How to improve patience in a trade

[nickyang07 6]

Hey guys. I am really struggling in the consistency. I have major two issues. So far I can have more green days than red days, but I lose too much on red day. I have worked on stop revenging trading when I am in big red. It's getting much better now. But I still did not good in terms of patience.

 

The only time I am patience is when the stock is really in my favor, and it starts to move immediately. Like ORB, I will take some profit in the first or second drop, then I will feel safe to let it run. Most of my good days come from this scenario. However, when stock does not move in my favor very soon. I tend to be nervous, and get out position too early, either with very small profit, or stop out prematurely.

 

For example, today I also made the same trade in AXON (ORBD), and AMD (ORBU) as Andrew.  The entry are very similar, but the outcome are very different.

 

 

 

(My exit are marked as blue line). As you can see, I took my profit too badly. The pullback of AXON made me a little nervous, so as soon as it give me some profit, I feel like want to take it. For AMD, after I got in, it's in the consolidation for 2 or 3 minutes. Because it's a little bit extended in the 5 minute chart, and there are some levels around 14.90$, I was afraid it will have a big pull back to the EMA9 in the 5 minute. Then I will be struggling whether to add more or prepare to get stop out. Sometimes, I saw Andrew will add more in the pull back. I think it's a right method when the market is a little bit choppy, as long as the stock is still in the right trend. But I will definitely take out my position if it break the EMA9 in the 5 minute chart.

 

I am really curious about the thought process during these two trades. What I can do to execute them better? How should I be more confident to wait for the 5 minute candle to unwind itself. If I am only be patient for couple of minutes, both of these two trades can turn out to be big wining trade. Then I can close my day. Unfortunately, I did not hit my goal, so I kept trading, then it turns to a small red day....

 

 

 

 

[Carlos M. 232]

Hey Nick!

 

You are experience what most of us are going through as new traders. Biggest issue for me when I started live are the two you just explained and I believe this is what hurts a lot of us to become consistent and grow our accounts.

 

First issue is we become strict with our winners and take profits right away and we become lose with our losers and let them get bigger than they need to wiping out several winning trades.

 

Second is that on red days we keep trading to try to make it green or break even, and boy what a mistake that is. When we hit our goal we stop trading, feel great, and hang out in the chatroom or just leave to go enjoy the day. Just Perfect. But when we are in the red, we want to be green so bad that we keep trading and lose 2x or 3x more than what the loss was originally. My biggest losing days have been trying to dig myself out of a hole to end green, wiping out hard work on other goods trading days.

 

We need to be strict with our losers and losing days and call it quits and we need to be lose with our winners (not too lose take profits on the way up lol.)

 

As for your trading above, AMD I find to be a hard stock to trade most days and I stay away from if there are other things on the watchlist. It tends not move fast enough most of the times and I like stocks that have a lot of momentum in one direction.

 

And AXON was very choppy based on that chart so not sure how you could have traded this better.

 

Carlos.

 

 

[nickyang07 6]

Carlos:

 

Thanks so much for your reply. You are right. That's the two sin for day traders. Many of my bad days are because I want to break even. I have to find a way to overcome this psychology barrier. Sometimes I just felt like my performance is doing a consolidation, every time trying to break the resistance, it got rejected, or have a false breakout. LOL. 

Regarding those two trades, I agree with you. Most of time I don't want to trade AMD, it's very slow. AXON is choppy. Should be more conservative on trading these kind of stock before becoming consistent. You know, I am really amazed how Andrew did on the profit taken. When he is in the right trade, he can always maximize the profit. That's the how he can always be green even with bad loss right at open. 

[Robert H 455]

When I find myself thinking about P&L during a trade, I start talking out loud about the price action. For example: 'We are making higher-highs and higher-lows. This moving average is clearly support. The original price target is still valid.'

I've found this method forces you to process the market information, which leads to being more patient and objective.

[nickyang07 6]

That's a very good advice. I did that before, but then forgot sometimes. I will certainly try it more.  

[GordonDK 6]

A couple of things that have helped me out quite a lot in recent weeks:

(1) I use hard stops for all of my trades. This puts a quite precise limit on what I can lose on a trade, and takes the edge off completely psychologically of when to get out of a trade. If I get stopped out, I simply move on to the next trade (or stop all together - ref. trading rule No. 3 below). At the moment I am mostly using a stop loss of 20c on e.g. ORB and VWAP trades. For both of these I try not to enter a trade unless my stop loss is then below or above the VWAP (for long and short trades, respectively). Perhaps later when I get better at this, I will start using mental stop losses, but at the moment it makes sense to me to use hard stops.

(2) After I enter a trade I will sell/cover 1/4 of my position after 0.2 to 0.3c gain/loss if the trade is going in my favor, and then I will move my stop loss up to the average entry price (as Andrew says he does). This takes the edge off considerably, since I am now in a risk free trade. I will then try to let it run until I can exit with a real profit to risk ratio of at least 2:1.

(3) I stop trading if I have two losses, where I get stopped out according to rule No. 1 above, in one day (without any winners). Period. Shut down the computer and walk away for the rest of the day.

(4) Since going live about three months ago, I have focused mainly on getting good at ORB and VWAP trades (only taking one or two trades per day at the moment). I simply try to stay away from other types of trades, though I think I will start dipping into ABCD and reversal trades now in the coming weeks. I think it's generally a good idea to break things down into smaller pieces (in life in general), and then try to figure out the smaller pieces one by one - rather than trying to figure it all out at once (unless you're Einstein the latter approach will probably not work - and it's probably not how he did it anyway).

Trading rules are always dynamic, I think, so the above is where I'm at right now. Will most likely change in the future as I gain more experience. Hope this will help.

[GordonDK 6]

Just a short update on my trading progress. With regards to (1) above, I have now moved away from using hard stops, since it would impede my future long term development as a trader. However, using the hard stops for about 6 months or so really instilled within me the importance of respecting my planned stop losses for the trades that I enter. For you guys out there who find it difficult to respect your planned stop loss, you might want to consider using hard stops for a period of time. If you use hard stops, then you have no choice but to exit a trade at your planned stop loss. As I said, I do not need to use hard stops anymore, but it was useful on my path to (one day) becoming a consistently profitable trader (a status that I have yet to achieve, though...).