiterate i'm not changing anything about my method. It is what it is and it works.

As far as the psychology problems those aren't really as big as I make them out to be. I missed one trade and that will happen (I don't pretend to be perfect) but I do feel I have a pretty solid grasp on my emotions when it comes to trading. I much prefer losing money than the feeling of skipping a trade that makes money (Seem wrong don't it?)

Thanks for the long post Michael! There is a lot of truth in there. But I promise you i'm not tinkering with the system!!!