Quote from SumJurk:
I think sticking to your plan is a big part of the whole.
Of course, I'm not saying you can just flip a coin (although some believe this) and make money if you stick to it. You need a method that's sound, such as breakouts, retracements, or reversals to name just a few.
But, I've noticed a lot of traders constantly jumping from one method to the next and back again, over and over.
One week it's divergences, the next week breakouts, the next retracements, and then go back and start all over again.
I think that's why traders fail. They can't pick a method (plan) and just stick with it.
So, I believe if you can find a method you like and then stick with it, you'll at least have a chance.
I've never been a big fan of back-tested "Systems". There's just to many other factors that come into play. Will you be able to make every trade? If someone dies, and you have to go to the funeral, I guarantee you that will be the day you would have cleaned up. Or, the day the power went out...etc.
I'd rather just have a simple sound method, and do the same thing over and over every day. Anyway...that's my two cents.
True story.
I just came to this realization about my own trading last Friday after analyzing my PnL statement for every stock I traded last month to determine where I went wrong.
Turns out if I had been disciplined enough to stick strictly to my real-time screening for trades, I would have been net positive for the month. Instead, I was net negative because of only four bad trades.
One was an after hours, pre-earnings trade on a stock that dropped almost $2/share on me the next day.
Two were stocks that I picked the night before from an EOD screener. They went up initially at the open, then tanked the rest of the day, but since I had seen that the EOD chart looked strong, I convinced myself that they'd recover before the day was over, so I just sat and watched as my losses grew.
The fourth was one where one of the other guys in the room shouted out a ticker symbol which had been dropping, but had a huge uptick right before he shouted it. I saw the huge uptick and thought there must have been news on it, so I bought instead of sold short without asking him which way he was going. Ended up that was the only uptick for the rest of the day. I bought at the top of a 15 cent uptick and it dropped almost 50 cents on me before I could get out.
Rules learned/re-affirmed this past month:
1) Stick to what works, even if you get bored with it.
2) Don't try and day trade after hours.
3) Cut losses sooner, no matter what the charts said the night before (or any other time). Cut 'em and move on.
4) Don't use EOD screeners for day trading. EOD screeners can't take into account news or other influencing factors the next day. (Though all of my picks did well within two days of my picking them - there were others I only watched and didn't trade)
5) Ignore the shouters, especially if it's not clear which way they're going.
6) Stick to what works, even if you get bored with it.
Another thing about these four bad trades was that I was convinced that they were going to recover and foolishly averaged down instead of cutting my losses, even though I knew better.
