Thursday, March 4, 2010

A new discovery and my plans for tomorrow...

I have realised that I have been paying far too much attention to the intra-day price action of my positions and the markets even though I am not a day trader!

I find my self looking at my P&L and open positions as well as watch list stocks intraday every few minutes and sometimes every few seconds (even though my intention is too hold stocks for multi-day and even multi-week periods after having pre-determined my loss).

I have decided that after doing the necessary research/scans and additions/deletions to watchlists, I will determine the night before the market open:

(a) Wether or not I am going to make any trades at all because all my capital is tied up, the market risk/reward is not favourable for trading and/or there are no attractive set ups;

(b) If I do decide that the markets are offering a low risk opportunity and I have identified attractive set ups, I will decide entries, add-on entries, stop losses, and position sizes the night before and employ buy stop orders and/or alerts to get me into the ones that trigger;

(c) I will assess all open positions the night before and decide wether or not I am comfortable with the stop loss positions and if they need adjustment instead of doing this during market hours;

(d) I will not take any trade or place any order that I did not plan the night before! This often leads to a host of errors like trading set ups that strictly speaking do not fit your criteria, taking on massive position sizes; large losses which could have been avoided and getting stopped out prematurely (eg. YUII today!). Basically this messes with your edge and therefore expectancy.

Although I am currently net profitable, not sticking to the above rules has cost me alot of my trading capital and commissions expense in the past few weeks. I have been left to wonder, what if? Well I can't change the past but I certainly can make an effort to be more disciplined from now on and I most definitely will.

So from now on, unless I am looking for entry into a trade planned the night before, I will try my best to ignore P&L and the markets until after the close of trading. I am confident that this will greatly improve my trading. We Will see!!!

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