Overtrading

[jwlabno]

Quote from steve46:
I've done the same thing with one adjustment that seems to work for me as follows:
In preparation for the next trading day, I take the following steps
1. I analyze the previous day's price activity, noting the opening range, and any breakouts that occur in the first hour.
2. I characterize price action after the opening range as range, congestion, or trending
...
4. I write a script for the next day that includes an "opening range" trade and a "breakout" trade.
...

It's not easy to give up large part of a profit when everything tells you to run.

I normally prepare overnight from EOD data and note support/resistance and prospective entry and and exits (stops and targets). After entering a trade I always put exit order at the price I worked out the day before.

During the day I used to change the exit orders to "meet" the price action. The reason I had was that it's better to lock in whatever profit I had and chance reentry than let it slide all the way down to entry price or below.

This did work from time to time, but for every time it worked and I did lock better profit in, there were about 10 times when I thought at the end of the day "I should've let the order stay as I originally intended"

I still do it, but much less. And even now my Praise to Regret ratio for not sticking to the original plan is between 1:1 and 1:2. In other words I still do more damage than good when "tampering" intraday with my swing trades.

The reduction I achieved and further reduction I am working on is not a one-time expereince - more like continuous event. First few times I remembered (still going ahead with change), a moment before changing the order, that I've done it before and I f----ed it up. Did some thinking and resolved to not to let the trade go in red but zero result would be acceptable, in other words I decided to give up all the profit just to see if it will work better, but this resulted only in slight improvement. I would still override my orders, each time after brief internal fight (the reason trying to keep me in the trade, the fear pushing me out), and the fear would usually take over, I'd say "stuff it, I'm changing it".

The fact that even KNOWING that it is bad I would still do got me into thinking and analysisng again and I figured out that this time the problem wasn't in acting on impulse, but "rebelling" against the way I was trying to deal with my fear. What I was doing each time I felt fear creeping in, was telling myself "Stick to the plan!" or similar. By nature I am more likely to change my mind if I am convinced with logic reasoning than a direct order to do so.

WHen I started ordering myself around to stick to the plan, forcing this way on my trading, some other part of my subconscious mind would rise in protest against this way of doing things, and cause me to fail. So I've changed it to convincing myself, when things are getting hot, and often BEFORE they get hot, in anticipation, I check all charts and depth and when the fears start affecting me I tell myself "OK, it's pulling back, but let's just wait and see if the other way will work better"

So in a way I make out of each case a scientific experiment and watch with curiosity (and slight detachment) instead of fear as the events unfold - and this reduced my brokerage fees to les than 1/3rd.

In my case it wasn't just being aware that I am doing something wrong I also had to find the right way of dealing with it.

 

[steve46]

Buddhatop:
Thanks for your kind inquiry. I am glad to share an example with you. I found that for the DAX for instance, that over a 30 to 60 day period, it was profitable to enter long or short after the sixth bar (5 minute bars). With the help of a fellow trader, I developed a couple of additional rules to filter out bad trades. For example, if the trade was going to be profitable, it would have to move to into positive territory by the next (7th) bar. If not then exit at the close of that bar, or exit with a 2 point stop, whichever came first.
Entry rule was simply to enter long if the 6th bar moved past the high of the previous bar, or enter short if the 6th bar moved past the low of that bar. In addition I found that that tendency was quite profitable if you could get to the point where you had some breathing room (profit of 3 points). If you got to a 3 point profit, you were likely to obtain a 10 point profit if you held on, and in some cases you could expect from 20 to 40 points. I hope you get the idea. This is a very simple example, and there are many others relating to gap openings, specific times to trade, and the activity of commercial traders at the Eurex exchange. In each case the tendency was exploitable for a minimum of several weeks to several months. In some cases, the tendency would disappear for a period of time, then reappear some months later. Hope this is of help to you. Best Regards, Steve46

 

[BuddhaTop]

Steve46


Thanks for your example. One thing I'm not clear about is when you mentioned that you'll enter the trade on the 6th bar when the price trades above the high of the 5th. Do you mean you need to see 5 consecutive up/down bars then enter?

 

[steve46]

No, I just mean that the high or low of that bar exceed the previous bar by 1 tick. Over a period of 30-60 days that setup made money, using a 2 pt stop. There are others. One simply has to look at the price action. It can be done with Excel or manually if you have lots of time. Simply go thru the charts one day at a time focusing on the first hour, then the second and so on. I like to use 5 minute bars, but one could choose any interval that corresponds with your trading style. I look first at setups that seem to occur better than 60% of the time. Then I look to see what happens when they fail. I characterize the max drawdown and then count the occurences to see if the expectancy is sufficient to warrant trading the setup. Hope this helps.

 

[gnome]

Quote from ortega:

I'm a new trader at a prop firm and am having a problem with overtrading. I am trying to be patient and wait for a trade to develop, but as I'm sitting in front of the computer and seeing the price move, I feel that I should be in to take advantage of the movement. I will see it move 20 cents and say, "I was thinking of shorting at the beginning of the move and I would be up $60 by now (I only trade up to 300 shares at a time)." This occurs throughout the day, but there are a couple trades per day that I feel good about and am confident in and they work out more than 50% of the time. I guess I'm wondering what others have done to overcome the thoughts that you should be in the market all the time to take advantage of the moves. How were you able to learn to be patient?

Thanks

"... take advantage of the moves... " I read this as your focus and suggest you view the market as, (1) SETUP, then (2) MOVE. Focus on identifying the setup to be in position for the move.