23rd May and my first day of day trading
Plan your trade and trade your plan. I have no idea who coined this phrase or when, but it is one that I have tried to ingrain into my psyche since I first realised, I wanted to become a day trader. However, today on what many would consider to be a most important day, my first ‘true’ day of trading, I did not follow this belief. I ended the day with a small loss. But from this loss I learned some very valuable lessons, and some insights about myself I didn’t know. So, all things considered, this day was actually a great success and one I am really very happy with.
So, I have been paper trading for roughly the last six months and decided that on the day of my 48th birthday I would begin trading real money. I have a strategy which I use and still test daily when not trading, which so far seems to be good. Provided that is I stick to it.
I am not an academically gifted person, I’m not dumb, but I’m not a scholar. I don’t have a degree, I only have a GCSE level education, and I don’t have a savant like ability with numbers or pattern recognition. So, what is my edge when it comes to trading?
My edge I believe resides in my patience and my ability to stay true to my plan and to ignore the ‘noise’ and the ‘chatter’ which seems to be prevalent throughout trading. I am referring to catching tops and bottoms, getting in at the start of a trend, not missing moves etc… (I realise now the irony of writing this, when reading the story that follows.)
If I miss a move or leave a fairly considerable number of points in the market on a given trade, then so be it. As many famous people have said “It is what it is.” I care not. I care only that at the time I traded, I traded well and was confident in my action.
This brings me to today. It started well in the morning. My style and strategy are such that they do lend themselves to over trading. The market opened at 08:00 (DAX) and by 10:45 I had only taken two trades for a total of plus 17 points. I was a little gun shy I will admit, and this nervousness led to slightly later entries than my strategy dictates, but I was patient, focussed and happy.
Then came a misstep. I moved away from the screen to make breakfast, came back, noticed what was a signal in my strategy and quickly jumped into a trade. The problem was, I sold at the bottom of a trading range. I only realised this in hindsight when my eyes scoured the chart and suddenly it was too late. I gave back 11 points. I had lost focus. I stayed sat until just after 12:00 midday when according to my reading and research, most brokers and institutions break for lunch until around 2:00pm (the US open). I went to the gym, had some lunch, and reflected on my morning. I came back to the chart just after the US open and the DAX was still in a trading range. However, I struggled to get back into the flow of the market, and by 15:30 I had not placed a single trade despite my strategy providing entries. I started to feel a little frustration creep in because of this perceived fear and reluctance to place a trade. I usually trade the 5-minute chart but decided to open the 1 minute. I could see the volatility right before my eyes and soon found myself thinking about making random trades. Chasing what appeared to be strong moves in either direction.
“If I had sold here, fuck I’d have made 15 points! What about selling here? Fuck another 18 points!” “Maybe I should go long if this opens above x?” This was gambling not trading. Any consideration or use of a strategy was nothing more than a distant memory. “Now, pull the trigger.” Nope, missed it. “What about now? Sell on close.” No again. Then suddenly I opened a trade. I sold. No sooner had I entered than it moved against me. “Fuck! Fuck why did I open a trade? What do I do?”, “If it moves anymore against me, I’m out. Fuck!” Click went the mouse, and nine points were gone. “Bollocks.”
Now this is where the first insight about myself and my trading mentality was revealed. Instead of diving straight into revenge trading or maybe even increasing my trade size to get back my loses and more, my immediate unconscious reaction was to shut the chart, log out of the broker and turn the laptop off. Happy days. I know there are those of you who will ask “What’s so great about that? You should’ve just taken a step back, taken a breath, reassessed and got back into the market calmly. That’s what a good trader would do.”
You’re right. But I am not a good trader (yet). I am a new trader. So, for this to be my natural reaction to not sticking to my plan and trading on emotion instead of information, I am overjoyed. There are many traders who probably wish they could do this as it would save them blowing up yet another account or giving back a week or indeed even a month’s profit. It’s a valuable default setting in my psychology and one that I am happy to have. As regards the lessons. I learned a few.
Always stick to the plan.
If you have a losing trade then realise it is just that, a losing trade. Nothing more, nothing less. Accept it, and let it go. If in doubt, sit it out. If you cannot see the trades, or you are unsure about what to do or how the market is moving, or you feel a little gun shy, then the best and most profitable course of action is to do nothing. Focus is as important as knowledge and patience. Be aware of when your focus has drifted and take a break. Step away. There are 106 five-minute candles in a trading day. It doesn’t matter if you are not there for all of them. What matters is that you’re focussed and present mentally for the ones you are.
Lot size. There is no law that states I must trade a minimum amount per point, yet I didn’t even think about this though when I was trading. In fact, it was only when I started to write this it hit me, “Damn! I could just trade half size per point. This way not only am I risking less on the overall trade, but also it enables me to have a 25 or 30 point stop because in ‘reality’ it is only 12.5 or 15 FULL points.” Why I never though of this at the time I don’t know. But I know that from now on, if I feel I am out of sync with the market, or not trading well, it will be my default to reduce lot size, certainly before considering quitting for the day.
I am new to trading. I’m going to fuck up sometimes. It is good that I make mistakes. This is how I learn. The best time to make them is early on not just so that they are cheaper to make, but so that I can experience them, acknowledge them, accept them, and work them out so the chance of them happening again is greatly reduced.
All in all, this is has been an exciting, informative, and reflective first day introduction to the world of day trading, and whilst of course it would’ve been nice to have ended it in profit, it’s a day that I would not change, even if I could, and I am very very happy and grateful to have had.
‘May all your winners run and run, but your losers pull up lame’
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