What did I do best this week and how I did I do it?
The trades I took this week, where all grade A or B and I managed each trade better, and held them to my required levels without micro management. I did this by focusing more on the context and where I thought price would naturally go. Primary I used context and the logical statements to keep me focused on what I am trying to achieve in each trade.
I did not manage to come up with a clear and concise rule to separate what the difference is between a scalp and intraday swing trade. And I mean a rule / process that I can explain to my missus, so that a non-trading person could understand. I am using her as a sounding board for my theories and processes, but she is now insisting that during these conversations that I must refer to her as the “#supportive wife”.
In summary, whilst I do not have a clear process for this at the moment, I am using context and bias to decide which trade I should hold for an intraday swing and which I am holding for a scalp.
Of course, this does not mean that the problem is solved, and I am over this issue. But it is a step in the right direction so I need to continue along this path and keep at it, until this style of management becomes a habit and I have a clear process to decide what style of management is needed in each case.
Part of the problem and this leads into what I did badly this week, is I am too much focused on the entry into the setup, rather than where am I am wrong and where is my target, which means that after entry my focus remains on where the entry was rather than the bigger picture.
What did I do badly this week and what lead me to do it?
Price traded at my confirmation levels and I was too passive in placing the trade when I saw the setup in order flow, resulting in not getting a fill and missing the trade.
Which can be summed up by this following tweet.
Too many traders are overly focused on the entry price. Correct sequence is STOP -> TARGET -> ENTRY. Determine the Stop and Target first!
— Awais (@eminiplayer) May 5, 2016
If I do not get the price that I want, then I tend to let the trade go, which is perfectly fine, in some situations but others it is the wrong decision. I need to factor in where the stop is and where the target, which will then give me a range of prices where entry will still give me an acceptable risk vs return. Of course the primary aim should be to get in as closest to where I am wrong and to get the greatest RR but will also give me secondary option to enable me to get in the trade at a worse price whilst still keeping the trade balance in my favour with the risk and reward.
Always look for the cheap trade by striving to enter as close as possible to where you will be wrong on it.
— Tom Dante (@Trader_Dante) May 4, 2016
What is the problem
The problem is that I have too much focus on getting the best price and the best price only, resulting in the missing of that trade.
Why do I have this problem?
Partly the perfectionism in me but lets me honest, a larger part is the fear of loss, and the focus on the loss part rather than the reward. The closest I get into the trade to where I am wrong, the smaller the amount I lose. I am not at a size yet where a tick or so in entry price changes my position sizing.
What I am going to do
I am going to change my process slightly, to focus more on the reward vs risk side. I am going to look at where I am wrong, then I am going to look at the target price and then work out an entry range from a minimum of 1.5 R, this will then give me a maximum entry price.
So if I am not filled on my passive order then I know how aggressive I can be to get in to the trade. I am going to take a sample of twenty trades with this new process. And then compare that to the trades taken over a similar time period, to gauge the weather stick to whether this process has some sort of merit. Of course then aim will be always to get into the trade closet to where I am wrong, but this will give me options to rather than just trade or no trade.
The last I traded more aggressively it did not work that well and really just added more noise and commissions to my stats. This time there is a better process, and I think it is worth giving it another attempt.