Friday, November 02, 2007

Review of October

The Highly Effective Traders says, "Confidence is all about trusting in your ability to perform."

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I made just over $2000 this month. The funny thing was that the majority of those gains came from two big days that I had near the end of the month. These two trades are certainly the highlights of my month. The funniest thing of all is how those two trades came after I was no longer trading on a full-time basis. I'm not sure what to make of that, I will have to contemplate it some more.

The low part of the month was near the beginning, where I spent a lot of effort into planning out and making trades that never came to fruition. I kept looking for big moves that never materialized. And to add to the frustration, I became impatient with the trades that I was in, and the market would taunt me by moving in my expected direction only after I exited the trade. Disgustingly frustrating.

I have also started trading the overnight session on a consistent basis. The good part about night time trading is that the action is slower, but no less volatile, so you get more time to think and react to make a decision. The major downside to night time trading is that sometimes it is not volatile at all, so there is nothing to act upon.

This month, I've noticed that I am relying more on trader's intuition. In the Euro trade, it went against me not long after I put on the short. But I kept my stop in place, and I had a sense that it would not hit my stop. I just "knew", and it was only later when I reviewed the trade that the indicators (Fib retracement, and downtrending VWAP) confirmed what I just "knew" at the time. In the S&P500 eMini trade, I just "knew" it was a First-Thrust-pullback reversal pattern, and was undeterred by my initial failure at trading the pattern. I am at peace when I am in synch with the markets. I get flustered and am prone to taking impulse trades when I am out of synch with the markets. That's when I try to make the chart look like a pattern that I know, or stubbornly cling on to the belief that the reversal is right around the next tick.
Knowing what to expect really helps to create your edge, regardless of whether you arrive at it from using a set of indicators, or using your own trader's intuition, or a combination of both.

Having a hypothesis or mental model of the market session is like saying, ".... my analysis says that there should be some buying support at xxx, so if it reverses at that number, I will go long.", or, "the markets run-up 6pts and now it's 705am, if it drops below this number, I will go short." So, it's not like calling a top or bottom at all whatsoever.

So, time permitting, I will continue to publish my daily numbers, because that helps to form my own mental model of the markets. I actually had worked out the daily numbers for today, but just didn't have time to publish them. In fact, I know my numbers are good, now I just need to figure out how to make use of them and control risk at the same time.

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