My Path To Success

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I've been taking a break. I did put on a couple tiny trades and lost around $20 today. I feel it is important to take a break.

I feel my discretionary is my strongest ability. Even so, I tend to make extensive use of my original trading systems especially when my read is weak. Developing such systems takes a tremendous amount of time and I've not had time to develop my latest ideas.

I feel that it is more important that I come into the market with strong confidence or edge given that my account is tiny. With a larger account, I could pay more out for "research and development" and trying various trading ideas. But, given that any trade I put on will represent significant leverage then I realize I need to be more focused. More over, it is better if I can do that R&D work without hurting my performance.

I think I will continue to make a conscious effort toward these goals:

1. Taking a break.
2. Only trading my best and high confidence trades.
3. Developing my existing systems and new systems. This development work helps form much of the life blood of what I do.
4. Continuing to refine, systematize, and know my discretionary strategies.
5. Continue to strengthen my feedback loops to the market. I'm not sure how to do this because I'm mostly unwilling to share my key insights into the market in the public domain. Although sharing my ideas is a benefit and helps me strengthen those feedback loops.
 
I was short biased and one of my favorite systems signaled. I suspected the market would continue to drop. However, I wanted to reposition myself for a long entry. I lost some performance by not holding onto my shorts.

I made some adjustments based on my experience trading this systems. Namely not chasing. Unfortunately, I'm still not sure I made the right play.

I payed 8 points premium for a spread which I think is too high. I've ran some simulations that suggest it is.
 
Available Capital: $4867

I will also be getting a rebate from IGMarkets for my first months commissions thus I am approximately @ $900 in profits.

I've learned a few hypothesis and some ways to improve my trading. I probably would have made up to 2x as much today if I had traded it exactly as I did my futures account. I made about $110 today with $300 risk.

Basically, I have to stop buying under the floor. I payed too much in market premium. Although buying near the floor and above it may be a different story. In general, I'm going to start to have to take more max risk on my trades.

Current hypothesis:

* Prefer wider spreads with more max risk and pay less premium
* Use the binaries, I'm winning on them
* Expert timing of spreads below the floor doesn't pay off enough
* Use the narrow spreads when the premium has eroded
 
Available Capital: $5,094

I'm still on "break". But I did take a trade today that netted me $226 (+ my rebates).

I feel pretty good about that. I had max $80 risk on this trade and max $1520 profit. Realistically, I seen about $480 potential profit.

I've started to close my hypothetical trades out at EOD to help compare my risk/reward on futures versus the spreads. My spreads are only good for 1 day. I would probably have held my futures trade longer if not closing out for purposes of auditing.
 
Available Capital: $5,320

Few observations...

* Price timing a spread near floor/ceiling doesn't work as well as I'd have thought.
* Premium decreases as price moves away from floor/ceiling and deeper into risk/profit.
* Timing binaries works well
* When near expiry, buying/selling near floor/ceiling can offer protection cheaper
* Premium relative to the market increases when the market is below/above floor/ceiling
 
Available Capital: $5,380

Few lessons/observations

One technique that I use to improve is that when i exit a trade: I always hang around to see if I made the right decision. Sometimes it is. But, often it is not.

It can be painful to make a suboptimal decision. Yet, such observation often provides insight into improvement or confirmation that certain ideas are working.

My other really powerful technique which I picked up just by watching "Billion Dollar Day" is to make sure I am taking all the opportunities. I mean that I am working to get every opportunity.

This is a powerful technique, I mean the mindset of getting into capturing every opportunity for 2 reasons:

1. I've always felt the very best opportunities are often the ones everyone knows about.

2. Stupid trades are often the result of missing an opportunity. I want to be in on the opportunity because it keeps me out of stupid trades.
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I try to pick up things here and there. With the spreads and binaries, for the first time I have a lot more choices. Choice can be empowering or problematic. I want to use my brain as efficiently as possible which means I don't want to waste time with frivolous choices. But some choices matter.

One of the new ideas I've started to implement and as a result of this and thinking about what Mike Bella at SMB referred too is this new idea of thinking about all the possibilities of how a trade may work.

Am I prepared for every outcome? I want to share a related idea which is the importance of not overstating ones ability.

Let me clarify, I thought the market would rally. I felt it might drop to 1314 tonight. I set a limit buy order for a binary. But, I seen that the market was taking on more of a momentum nature.

I did not let this bother me. I just switched gears and profited from this opportunity by using the wide spread and taking out a measured move.
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I'm always learning. If I had held this trade for just 10 minutes longer, I would have picked up about 60% more. Maybe I can use this in the future.
 
Available Capital: $4,842

I've had a lot going on in my life outside of trading. My losing streak is enough to capture my attention but not enough to be clearly abnormal. Part of my what has hurt me surely has been the late day reversals, a pattern that I was able to detect and profit from when it started but did not realize it would be persistent.

I'm still up quite a bit in percentage terms. But, this losing streak is not good. More telling is that I've so much important going on in my life that I realize it isn't terribly important.

One thing today was I thought of going long oil. I didn't think it would matter really if I were long oil or the SPX. I don't trade OIL but am trying to expand my edges out.

At any rate, due to outside market factors, I may be required to take a clean break from trading for up to several weeks.
 
Available Capital: $4,581

I'm on a bit of a losing streak. I think a lot of my losses can be attributed to reversal days and trend day failures.

I've a lot going on outside the market. And, that doesn't help. But, I don't feel it is the primary reason I'm losing.

Due to my losing streak and more importantly external factors not related to my trading, I will be cutting down my discretionary trading and only taking my system trades -- at least for a while.

I feel that overall I do better then my system and my discretionary trading abilities are invaluable to my long term success. However, given my tiny account and low margin for error, as well as the changing nature of the market, that I need to be more selective.

I also feel that when using extreme leverage and tiny accounts that systematic trading may be more appropriate --- because there isn't much capital to use for learning and adapting. Most of my discretionary edges can be quantified to a degree and I'd like to do that more -- to try to create the best synthesis of my natural market read and my systematic edges.
 
Available Capital: $4,280.38

Brutal... I was right on the move but decided to use a limit order instead of market. I always use market order but with 5 losses in a row then I decided to need to pick my spots better. I never got filled until the rebound and took a small loss.

I've seen some ways to improve my trading for the current environment. I am not going to be taking any more discretionary trades for at least a week.

I'm too leveraged to mess up. I will be relying on my system trades and be refining my edges.

I plan to add to more high return futures systems to get some lower correlation between them and some diversification. I am a great discretionary trader and value my read. But, I recognize my read isn't working well in this environment. Even with a great call the market would drop, I didn't execute on that properly.

I will win. I will adapt. But, right now I must protect my capital.
 
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