Maintaining Self Discipline

[studentofthemarkets]

Building habits to help with self-discipline is going to be the short-term focus of this journal for a while.

This video contains 7 observations of habits found in successful students and people. It would seem that forming these same habits should also help with becoming a disciplined and successful person, including being disciplined in trading.

Made a checklist of all 7 to work on for a month.....hoping at the end of the month I'll have made some improvements in each area.

 

[studentofthemarkets]

My trading focus for now is to develop consistency by being very selective in my trade entries. I've said that many time before but always get away from staying with it. However, when I go back to it, I find that I can get good trades with a good risk to reward ratio and hardly take a loss.

I've been helped a lot by listening to James Clear's book Atomic Habits and watching many of his you tube videos. I'm working on building habits of watching for the clues that make getting into a trade safe and only taking those trades and being OK with not being in trending price if I can't/didn't get into it safely. He mentions using friction to make it harder to do something you don't want to do. I haven't thought of a way to make it harder to take a bad trade than to take a good trade before the trade is taken...except by trying to make my charts as clear as possible so it's easier to distinguish between low probability and high probability trades. Something I keep thinking about trying, but haven't done yet, is to say out loud the reasons for taking the trade. So, I will begin to say out loud the reasons behind a trade before getting in....now that I've written it in this journal I'll be more likely to make a habit of it. James Clear gives some details in his book about the benefits of saying a checklist out loud and I really think building a habit like this would help me organize my thoughts while trading. Even writing helps me organize my thoughts....I didn't know I was going decide to start talking through my trades until just now. I guess I just feel kind of funny talking to myself and also, I wonder what the others in my house will think. I suppose if I tell them beforehand to expect that I will be talking to my charts, they should understand....

 

[studentofthemarkets]

I've missed writing in this journal. Also, I don't stay on track as well without the accountability that it gives me. I am still struggling with taking trades I know not to take. Why I take them, I have no idea. Seems like I'll do well for a few days in a row and then old habits take over for a day. I've been stating out loud what I see in the trade before getting into it, sometimes. I think it helps. I need to talk through each trade. Maybe I should make the point of stating that the trade is following my rules and not overtrading. Going to write that out and stick in next to my computer screen so I won't forget that. I really don't think I would overtrade if I had to say out loud that the trade falls into the category of overtrading.

So, I've been thinking that if I post a well-taken trade every once in a while, or maybe daily, then I'd be more likely to be more careful to take only those kinds of trades. It was hard to find a perfect trade from today. I had some good trades (and some overtrading that needs to stop) but there was always something not quite perfect about every one of them. This trade isn't perfect either, but it is pretty close. The thing I didn't do right was that I didn't stay in the trade until there was a reversal in direction. Instead, I got out when I liked how far it went....or rather, when I was relieved it had gone as far as it did without pulling back. I still have a lot to work on as a trader.

Demo Trade:

 

[studentofthemarkets]

Still need to work on consistently waiting to take only the best set ups and not overtrade. I had a few good trades I thought about posting here but none of them were taken exactly right and I'm trying to post only perfectly executed trades. Hopefully next week I'll keep focusing on getting them just right...not too early or too late and have something to post.

Here are my plans for increasing accuracy and taking only the best trades:

Keep reviewing my rules for entering a trade.
Go through a checklist out loud before entering (I find it really hard to say things out loud, but it should help with the process).
Keep working at implementing the suggestions for developing good habits and overcoming bad habits given in Atomic Habits.
Watch videos (such as the one below) that reinforce the idea that I have to wait for the best trading opportunities.

Just something random to share: Yesterday I traded off just the 15 min and 1 hr charts using a 30 tick stop loss and 2 contracts each trade. Ended up doing surprisingly well with a 50% winrate (includes breakevens as wins) and ended 321 ticks in profit. I'm not even sure how it worked so well because I didn't have my usual setups to use to enter a trade, I just traded the direction I thought the 15 min candle was likely to go and entered based on the pulses within the candle. I don't plan on trading off of only the 15 min chart again. It was an experiment to see if the 15 min chart could give enough direction bias to help with getting the trend direction right by itself and with the help of the 1 hour chart. I now think it does help a lot with determining bias for trend direction. I've been noticing that the 15 minute candles seem to trend smoother than the 5 min sometimes so I'm trying to learn to read them better. Hoping that by focusing on larger timeframes like the 15 min, I'll start doing better at staying in a trend.

 

[studentofthemarkets]

This touches on several areas I need to work on, such as being more patient and being very precise in developing trading rules or a playbook. He also mentioned journaling in the moment so you can review it later and compare what you thought you were seeing was going on with what actually took place.

 

[studentofthemarkets]

I have discovered coloring candles according to moving average slopes.

They are the key to timing entries perfectly and staying in a trade long enough.

Well, this isn't a new discovery for me. I've tried them before and seen others use them. I never liked the look and didn't trust them. But tonight, when placing them on my charts I feel like I have solved all my trading problems. Buy when green. Sell when red.

I always get these amazing revelations of what I can do to improve my trading when it's late at night. Then they don't work as well as I think they should when I try trading with them.

Well, this time, I don't see how they can't work. Unless I simply can't bring myself to enter according to the colors (not giving up my regular trading system, just coloring it according to the triggers for my system).

Maybe I should go to sleep and stop day dreaming.

 

[studentofthemarkets]

Just wanted to document in this journal that today I came to a much clearer understanding of the 5 minute chart in view of what is going on in the 1 hour chart.

Since I'm already writing here, I'll also make a quick update, instead of waiting until Friday.

Regarding using colored candles, so far I really like using them because they free up my concentration from trying to figure out which direction I'm suppose to be looking for a trade to get into, to trying to find a good entry. It's a nice change to work with, but I'm not sure I'll always keep them.

As far as posting perfect trades, I still haven't taken a perfect one yet this week. I've had some good ones, but each one I was stopped out just beforehand and I don't count those as perfect trades.

 

[studentofthemarkets]

Here is a perfect trade. I'm defining a perfect trade as one that was likely to work and was executed correctly. I'm not considering the size of the move.

This was countertrend on the 15 minute chart, and so I hoped to get out about where I did, depending on price behavior, rather than trying to trail it for who knows how long.

The first contract serves the purpose of making a little profit so that I can hold onto a 2nd contract and let it go through it's ups and downs without worrying about losing profits. The times I try to hold onto trades without capturing some profit first are too difficult emotionally...even though it's demo.


15 minute and 5 minute charts:

 

[studentofthemarkets]

A perfect trade. Well, close enough. I hadn't had one all week. My tight stop losses kept getting me out first and then sometimes I got the direction wrong as well. So today I determined to try to get at least one perfect trade.

The first drop after the open didn't seem safe to enter, so I stayed out....then wished I was in it all the way down...but I didn't trade it because none of the possible entries were the perfect trade. Then the bottom came in. I nearly pulled the trigger, had my finger on the mouse to buy, but was trying to find a perfect trade going the same direction as the trend, and this would have been the begin of a new trend (on 5 minute chart timeframe) but it was not a retracement into a trend, which I think is a little safer to get into.

So, I missed the move back up too.

Finally, got a retracement into the trend....but it didn't last long...it was the tail end of the uptrend....which is has since turned around and is now trending down....

So, my trade wasn't exactly as safe as I had wanted it to be. I gave it a larger stop loss than I like, because I'm tired of getting a good trade on only to be stopped out and then have the trend continue without me.

My stop loss was 133 ticks for each contract, so 266 potential loss. I also took the first contract off before it reached 133 ticks, so it was less than a 1:1 risk to reward for the first contract. I moved to BE right after taking off the first contract. Figured I'd just get right back in if I got stopped out and it still looked like it was going to go up, but it would prevent this trade from becoming a loss. The first and second contracts combined made 331 ticks after (demo) fees, and that is greater than my risk of 266 ticks. Not very good, actually. I'm still working on the best way to get into trades without losing or overtrading.

So, in a sense, it was a scalp trade, not a trend trade. But it was still more likely to work, than not, in my opinion, and it went straight up, which was the best part. I didn't trail it as I would a trend trade because, honestly, it just went up so fast, and was at an extreme, that I closed it when I was happy with the trade....trailed the 1 minute candle at the end, just in case I was wrong about my feelings and it pushed up higher....but it turns out that was a good decision.

Aside from trading in the premarket, this was my only trade on the Nasdaq today. I did place one trade at the open on the YM, but no other trades today. I'm saying that because somebody might think I just traded all day and showed the one that worked. Well, luckily, my first try worked today. But it meant I sat around watching nice movement on the Nasdaq that I wasn't in.

Too bad I'm still on demo, this would have been nicely profitable if it was real money. I've decided to wait to trade live until I get more consistent with trading well without getting stopped out first.

15 minute and 5 minute charts:





Probably won't post anything in this journal tomorrow so here is the video I watched this week to work on being more disciplined in trading:

 

[studentofthemarkets]

Last week I took a whole day to find a perfect trade and in doing that missed some good trading opportunities because they were somewhat risky. I began thinking about why I miss the bigger moves so often and tend to take the smaller, countertrend moves. I believe it's because the beginning of a bigger move on the Nasdaq usually isn't very clean and doesn't have a lot of reasons to support getting into the trade, unless I'm willing to take on more risk, or less risk with multiple chances for stop outs (trading bottoms or tops).

That has led to thinking that maybe I would be better at trading just the premarket. Since January until end of last week, I had traded it for 17 days and 13 days were positive and 4 days ended in drawdown for just premarket trades.

So, this week I began focusing ONLY on the premarket. This week I did not end positively, but I believe that is because I changed how I approached it. This week was experimental. I was trying to take every opportunity rather than how I had been selective in the prior months--and that is because I'm trying to get a feel for where to place stops and targets and when to use a set target and when to trail. My current plan is to stick with a set target and work on getting a good winrate with it and then increase the targets or add a runner. For today's price action, trailing would have made more sense than taking as many scalps as I did.

I wasn't going to show a perfect trade for this week, because I don't plan on showing my premarket trades in this journal. But I think I will just for this week's wrap up. This is likely the last trade I'll show on here until I go back to trading after the open, if I ever do go back.

Perfect Scalp Trade:


Brett Steenbarger made a really good comment in this video that I listened to this week. At 31 minutes into the video he said, "We want to develop best practices by turning them into habit patterns."