Whenever you feel like you've lost an edge in the market, take a step back and spend a few days trading only your favorite setups. I've committed to an 8-day program where I will gauge my performance based on new rules. That's right! Starting today, my monthly P&L is $0 (it's really -$2300 or so). It's important that you retain control at all times. At midday, I updated you all that I've made most of my money back. My afternoon trading coughed that recovery up. Disappointed? Yes. Stressed out? No.
"Trade like your life depended on it."
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4 comments to "Down some for the month. How will I get out of this slump?"
Anonymous says:
How do you measure your edge?
Anonymous says:
It's a combination of my win rate per trade and emotional feeling. I categorize my trades in three categories (A, B, and C). SMB Capital, a prop desk in New York City, suggests that one way to battle a slump is to stick to your favorite/best setups with smaller size. Build that confidence back up! That's the idea.
For me, I measure my edge statistically and emotionally. Statistically, I want to know that my best setups (A and B trades) give me over a 50% win rate combined. Because my wins are usually 3-6x realized over my risk, I'm okay with a win rate even as low as 40%. In addition, I measure my emotional volatility. Being a relatively new trader still, I've recognized that a few straight losing trades can put me on edge. I'm learning to combat this.
Today, I told myself that I can only make 5 trades so I had to be extra picky. Verdict? 2 winners, 3 losers. +$330. Of course, this isn't enough data but I'm going back to step 1. I'm eliminating "C" trades from my book and will trade less volume until the market is more accepting of the volume I usually put on. Until then, I'm perfectly fine waiting for my best trades and rebuilding my confidence and "edge" back up again.
I'm always looking for new ways to train myself and learn. If you have any suggestions, please feel free to post!
Anonymous says:
Building confidence by taking smaller size and good setups makes a lot of sense. It seems to me though that you're still trying to find an edge, because if you had one you were confident in, you would take every setup so that your actual pnl would converge to your statistical edge. Instead of spending money in the market, do you have anyway to back test your ideas?
Here are three books that helped my trading:
Trading and Exchanges
Inside the Black Box
Evidence-based Technical Analysis
I applaud your dedication to your trading preparation, but you might consider getting more sleep. In college, I always had to choose between cramming for an exam and getting a enough sleep. After a good night's rest, I performed better because I would avoid making stupid mistakes. Here are some articles I read recently about sleep:
http://www.scientificamerican.com/blog/post.cfm?id=short-on-sleep-brain-optimistically-2011-03-08
http://blogs.hbr.org/schwartz/2011/03/sleep-is-more-important-than-f.html
http://www.sciencedaily.com/releases/2011/03/110308124748.htm
Good luck trading!
Anonymous says:
Hey thank you for the response!!!! I'm not that internet savvy so it took me awhile to find my comments.
Anywho, I only sleep 3 hours a day bc I have a 2nd full time job at Apple after Market hours =P
I'm exhausted but I love trading. No one said it would be easy =) To date, I have posted 2 consecutive positive months looking to add a 3rd in April. Feel free to read my newest posts to see how I've been doing.