I have been trying to discover my trading style for too long now. I have purchased a few systems to "jump start" my trading. Like a lot of new traders, I wanted a system that just worked, was consistently profitable, and I would just follow the rules and make money. Not much to ask right?
Well.... I wish trading was that easy. I think many traders fail with that type of attitude. Just wanting to blindly follow a prescribed system and not really discover it the trading system "fits them." I have lost who to give credit to now, but I remember reading somewhere that the "Holy Grail" of trading is discovered in yourself, not in a magical indicator that tells you when to trade. That may sound crazy to some people.
I'm a firm believer that everyone is unique and has personality traits that may help or probably will hurt them in trading. We just have to find the right style of trading to fit our personality and not try to force our trading to work in an existing system. In other words, we need to understand the system and make it our own. We must trade what makes sense to us and work through issues like:
Markets to Trade
- Stocks, Indexes, Currencies, Options, ...
Time frames
- Can I trade all day or do I still work?
- Can I stay focused on the charts for the entire day?
- Can I only trade part time or do I want just a few hours to trade to enjoy my freedom and life.
- Do I like fast charts with a lot of decision points or should I slow it down and have fewer trade decisions.
Risk Reward
- Do I want to take on little risk, but I'm willing to harvest smaller relative rewards.
- Can I risk more and try for fewer but larger winning trades.
And more...
When I started trading stocks many years ago. I always had a short term focus and only wanted to hold a position for 1 - 2 weeks. I did not like what I felt was the roller coaster ride in buy and hold. I wanted to capture the swings in stocks I felt were cycling and make "more" than just holding on to a good stock.
When I was able to get into full time trading, I was interested in capturing the intraday swings available in the markets. My focus shifted into the Index Futures markets not liking the "hit" that I could receive when Stock earnings or other big news came out. I did not want to do a lot of research or to have to worry about how the market would interpret the news. My favorite was - Earning are up, above company predictions, but.... not above the analysts expectations.
Don't get me wrong. Trading the Stock Indexes, I still need to know when major reports are being released. I either avoid trading in front of the news or I may try to enter a position if I expect that I can "protect" the trade and only risk giving back some paper profits in hopes of getting an additional launch off of the report. I have long given up trying to interpret or anticipate the news. I just trade the price action that results.
I'm sure I have worked through most of the problems that new traders run into.
Over confidence - Jumping right into trading with some size before trading in simulation to get the feel of the market in real time. Let alone being able to "learn" how I interpret the system in real time while only risking paper money. If I had only one do-over, I would have started with "Sim Trading" and not "burned while I learned" at first.
Scared money - While I did not have any large losses per contract. I was just slowly whittling down my account more than I was building it up in the beginning. Then the overconfidence fades and one starts questioning if this is the right trade only to end up chase the trade once it is obvious that the trade is working. Now I'm in the market at worse entry price and will have a harder time defending the position in the normal market gyrations. Do I try to hold this "bad entry" for larger profits or will the market come back and test my entry and I should just take profits now while I have them..... The right answer is take the trade at the signal or wait for the next one.
Early success - One of my early success was letting my losses run and cutting profits short. err. wait. That is not right. For some perverse reason, I could let a trade go against me right away and hold (Hope) for the trade to turn around. But if the trade started working right away, I had a harder time when the market "tested my entry price" before continuing in the direction of my trade. And the ES loves to "back and fill" or back and test your entry more often than not.
I learned not to chase or jump on those sudden moves and expect them to keep going. Often sudden surge moves are fake outs to draw traders into a trade. If you are trading the ES, let it come back and fill at your entry or wait for the next signal.
Pulling the Trigger - I can say I have never had trouble pulling the trigger and putting on a trade. Actually I had the opposite problem. I was over trading and not filtering the signals and taking only the best signals. Remember - I want to captures those intraday swings. I must get everyone of them. Can't miss any.... err wait... Look what is happening, I'll get some good trades and turn around and give too much of it back trying to capture more moves in the chop.
I'm sure I have more bad habits and new trader problems that will come out in future blog postings.
It is time to actually make my trading start working for me. Otherwise.... well lets not go there yet.
So for now I plan to post most week days. Don't know for how much longer, just for now. I'm not into posting trades as they happen. Right now I don't want the distraction factor. Maybe latter I'll want to be distracted from the trade so I can "let the trade work" and not cut that winning trade short.
That is it for this post.
Trade Wise, Trade Well.
John
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