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Yesterday I was reviewing what some others on the forum were saying, like @PandaWarrior, about risk control being a real key to success. He mentioned that Top Step Trader's risk tolerance rules were good to use as an idea of how little risk we want to be extending.
I spent time thinking about what it means to me to be risk-protective. And I came up with these concepts:
1) I still like the idea of 2 contracts at a time so that I can use one contract to lock in profits soon but still have a chance to make a healthy profit. I think that's actually something that helps with risk, because if I was only going for big shots, I'd have a higher probability of stacking up lots of losses in a row, which makes top step trader rules hard to achieve.
2) I think that moving my stoploss up to zero quickly is something that mitigates risk. It will definitely cause me to miss out on some winners, but it also lessens my losers for sure.
3) I might use one of the contracts to lock in profit at a point that's equivalent to my stoploss (ie if my stoploss is 6 ticks, then i put a profit target at 6 ticks). That way the trade gets to breakeven quickly. I'm not sure that this really would have a positive expectancy for that one contract though, so I'm not sure if this one makes sense. But it's an option.
4) Do less trades. Be very selective about my entries. Only the golden opportunities should be traded.
5) When I enter a trade, I should look at the "other" side to think of what they're seeing. If I am considering going long for example, but I see that I could just as easily be going short right there, then that's not a play worth doing. It has to be no major reason for the opposite side to be making an entry (or a weak reason).
6) Don't trade the open, close, or oil inventory too volatile.
Overall: lean heavily toward risk protection instead of FOMO. I believe I'll eventually be capable of that if I can prove to myself that it has a positive expectancy.
So I decided that today, I was going to try being really safe using these ideas.
And I did wait for the open to get through before I started trading, first time in a long time! And price went up, and then it had a pullback and the pullback looked absolutely perfect (57.35) and I got long. It started to go my way and then immediately failed. I'm ok with that though because it looked like a great setup.
And after that trade I immediately,without realizing, went back into my gunslinger mode haha.
The fomo is real for me! I actually didn't realize how badly I had it until this experience today. It's largely fomo, but also an urge to find setups that I'm good at executing and making money on.
I ended up at -500 for the day. Had a couple of good trades that looked like obvious opportunities, and they did win. That was great. I also took some questionable trades. I definitely didn't consistently use my risk-protection approach outlined above.
It's true that I don't know which setups will ultimately work for me. But I think if I take the approach of risk management outlined above then it might give me better odds of success and maybe just as important is it also might help me really narrow down the absolute best opportunities.
I think it's still a long road in front of me. But this seems like a good baseline framework to use while I explore. Risk control, risk control.
I walked away +$50 today. Unbelievable!! I didn't lose!!
I was way tighter with my risk today. I took myself out of what turned out to be some big plays because I was so eager to take risk off if it didn't immediately go right. I pulled myself out of one play at breakeven and it would have turned into a $400 winner, for example. Same thing on another $100 winner.
But the max I was down at any point was -200. I got up to +200 but then faded back down. Overall, I do feel like this is going in the right direction: risk control. I'll get better over time at figuring out that balance. I probably leaned a little too heavily toward risk control today.
I went into the day thinking 56.00 was a big level, and I actually saw the wedge forming going downward into 56.00 and I played that for my biggest win of the day.
It broke 56.00 down to 55.75, and man that chart formation right there is EXACTLY what I normally look for on a trend reversal. A really strong spike in one direction, then a failed re-test that doesn't quite make it to the original low but gets close. From my couple months of looking at CL, it seems like that's a great pattern for a winning reversal. I just couldn't get myself to pull the trigger on it. I had two separate times I came very close, finger on the trigger. I somehow went from total fomo mode to total risk aversion mode haha.
But even though I saw that reversal, I was still thinking "let's see this thing go back to 56.00 and I'm going to short it big time". Sure enough it got back there and I was ready to fire, but the price didn't bounce real hard off there. It kind of hovered for like a few minutes, so I didn't think that was a resounding "yes" to my theory being right. I was in risk control mode, so I didn't play it. That would have been a nice little hundred bucks.
Then when the price bottomed out at 55.85 and went back up, I have to admit my brain was pre-configured to still be thinking short. Exactly what everyone says not to do. But when the price broke up thru 56.00, I flipped the switch and realized this thing might be headed up. I was just a little bit too late. I put in a bid at 56.02 at 736am and it touched my price but didn't fill me. The price just took off without me. I really wish I had gotten long at 56.00 a couple minutes before when it poofed above a few ticks and came back down. It was set up for me to give it a shot but I just wasn't looking at it that way until like a minute too late. Always so funny when you look at the chart in hindsight: I was trying to save one tick and gave up so many...
Overall had a lot of fun trading today though. I think I'm probably still over-trading!
Excited to see where this risk control concept takes me though. Nice to not lose several hundred dollars for once...
This day ended up being like a replay of my first day when I started the trading journal.
Strong upward trend day, and I kept shorting at every major swing level on the way up.
The price hadn't gone all the way down to the end of the range, and i was looking at 50% pullback levels for the bigger short trend and got knocked back at every turn.
I lost $800 today. And this is supposed to be in my risk control approach. Part of my risk control approach is moving stoploss up to breakeven asap and setting a nearby profit exit for one contract. But I literally didn't have a single winner today.
Positives from today though:
1) I didn't trade the open. That matches my risk plan.
2) This is the least amount of trades I've done in a day in several weeks. So I'm getting better at being more selective and not exposing myself to as much risk.
Problem is the trades I'm selecting aren't winners. I'm not sure at this moment what exactly I need to change about my setups to give them better odds. I am watching nexusfi.com webinars and trying to learn more, but I'm kind of fracturing my focus by doing that because it's a lot of different ideas. Like I saw a guy who recommended a volume-spike price reversal and I tried that today twice and both times it failed.
The main problem for me ultimately is I don't know which setups have edge, so I'm still experimenting basically.
I keep seeing people talk about managing risk, and to me that means keeping losses tight and being selective about plays. But maybe I'm not interpreting it correctly.
May I ask how large your stoploss is typically for your CL trades? And do you have an other risk management mechanisms in place beyond what you've already described?
Initial stop loss for me is 7 - 10 ticks depending on my entry. For a long time I thought I could get it down to a 5 tick initial stop loss but found CL was a bit too erratic for me to achieve that tight of an entry.
I found that if you only trade 1 contract (whether in SIM or live) it will force you to refine your entries and you will learn how to hold on longer to winners.
I haven't posted in several days. I'm still plugging away every day. I am trying to drastically reduce the number of trades I do, and focus solely on the really important levels.
I'm spending time taking Adam Grimes' free course and also watching webinars from futures.io. Continuing to try to soak it all in.
I'm really enjoying the Adam Grimes free course at Market Life. He seems to think like I think, where with any given trade setup idea there is a question of "yeah but how has this worked historically over many samples". The back test mentality.
I don't know yet where this will lead, but he does share some of his research in the course and I think maybe I'll be able to use that as a springboard to come up with some trading strategies.
I may not post here much for a while because I'm also keeping a journal in a Word doc where I document some private thoughts and I'm having trouble carving out the time to maintain both. If there is a point where I want to open my experience up for input or feedback, I will post here again. I'm really grateful to be part of this community.
