It's taken 15 months, but finally it's happened. I guess it was inevitable when you consider just how difficult trading is. At least I can take some solace in the fact that I am not the only one who this has happened to. Many have come before me and many will come after to whom the same destiny awaits.
This week....I finally....traded my strategy 100%! I finally proved to myself that I can be the trader I know can be and it feels f**king amazing!
Well I say 100% but it's more like 99 because of one small mistake with regards to a stop placement. For reasons I still cannot work out, other than the fact that my focus obviously wasn't where it needed to be, I placed my actual stop two points higher than I should've which resulted in me being stopped out (I would've still been in by 0.35 of a point!) and so taking an additional trade, which had I used my strategy and it's rule for the placing of stops, I would not have taken. Other than that, 100% baby, and I cannot tell you how good it feels, in more ways than one. Not only does it give a real sense of freedom to my trading (I'll explain this in more detail later on), but it makes me realise that provided my strategy is a winning strategy, then there is a glimmer of a chance that this can actually one day, become my fully time job and that...is...everything! That's all I ever wanted this to be. But let's not get ahead of ourselves because if it's one thing I've learned through my short trading career, it's that just when you think you've nailed it, it reminds you in fairly quick order that you haven't. You're still its bitch and not the other way around. So before I start dreaming about quitting my job and owning my own house, I want to actually take a step back and look at myself and my journey, introspectively, and analyse how I got here, and equally as importantly, how do I stay here?
As regards how I got here, I can pinpoint the exact time and moment that was the tipping point in me realising that something had to change, I had to change, because if I didn't, I was going to stagnate in a no mans land of perpetually breaking even. It was Friday 18th August. I was reviewing my trading for the week using my spreadsheet. On the spreadsheet I track my 'actual' trades and their results vs my 'could've' trades had I followed my strategy religiously. I record the time the trade was taken, the instrument (DAX or FTSE), entry price, stop level and the exit price. I also colour code the trades to show a number of other things, but the main two are - if I moved my stop, and if I manually closed the trade instead of using my exit strategy. Any differences between the two hight-lights where my weaknesses are. For example, I was guilty for a long time, of closing a trade too early and leaving a lot of points in the market because I let emotion decide, or rather more accurately and psychologically relevant, I let my lizard brain and it's fight or flight response to pain decide. I'd dropped over a 100 points that week and also noted that my strategy had returned a small loss. This was the first time since I'd been keeping my spreadsheet back in the beginning of March. It was then that I decided to have a closer look and see just how successful my strategy had been up until this point. I noted that in 22 weeks my strategy had returned only one losing week (this week and it was only -13 points), and in total had returned 2061 points! Working on the principle of moving up in stake size every time my account balance doubles, by 24th July I should've been trading at £2.00 per point, and up until this week I would be 370 points short of moving to £4.00 per point! However, here I was still wallowing around at the minimum £0.50 per point. I'm not much for abbreviations but WTF???
So this raises some serious questions. What was I actually doing if I wasn't following my strategy, and more importantly, why was I not following my strategy?
When I looked back on my actual trades I was doing two things which stood out most with regards to the huge difference in results. I was not staying in the trade long enough which seemed the most destructive, and I was trading erratically (emotionally) and so largely ignoring my strategy in favour of trying to guess correctly what was going to happen next. For example I'd watch the market make a move without me and I'd umm and ahhh about getting in. Should I get in now? Where will I put my stop? What if I get stopped out will I get in again? In hesitating like this with no clear plan I was getting in at the wrong time and getting stopped out for a loss. Or, I'd look at the market and instead of taking a trade, I'd convince myself I was being 'patient' and waiting for a good signal when in truth, I was fearful of losing. Then I'd get a signal, I wouldn't take it aaanndd the market would move without me and I'd end up missing a great move (30/40/50 points or more). Then of course I'd get annoyed and would try and take what I call Up/Downs or Down/Ups. This is where you get a fairly large candle moving in one direction, say thirty points or more, only for it to close on it's respective high/ low and then on the very next candle, the market would reverse virtually all the way back to the prior candles open. It has minimal risk as I assign a 5 point stop loss, but they don't happen as often as I liked to think, so would lose again. I was flipping the switch, certainly not a bad thing to do and something I will develop more in my arsenal as I progress, but without any real consideration for market conditions, and to compound this further, I wouldn't stay in it long enough when it did move in my favour anyway. I was over trading or to put it in more simple and accurately honest terms, I was revenge trading, but without the acknowledgement of that being what I was actually doing.
When it came to staying in a trade, I was guilty of acting on impulse (emotion) and not the mechanics of a strategy, and as soon as it stalled and moved slightly back against me, I'd snap close the trade, happy that I took 22 points instead of 10 or even worse, a loss, only to watch it then sail off in what would've been my favour, and those 22 could've been 52, 62, 72 or more...
Armed with this knowledge now presented in unarguable black and white, and having confirmed it with my review of the actual and could've sections on my spreadsheet, I could no longer hide the fact I had, without acknowledging it, until now, joined 90% club, but all the while convincing myself although I wasn't profitable I wasn't blowing up, I was breaking even, so I was actually a good trader. The truth hurts as they say, but, they also say that for the phoenix to rise from the ashes, first it must burn. Well, this intervention if you like and the hard facts it showed me, was my barbecue. I decided there and then that on the coming Monday, whatever happens I will 100% trade my strategy. That's it! No more BS. Trade your f**king strategy. And I did, and it felt so damn good!
It felt good because when you trade a strategy, it removes all the emotional chains that weight you down. You don't have to think about anything other moving your stop as and when is practical. The strategy takes care of everything else. The signals dictate when I enter a trade (without hesitation or reservation - to quote Mark Douglas). My stop is ALWAYS 3.5 points below the low or above the high, dependent on the direction of the trade, of the candle prior to my entry candle. This gives the trade a 3 point buffer and the 0.5 accounts for the spread. It dictates the exit point of each and every trade should they move in my favour. Notice I said point and not 'target'. I don't deal in targets. Why not? Two reasons. One- how can you possibly set a target when you don't know where the market is going to go? Two - a target adds emotion to your trading because what do you do if it falls just short or exceeds it? Hold, add or close?
I'll give you an example of just how freeing this really is below.
On Friday my strategy gave me a sell signal at 0932 in the DAX. Looking at the prior price action, I knew I was very likely to get whipsawed out, but, I was trading my strategy so I took the trade. Sure enough it stopped me out for -15 points. Now this is where is gets interesting. The exact same candle reversed, and as per my strategy, this cancelled out the original entry signal. The very next candle then gave me a buy signal, so, without missing a beat, I was straight back in in the opposite direction. The next candle after that one turned the market back against me and I got stopped out again (this is the trade I referred to above with regards the stop being two point to high - as per my strategy), and that resulted in -23 points. Then at 1000 I had a signal to go long. I snap took it without any hesitation, set my stop, and I stayed in that trade all the way. I ignored any feelings of discomfort and wanting to realise profit. I used my exit strategy and eventually closed it for +27. Now this may not seem that impressive to those who've been trading a long time. In fact it might be standard, but for me, it represents a true epiphany in my trading. It shows me I can be the trader I so desperately want to be. It shows me I am the trader I so desperately want to be. I ended the morning, thanks to that last trade at +5. Had I not messed up my stop placement it would've been +26. But it's not about profit or loss, it's about discipline and sticking to a strategy religiously, through thick and thin. Had I not had my 'intervention' and had I not been trading my strategy religiously, I can assure you that those two losing trades would've affected me negatively, and I likely would've closed the last trade much sooner, had even taken it at all!
Although I've said before in my Weekly Updates I'm looking forward to the following Monday, this time I really am. So much so that I am looking forward to this week more than any other week in my trading journey so far, because I know, whatever happens, win, lose, or breakeven, I am finally the trader I knew I could be.
At last...
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