Two and a half weeks ago I made some changes to my trading. The basic ideas were:
- Stop fading
- Tighter stops (< 2 pts)
- Bigger winners (> 2 pts)
- Shoot for 3.33 pts/day trading two contracts.
- Avoid scaling in
Let’s talk about #4 first. In the past I’ve had a goal of x pts/contract. But some trades I’d do 2, some 1, etc. and it got hard pro-rating that. So in the end I decided a fixed goal for 2 contracts was best and if I trade 1 then that’s my problem. For a while I while I was scaling in (#5), and what I found was my best winners were with 1 contract and I couldn’t stay in that long because as soon as I needed to take a scale I was out. And I found my losers were all with 2 contracts. So I wanted to cut down on scaling in. That means being patient and waiting for the right moment and pulling the trigger. So #4 & #5 go together.
Last week I averaged 3.55 pts/day. And my two week average is 3.825. So I’m really happy to have met my goal two weeks in a row.
Over the last two weeks I dramatically reduced the number of fades I did (#1), and that was a good thing because the last two weeks have been very trendy, with many days having 15+ pt range. It’s not good to fade on those days. So I kept out of trouble. Conversely during the European morning session, I avoided fades and went for continuation and often didn’t get it. And during one Globex session I did well fading. So my conclusion on this is fading is really important but you have to when it’s safe(r) to fade. I don’t have set criteria for this but it’s something I need to work on.
I was successful in using tighter stops, and sometimes trailed them too tight. And a couple times I gave it more room and even scaled in a 3rd contract and regretted it – in fact that’s how I got my biggest loss. It’s ok, I’m not perfect. I’m aware of it and I’m tracking it and I’m making progress.
I also went for bigger winners (#3), partly due to the increased volatility that we have.
So I do have one concern: Now that I’ve adjusted for higher volatility, what if volatility goes back to being normal? What if instead of 16 pt days, we start having 10 pt days? Will my trading work? Will I be able to adapt quickly? I’ll have to wait and see on this.
Here’s my two week performance:
The areas I want to improve are marked with orange arrows. I would like my profit factor to be 2.0. To get that, I either fewer losses or smaller losses. I would like my average win to be at least 1.5x the size of the average loss. Scratching does mess this stat up, but clearly 1.00 is not my goal. And I’d like my largest loss to be $250 which is 2.5 pts per contract.
So those are the performance goals I’ve fixed for myself this week and I’ll report on my progress next weekend. I hope everyone had a great holiday, I know I enjoyed the time off this week and didn’t spend 1 second thinking about trading.