Gah!

Gah.  Been a whole month since my last update.  This is what happens when you go off the rails and lose discipline.  I went off the rails in the next sessions following my last post when another round of mental capitulation led to the wiping off over $3k from my account – in the space of less than 24 hours (the worst episode being $1,900 in about 10 minutes).  Recently, I was fortunate to speak to a large retail trader who said that he, similarly lost the plot once resulting in over-trading, and capitulated to the tune of –$78k in one day – so at least in a perverted way it makes me feel relatively better.

However, I needed the time had to step away to reevaluate what went wrong.

From a technical perspective, firstly, I realised I was making an excessive number of trades – about 15-25 per session.  I mean, that is just ridiculous for what I was trying to achieve.  Not only was the success rate was merely 40 to 50%, I was taking way too many losses to begin each session and booking profits way too early in order to climb back to break even.  Too many trades, need to cut out that rubbish.

Secondly, this led me to realise the main problem with my trades over the course of December and January was that they were all, generally speaking, poorly timed counter-trade trades.  The fact that I had price action trading success in December was more of a beginner’s luck than anything.  Even if the goal of a price action trader is to read and react at perceived cluster levels, it is unacceptable from any trader’s perspective to be trading against the trend.  If I can’t follow this simple golden rule – trade with the trend – then I should not be trading at all, period. 

In order to counteract this, I have incorporated the 200EMA (multiple timeframe approach).  This alone has greatly cut down my natural tendency to over-trade.  Banks have a tendency to act at, or stop hunt, 200 moving averages in all time frames.  And certainly at times price action reacts to different 200 MAs (simple, exponential, linear weighted, etc) on the same time frame.  So which one to pick?  I was unsatisfied at the arbitrary nature of this but settled on the 200EMA for the purpose of determining the trend bias.

I also brought back an old favourite, the Robby DSS Bressert momentum indicator (multiple timeframe approach).  Being an oscillator, it is necessarily imperfect in all the ways we are all familiar, but again, the point is that the bias it provides is crucial in stopping me from over-trading and jumping in at any and every 5 pip S/R rebound spike.

I am also experimenting with the HAPPs indicator, which the author alleged breaks up the market into binary phases.  This results in the computation of static support and resistance levels, incorporating Fibonacci principles.  So far, the price action playing off these levels have been surprisingly promising.

Thirdly, I realised after having a small break that I was not actively dealing with the insidious onset of trading tilt as each session progress – and particularly when I suffer losses.  As soon as a trade got stopped,  I’d immediately “feel” a strong and reckless urge to jump back into the market and at times, this urge was so strong that it was as if there was a complete disconnect between what my mind was saying (“DO NOT TRADE”) and what my hand was doing (“AH FUCK IT, DON’T CARE, ENTER AGAIN – MARKET SURELY GOING TO REVERSE NOW – oops entered already, shit shit shit”).  If anything, this emotional “urge” was the main driver behind the reality of my over-trading.  My behaviour was clearly falling into the unhealthy compulsive gambler mentality, and the account paid dearly for it.

The biggest improvment in this area is my realisation that, yes, I can just let it go.  Let the opportunity go if its not quite A+ right; let the market take my stop loss; let whatever happens happen.  I think this was the mindset I began with at the start of December, but this got lost somehow along the way.  The ongoing challenge is consistently maintain this state of serenity, and be aware and ready to act when the spinning top starts to topple.

The other improvement is the realisation that I can do a number of things to reduce the likelihood of tilt.  Simple things such as mindful breathing, only trading with the trend, accepting reality and letting it go, cutting out all rubbish trades and only betting on A+ setups.

Wednesday

Tuesday

Monday