This morning my trading results were very good. I took three trades and all of them hit my target – these were long DAX, short Cable and long USDJPY – the net gain after commissions was +2.8R. Additionally my exposure (in terms of time) in the market was quite limited. The trade durations were 6, 32 and 40 minutes respectively. In the afternoon (shortly after I returned from lunch) I took another trade on USDJPY, with a scratch result
What went well during these trades?
I was keeping an eye on various instruments – mostly US dollars pairs so GBPUSD, EURUSD as well as AUDUSD and USDJPY. Finally I was also looking at the dollar index (the “dixie”). I had plotted the daily pivot lines on the charts for three of those instruments. I was rather patient, and looked at how price was behaving around the key levels and pivot levels. I also kept in mind that today was likely to be more on the quiet side – given that it was a Monday, and that there is no Tier-1 news. The DAX rallied strongly in the morning between 7am and 8am, and I took a long just below the 12,000 cash level.
So in summary I guess I watched the market closely and tried to spot correlations between the pairs. All of the dollar pairs seemed to be hitting support/resistance around the same time.
With the winning trades, I often want to get more pips out of the result – this leads to me moving away from the standard 20-pip (or whatever target) – in actual fact, often the standard size target works very well. Over time, as I get more and more experience under my belt, I should be able to make better judgements as to where exactly to place the targets. On the second USDJPY trade leaving the standard target would have gotten me out with a +1R win at 13:09 – with around one and a half pips to spare. Just before price reached the target I removed the limit order, because I thought “what if this goes 20-30 pips above the 120 handle?”. There’s a word for that – it’s called greed.
My first step in developing my psychological component of trading is to ask myself a set of questions at the end of each day – these are listed on this blog post.
1. The entries were based on my technical interpretations of the market, rather than by being attracted by wildly swinging prices. Thus the proficient trader was in charge. In terms of the management, there was some influence from the Destructive Trader who wanted to protect profits and was tempted to close trades early (which did happen in the case of the Cable trade) and was greedy on the USDJPY trade. So a mix of proficient and destructive trader in charge of the position management.
2. Overall, most of the session was spent trading well. I felt patient, in control and disciplined. I didn’t actually spend much time in the market – when tightening stops, I did to still give the trades plenty of room to move. Thus Proficient Trader was pretty much the “dude of the day”.
3. Proficient Trader could ahve been even more in charge by sticking to the guns on the position management aspects. Rather than trying to maximise pips on each trade and going for home runs, just stick with the standard stop and target sizes for now. The real gains are made by entering at good levels. That said, I need to be careful not to be over-structured and non-flexible in terms of the trading approach.
4. Good trading: Use of pivot lines and round numbers, spotting correlations between instruments, using the dixie, patience in entering, good position sizing calculations, good trend analysis and spotting of technical patterns, usage of strength+weakness, use of psychology assessment
Bad Trading: fluffing around with the target-limit orders.
5. The bad trading was caused by the emotion of greed – by wanting to hit big runs on some individual trades.