/ Trading

I made 6.5% yesterday, I should be very ashamed

I made 198 account transactions on 11 trades yesterday in one session, **198!! **I finished up 6.5% on the day trading only the AUD/USD off a 5M chart. A decent day on paper. Yet by far, yesterday was my worst trading day so far this year. Another couple of days like yesterday, and I will be writing next week how I lost 20% in a day.

I am a full time day trader, I trade one pair, primarily in the Asian session, running 10 pip stops that I rarely let run that far. I pride myself on money management and the discipline to cut and run on weakness in either direction, and to follow my trading rules. My forecasting sucks, my hit rates are average at best, but I try to make trading a sport, sometimes you get a ball that’s too good, just make sure you play a good shot.

Overtrading, averaging down and golden rules

The first issue is I made 198 trading transactions in one session, not 198 trades, but account interactions, moving stops, adjusting profit levels etc. etc. How could one session of trading need 198 account interactions? That was on 11 trades. That’s 18 interactions per trade. A trade should need somewhere between 6 – 10. Open, Close, Stop, Target, Stop to break even, perhaps another to lock in profits. Not much more. Too much red cordial for me it seems.

I averaged down, let trades  run to their stops when I knew they were cooked, allowed price to retrace “hoping for another leg”,  kept trades on through important news, you name my golden rules, I broke them. Actually I didn’t break them, I threw them off a tall building and elbow dropped them. Yet I made 6.5%. It’s time for a lottery ticket.

It’s not like I can’t see my golden rules when I trade:

Golden rules of trading image

Simple rules, trade with the trend, get out before major news, take profits and run before a retracement and protect the account at all costs (hence the red pen). I broke all of those rules, every one, and yet by a sheer miracle I made a nice return on the day. It’s nothing to be proud of, yet if I told you I made 6.5% yesterday in the Asian session without explanation, I might be managing your mother-in-laws money by next week.

I got good returns, but I didn’t trade well. In fact I traded rubbish. It was like winning the 100M sprint because the other guys fell down. The risks were skewed so far in favour of blowing a weeks hard work that it was only the will of the universe that kept this weeks profits in tact.

Evaluate how you traded the day, not your end of day profit figure.

Mike Bellafiore of SMB Capital Trading (@smbcapital) says it best in his book, oddly, One Good Trade:

One good trade, then one good trade, then one good trade

Trading is about consistency of execution, of process and discipline. There is no other way to evaluate yourself as a trader. Now where is that wooden spoon, I have been a naughty boy.