What do you do to stop overtrading / manage trades? | Psychology and Money Management

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What do you do to stop overtrading / manage trades?

  #12 (permalink)

Georgia USA
Trading Experience: Beginner
Platform: NT8
Broker/Data: Continuum
Favorite Futures: ES
JMoniker's Avatar
Posts: 25 since Jul 2018
Thanks: 47 given, 47 received

Take what my post says with a grain of salt as it is only what has improved my personal trading on days like the ones you mentioned. How I react on these days is a bit different.

Stop Placement: Let's say I am long and my stop is 3 points away. Am I willing to go short there at my stop if it gets triggered? If my answer is yes, then my stop is valid because if I am willing to go short there, that means my long bias gets invalidated there. To me, that is a good stop. But if my answer is no, then I am trading my P&L and my entry was too early and I simply cannot afford to scale in and play the whole zone. I don't enter on horizontal price levels such as "I will enter at $2960 and $2960 must hold with a 3 point stop!!!". For example, I will do 2950 - 2960. So long as it is within this ten point range, I am happy to stay long. If I am not willing to go SHORT at 2949, then that means I am STILL bullish, which then means my zone SHOULD have been 2940-2950 instead. This is how I avoid getting stopped out. The second is that especially with ES, there are giant shakeout candles ALL the time that don't have any follow through. You know, those candles that are as long as your finger that appear out of nowhere and then completely erase itself back down. I've seen too many of them and now when they appear I just giggle instead of having a heart attack. This again goes back to playing zones, not specific prices. A three point stop means nothing to anyone except me. It has nothing to do with anything. I go long if my stop is where I would go short, that's the simplest way I can put it. To summarize, if I can't afford the zone, then I can't play. Period. Watch your instrument. When ES goes vertical into resistance, with the momentum of the speed of sound, I've seen it get slapped back down at the speed of light just as viciously. It loves to move quickly and trap traders. Another tactic to is enter where your stop WOULD have been, given that your bias is still valid there. (i.e Wyckoff Spring). Price doesn't move in just one direction and price doesn't have to go up immediately just because I happened to go long. I always try to remember this.

String of Losers: Again, this is how I personally look at this so take it with a grain of salt. I only trade ES and here is what I know to be true for MYSELF about ES. It is always within a range. When it is trending, it is within a range. It's been inside a range for two years (daily chart). You'll find an infinite amount of ranges within ranges as you go down the time frames. What looks to be an uptrend is only retracing a prior leg up towards the top of yet another range. Knowing this, I tell myself very simply: buy low and sell high. Know the current range. Do not trade the MIDDLE of it. You may buy the bottom of it and sell the top of it. Stop taking trades that you KNOW have very little reward. You know those ones where you KNEW it wasn't gonna go very far? Every single trade can hurt, even the small losses. I stopped putting on little "playful trades" or "feeler" trades. This last bit might be a little controversial but I don't quit if I've had X number of losers in a row. If a setup is there I'm taking it. For me, if I have three losers in a row and I quit, this is extremely damaging emotionally. My anxiety is high, I can't sleep, and I feel terrible when I come back the next day. There's a fine line between revenge trading and going crazy trying to make your losses back but what I do is, I look at every trade separately. Those three trades I lost in a row, I learn what I need to, and move onto my next setup if there is one. There have been many days where I would lose three times in a row then make back all of it and more on the next trade. Again, ONLY IF a setup is there. As you read into Mark Douglas, you'll notice he's a huge advocate of taking EVERY setup you see, not just ones because you're in a good mood or feel particularly optimistic that day. If I'm getting chopped up on a choppy day, then I failed to realize it's a sideways chop day. Once I realize what it is though, I get back in. People can trade chop. People do. I said I wanna learn to trade it. Get back in when you get a grip on what's going on. Because I know you've had days where you quit and then watched it do exactly what you thought it would and then your soul shrivels up. Micro contracts are available so trade those if that will enable you to dust yourself off and get back in.

Itchy Finger: You'll get rid of this when you've lost enough money from taking "playful" or "feeler" trades. To me, this particular finger has not experienced the WRATH OF FIRE AND THE MOURNFUL WAIL OF DYING DREAMS and..sorry I got carried away. It'll fix itself in time. You don't have to let it teach you that lesson though. You can change that now.

In conclusion, I just really want to drive home this last bit. I don't have a job outside of trading anymore, it's my sole source of income. I have no family, wife, kids, etc. I have time to stare at my instrument all day, which is ES. It's all I did for two years as I busily went from being six figures before starting to trade to six nickels to rub together for warmth. You have to really know your instrument almost like it's a person. I refer to ES as "him" in my journal. I know his personality, his characteristics, his habits, and his moods. I spent 10 hours a day for two years getting to know him. There were days where my legs would get white splotches and my feet turned purple from sitting so long at my desk. My knees ache on rainy days and I still have weird discolorations on my legs. But say for example I pull up a chart of CL. All of my supposed "technical skills" I gained while pretty much getting diabetes go out the window. As I skim through the charts and varying time frames, I can see with my eyes that none of my setups would have worked. This is where I feel I have an edge, only in ES. I can't even trade NQ. Again, I just don't get it. The price action even though it's supposed to be so similar to ES, doesn't speak to me. The way NQ's candles print makes my head explode. But there are people who say the same about ES. So whatever instrument you're trading, get to know him really well and you'll be able to see when he's feeling flirty hunting for stops or algos are going up 10 points and then dropping ten points right after each other or he's breaking out.

P.S - For me, and maybe only me, my P&L actually got better when I stopped placing manual stops. Obviously I'm not going to let it run 50 points the other direction, but those tight little 3 point, 2 point stops were really chewing me up. I'll sign off with one of the most basic but earth shattering pieces of advice I ever got: "In a bull market, prices being rejected at resistance is not bearish. Support levels not holding is". Laugh if you want, this changed everything for me. Good luck!

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