A terrible end to July and then a whippy start to August.
If I was to summarise July in one word, it would be “wasted”. So in order to make a bad month good (!) I need to make good my wasted opportunities of which I will detail below –
Looking back across my trading diary, if I hadn’t have made 2 impulsive trades I could have actually been flat for the month. This includes getting in too deep with my exposure and closing everything, as well as opening up several trades which instantly reversed on me and hit my stops.
How am I going to go about being better than flat for the months coming ? I need to add a new rule to my trading plan and I need to follow the rest of my trading plan more closely. Two very easy things to say out loud or write down and so two things that I am going to have to work on a daily basis to make sure that I actually do adhere to them.
So, my new rule is, ‘If my equity rises a certain percentage through my trading and then retraces 50% from that high, I will close out all trades in order to book a profit until a clearer direction occurs or the end of the month arrives’.
Looking back through the diary, I always seem to have a good period within the 30 days that I ultimately end up down. So if I had applied that rule from the beginning I would never had a losing month! Sounds easy huh? This is a realisation that struck me hard between the eyes and is good money management.
I’m not saying that I would have been very profitable for each month because I wouldnt have, but so often I have seen a 5% or 7% increase in my account balance only to see it go down to 2%, then to zero and then in a last ditched attempt to get something from the month I open up an impulsive trade with high risk in the hope of a high reward only to get spanked hard!
When going through the trades, a lot of losers have bee ‘scalping’ ones, I no longer scalp as I have realised I don’t have the mental capacity to get out quick enough. Quite a few big losers have been on the SPX, which can do 2% of my balance really easily. So that is now off the list too. I’ll return to the SPX when I have a standard account rather than a micro.
My two trades that I have open currently almost gave me the worst start to a month ever. As soon as they opened, they reversed and I thought I had been suckered in. The strategy that I follow is a trend following one so there are a lot of false signals compared to the real signals. Obviously the idea is that the trend continues and more than makes up for the previous losses following the false signals. The 2 current trades have both come out of a significant period of consolidation so I am thinking that this could be a good trend to follow. Only time will tell…
I met another trader yesterday, he says he’s successful and he certainly talks the talk and I have no reason to doubt that he is consistently profitable. I thought I would go to the meeting and ask some pertinent questions, get some insight into how he goes about his business. What the meeting turned into was more of a confession box situation, where he would ask me a simple, straight forward question and I would blurt out all my trading misdemeanours.
Coming away from the meeting I felt as bad as my balance looked. However, having replayed the conversation through my head and thought about my admissions of how I wasn’t following my strategy or rules, I actually felt good, in as much as I have resolved to try a lot harder. I aim to answer his questions more thoroughly, with conviction and accuracy.
An example of what he wanted to know would be What is my edge? How many draw down days does my strategy average? How much of a win rate does it have monthly?
These were just a few that, if I can answer, I’ll have more confidence in myself that I know what to do mentally when it all seems to be going wrong.
Hope you had a good week!
The Master Investor Show 2020 tickets are now available. Join us at the Business Design Centre on Saturday 28 March 2020.
Book your FREE tickets today using code: MIBLOG