New direction

After struggling for the last few months to make a decent living by trading and doing the name of my blog justice by now being almost out of money, i decided to give my professional life a new direction and stop day trading.

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I can honestly say that trading for me was very  interesting,but at some point my obsession with all things related to the financial markets became more of an addiction than an actual job. I think there are lots of traders who know what i am talking about, i in fact know that a lot of traders in different chat rooms admit that to each other, but it always comes across like some kind of joke,when it really is serious.

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I value the experience of doing this for a few years now and i am looking forward to the different things that life has to offer, because trading can narrow down your horizon of expectation,when everything you always think of is the amount of money you can make or lose.

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What is really lacking when you are a day trader is the feeling of doing something useful for society or even yourself. As long as you surround yourself with people and media that  mostly value your financial success or the status that comes with it, that feeling stays in the back of your head.

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But as soon as i started to lose money i began to ask myself, what i really tried to accomplish. And i finally realized,that i had become addicted to the excitement of trading and the insecurity of not knowing what the next day would bring. But even as i kind of enjoyed the anxiety, it also weighed on me and made me tense and sleepless sometimes.

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At this point i am looking forward to something more secure and organized. This will probably be my last entry to this blog, and i hope that anybody who is either day trading or thinking about starting a career as a trader can get something out of my experiences.

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Scalping high volatility

I didn’t post my recent trades,because the market was as volatile intraday as i have never seen it before. I changed my strategy to extremely short-term scalping. Scalping 2 points or 5 points in about 30 seconds is not possible when you try to post every entry and exit.

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As soon as the volatility in the mkt normalizes again i will return to trading as usual,but right now it still is a very unstable environment. The mkt is extremely news driven and i will wait for a slowdown and a trend. As long as this continues i will keep my risk low and my holding time extremely short.

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Discipline pays!

In my last post i was really upset about my trading. I didn’t follow my rules last week,i was undisciplined and i overtraded. I went into this week with the intention of not taking more than two trades per day. Not because there are not more than 2 opportunities to make money every day. There is almost unlimited opportunity for a day trader to make money during every single day.

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But on the other side,there is also unlimited opportunity to make stupid mistakes every day. And therefore i knew that trading less  would force me to be more patient with my entries. And even though i know that i missed some great opportunities this week,even that realization shows me,that patience is very important,and it reinforces positive behavior (at least i hope that it does next week) that it worked the way i hoped.

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I didn’t make a lot of money this week,to be exact it was 382,50$,but the important thing is, i followed my rules and as a result i had only one loosing trade for the whole week. In retrospect i know,that had i been more patient and waited for the best opportunities, i could have made double or triple that amount. But step by step i will get there.

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There are a lot of things,that i know,but still don’t consider every time. One of those things is,that when trading the ES_F it is very important to get in @ exactly the price that u want and not 1/4 of a point higher or lower,because at the end of the week, when you take for instance 10 trades and every time you buy 1/4 of a point higher than your perfect entry, that is 4 points or about 200$ that you didn’t make,just because of that. That is 800$ per month….

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It is critical to be aware of the bigger picture of your trading all the time, not to think that this one trade you are in now is somehow different because of some news event. There is always news out there and there are always good and bad setups. It sounds simple and it can be simple, if you just don’t over-think it.

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Blame Yourself!

Sometimes traders tend to blame the government,the Algos, the media or something else for their bad trading performance. When i look at the way i traded today, it would be easy to complain about all of those things.

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But ultimately the only reason why i had a terrible day today,was a lag of discipline. I wanted to wait for good low risk,high probability setups. Instead i traded on every large green candle or breakout of a channel. Instead of analyzing the market and waiting for the trends to develop,i just jumped on every small move at exactly the wrong time.

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Coming into this day i knew that it would probably be very choppy,because of all the news and opex. I was even thinking about taking the day off because of that. But because i am addicted to the market i couldn’t  do that.

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The only way to stay in this game is to learn from these mistakes. This job is very challenging exactly because it is also an addiction(for most of us). I still have to learn how to control myself better and not change my trading because of some emotional bias.

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Next week i will trade a lot less and make a lot more money. That is one reason why this job is so great: doing less can mean bigger profits!

 

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Writing down a plan

Usually i have i pretty exact picture of what i want to do in any situation. I thought that i didn’t need to write everything down in advance, because i told myself, that it would make me less adaptive to the market. The market is like a moving target and it can hurt you when you have a plan that is too exact.

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But,the big problem with that approach is volatility. It increases at turning points or at important support/resistance levels. At those points i always over trade. This is especially bad because after the choppy action in the market is over, usually trading will be somewhat easier again. But it is harder too trust it,when you got chopped up in the wild intraday swings.

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For that purpose,it is very helpful to write down a plan for every scenario, that is as precise as possible. That will lead to less trading,prevent emotional reactions and save money

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Friday is a perfect example of that. I saw pre-market,that NQ was failing at 2250.  I should have taken a short against the pre-market high @ about 2255.  But because i was not prepared well enough,i shorted too late (2243.50) were the risk reward was not that good any more. I quickly covered, then thought the market should go higher and at least test the pre-market highs again. So i waited for an opportunity to get in, disregarding too many of my rules, i stepped in at the first sign of stabilization,although VWAP was still declining and there was no real sign of some significant support (it was just a bounce in a downtrend,just like so many).

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That shows the importance of having an exact plan written down.You can make rational decisions while the market is closed and execute them during market hours. When you don’t make rational decisions that are based on a plan,the market will very likely suck you in at exactly the wrong time.

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Transparency

After having the same problems with my discipline multiple times (selling too early as soon as my profit reaches certain levels)i decided to make all my trades public on profit.ly from now on. I hope it will help me doing things the way i planned every time and not only most of the time. Today i didn’t trade well: i traded the Nasdaq Futures (NQ) and sold after a combined total of 4 points with 3 contracts.

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My entry was very good but my exits were much too early, considering that the NQ gained about 40 points today. Had i followed my selling rules i would have made almost 1000$ today,but i actually made only about 200$. So even though i made money today,i had a terrible trading day. Had i not made money,but the right way, it would have been better.

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Trading different setups

Recently the market has been going down during the day. The 5dma is declining and in that environment most breakouts are failing,so it doesn’t make sense to trade them. To make money in this market i was looking for a different setup that seems to have a higher win rate.

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Because we have mixed messages (shorter term decline in a long term uptrend) i look for weakness,stabilisation and then small bounces for scalp trades,as long as the 5dma is not flat or rising. You cannot expect much out of this mkt as long as so many people are selling into any rally attempt. But shorting it with all the longer term moving averages rising is just not what i do. So my trading will be less frequent and i will close my positions more quickly until all the trends are pointing in the same direction again.

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