Slow Trader

Category: Notepad mistakes

  • Trade entries

    Trade entries entered the most are:

    (1) On-limit entry trades that don’t activate, lead the way; this means we did not get the price we were prepared to pay for the trade. And that’s fine. (on-stop entries are not part of our strategy)

    (2) Next, with a similar number, are break even or near breakeven trades; usually these are trades that did not provide the follow through we anticipated. A difficult area of a trade and a clear strategy statistically works best here.

    (3) Further down the score are trades that make target.

    (4) Those trades that are profitable but are exited before target due to price action, rather than nerves, are similar in number to those that hit target.

    (5) Trades that hit stop or are exited early due to price action are fewer than those that hit target, thank goodness! (importantly, these trades are smaller than the target hit trades)

    (6) However, the big leveler on trade entries, and the difference between a consistently profitable trader and everyone else is limiting, zero would be nice, the amount of batty entries. By batty we refer to ego or tired entries, but more often than not they are miss read market reversal entries; a low risk, low probability trade that invariably ends up being vastly more expensive than anticipated.

    The simple conclusion is: read the market cycle and price action and stop batty entries.

  • Conflicting emotions – from notepad mistakes

    We always see opportunities to exit a trade before target.

    We see that we’re ‘in the money’ and worry that a reversal will take our gain away.

    So, we exit early, grab what we can and then justify that to ourselves.

    On the other hand, if we are out of the money, we more often than not hold until our stop is hit (to exit early is an acceptance of any loss against us and we are in hope that a reversal of price will minimise that loss).

    That is our nature, but makes for a poor strategy.

    We need to reverse this tendency and help to balance the equation.

    We need to discipline ourselves to: (1) hold until target and (2) exit a losing trade early if probability favours the stop being hit.

    Sounds easy, but probably one of the hardest things for a day trader to do.

  • Introduction to ‘notepad mistakes’

    As a continuance of my post on ‘learning from mistakes’ I thought that I ought to share some of the mistakes I’ve made (and occasionally continue to make).

    We pay a lot of money for our mistakes, so we may as well learn as much as we can from them. I would like to think that ‘once’ for each mistake would be sufficient, but no, daft as it seems, I can make similar mistakes many times over.

    The best way for me to learn was to write out the mistake, and lesson it provided, in a note pad. At least that way I’m acknowledging and taking responsibility for the mistake and, hopefully, I will refrain from repeats.

    Such posts will be called ‘note book mistakes’. There may be some lessons here for others (albeit I wouldn’t expect the Slow Trader fund investors to gain solace).

    The mistakes are based on short-term trading with a price action bias. However, they are broad in context and may apply equally to any trade duration or system.