What am I doing wrong? <30% win rate

[rsthomp 0]

Hello everyone,

I've been trying to trade for quite a while now, taken Andrew's classes, was in the chat for a year, read both of his books multiple times, other books, etc, and I've only been managing about 30% win rate ("win" in the sense of not losing money on the trade, not in terms of getting to my target).  It has been quite frustrating, constant drawdown, and I'm not sure how to improve.  I've provided some examples in the hopes that someone would be generous enough to look.  Thank you very much for anything you are willing to offer.

[Bibonow 19]

Hi there ! quick answer since I have to go to bed and be ready in chat tomorrow, 
1) I think you are chasing. I mean lets take for example your trade on $CORT, the 1min chart show 6 red candles in a row and you shorted on the last one. To me, it is sign that people are about to cover so price will go higher. I used to do that all the time untill I understood why price move. 
Think that way, you wanna go LONG when people cover and SHORT when people sell

 

2) same trade on $CORT , you were patient with the pullback, price droped to 18.30 and you did not lock some profit. Maybe think about scaling out.

 

Feel free to come chat in the chat im Vince with a pig head

[nmarnson 8]

I notice a few things. 

1. As Bibonow mentioned, some of your entries are at the end of moves. Stocks move in waves, and after it makes a move, it has to pullback. Sure sometimes it just keeps running, but 80% of the time, it will do a pullback before the next move. Late entries are giving you a small chance that the stock will keep going in your direction, and a big chance that it will pull back significantly, leaving you with a big loss. I personally ALWAYS wait for significant pullbacks, and get in there. It's a rule for me, for this reason. 

2. Your stop losses are a bit too far, and causing your losses to be bigger than they have to. Here as well, the entry is key. When you wait for a pullback, and get in there, you can get away with a much smaller stop loss. Take CORT for example. If you waited and got in at 18.80, it's much harder for you to get stopped out, and you make more money on the next down. 

Make the waves work in your favor. If you're going short, get in at the top of the pullback. If you're going long, get in at the bottom of the pullback.

Yes it looks like the worst time to get in, and that is exactly why it's so hard to trade. You have to trade for what the stock is going to do next, not what it's doing now. It's the opposite of stock chasing. And it gives you big reward, and small losses. 

Edited December 14, 2018 by nmarnson

[Robert H 455]

I noticed you are trading lower float/sub $10 stocks. These can be extremely risky and volatile, especially on the short side.

I agree with what others above are saying: your entries are often quite late. This means that your risk:reward is less than optimal.

Another thing I noticed is that you are entering without a clear setup or signal. Do you categorize your trades by strategy? If so, please let us know which one you took on each ticker. Here's my brief feedback on each trade:

ASTC: low float, shorted at support, stopped out too late

PBR: Decent trade, good first partial. Not sure what your short signal was as it wasn't a 5-minute ORB

MSFT: Very extended for short entry, right at support. Second short unnecessary after the prior reversal hammer

DSW: Coiling around the VWAP with no clear breakout signals in either direction--chop

LCI: low float, shorted at support. The candle you covered on looks scary. It dripped after it lost the support, so at least you had the right idea.

NTRI: Slightly late entry but great partials during the downtrend

SJW: I remember this stock was very volatile. First trade was actually well managed. Good job. 2nd trade was OK as well. The 3rd trade, you shorted during an uptrend. The stock was clearly reversing to VWAP on higher-highs, higher lows.

AMD: Very late entry but good exits at the 50 SMA

ANF: Too many MA's it was stuck between, hence the chop you got stuck in. Not a clear signal in either direction until it broke down at 10:30 AM

CORT: Chase as noted by the others. The signal for short was after it engulfed around $19

AEO: You had the right idea after the prior red candle and loss of VWAP. Price action seems rather choppy based on the 1-minute chart. Just too many MA's acting as support against VWAP.

My tips: Focus on identifying the setup, timing a good entry, and finding a good target/stop. Remember our job as traders is to react, not predict or chase. Stick to 1-2 strategies for now until you can be consistent. Review Class 3/4/5 if necessary and good luck!

[Willy 25]

Hello,

It seems to me that you do not have clear setups. Based on my experience you must practice two setups and wait for them as a sniper and only then execute the trade. Can you please explain at least one of your setups and the plan you have to execute it?

 

[WilliamH 67]

RSTHOMP,

I want to especially emphasis what RobertH and Willy noted.

It is great you have calculated your success rate at 30%. This gives you something simple and clear to work on. Now how do you work on it?

You need to break down that 30%. This is going to be very hard and time consuming if you have not done it. But it must be done to dive into better understanding the problem and how to fix it. It will be well wroth it.

Consider defining each type of setup you take, and finding the win/loss rate, as well as how big each, win or loss is. Make sure to have a category of "Non Setup" or "revenge trade" or something like that. For many of us, chances are we take trades that have no real setup, but block those trades out of our mind when doing real analysis.

After you find the setups that lose the most, CUT THEM OUT of your trading plan, only for now (you can bring more back later)

For the setups that you find the most success, really focus on them. Hone in on them, really understand why they work. The risk/reward, the time frame, the ease of entry. Master those setups. Once you really understand how to find success with those setups, add more to your repertoire slowly. . . 

Now here is the problem you will run into, that we all do. We are wrong 3 times in a row and think the setup is no longer valid, we revenge trade. We dont even remotely follow our plan. We see other people in the chat posting how much money they made (we forget most people only post their winning days and hide their losing days)and we get major FOMO. We throw our plan out the window, lose big, get exhausted with ourselves and start the cycle all over again. But each time we do this we lose trust in ourselves little by little over time when finally we think we have no clue what we are doing. This is the path of so so so so many traders. It was never about the plan that might have been solid. It was about failure to properly execute the plan. 

So then what do we do? we start over, build our confidence. Use small shares. prove to ourselves we have a solid plan AND can stick to the plan over time. We avoid taking too big of risk, we learn to avoid bad setups, we remember that FOMO will only lead to bad trading. If we can do this overtime and consistently is how we can improve our trading.

[NickAbrams 11]

Wait for the close of 5 minute candles.  Does it show a Trend in either direction?    I only trade when the price is past all the Ma's on the 1 5 and 15 minute charts.  That is when prices move.  William H has a video on Moving Averages that was a huge help to me.  That is your sign of potential trade. 

But now you have to find the entry.  You have to be willing to walk away from the trade.  What changed everything for me was when I started to keep this is mind "don't look at a trade I am not willing to walk away from".   Similar to Don't make a deal your not willing to walk away from.  I am asking the trade to show me more.   I set a deal with the stock and say I'm not set on you yet.  Here's what I have to see to get me to bite.  And I set a entry target for myself.  That is obviously one with outstanding risk to reward.   If the price retraces to that point,  then I enter,  If It does not, and the price continues trending, the trade wasn't good enough anyways.  It doesn't deserve my emotional energy.  It is an emotional field of entitlement and "pickyness", maybe that is the word,  that has been so powerful to my entry plan.  It is the difference between being reactive and being proactive.  As if am a prey animal with my eyes wide open.  I am taking in all this that is happening to me, saying " this is the last time I will be able to get into the trade,I have to get in now!".  It is a sense of desperation!  But of course, this is terrible, because my entry is in between Support, maybe the 9 or 20 ema, and resistance, maybe a daily level.  I want my entries close to the supports and resistances.  I mean within 10 cents on a stock like amd. When I keep my Target Entry plan, I think I psychologically change.  I am not a "prey animal" or adolescent with my eyes wide open.  I become aiming and judgmental.  Thinking " this price is not good enough.  Only this is that I have determined is a worthy entry for me.  I am aiming and attacking focused on entry.  It is huge.  Maybe it takes me to a feeling of power and control that is difficult to have in trading because again,  there is no certainty.  So control is a bad word.   Maybe what I am after is the sense that I decide my own deal!  We have to power to decide our own entry.  But that would mean passing on some trades in the processes.  Now you are making a deal with the stock.  And this is my deal for you Mr. AMD.  And I are firm.  Sometimes the stock gives in.  Sometimes it doesn't  This brings me a sense of hard ball attitude, knowing I am fine being out of this trade,  maybe much better off being out of it.  I am in the drivers seat,  So you, AMD!, will have to show me more before you get your hands of me.    And all this talk sounds arrogant maybe that fierce and judgement attitude is important.    I only trade when the price is past all the Ma's on the 1 5 and 15 minute charts.  That is when prices move.  William H has a video on Moving Averages that was a huge help to me.  

[rsthomp 0]

Thanks everyone for the advice and encouragement.  

NickAbrams, where is this video you referred to?

A lot of you mentioned I don't seem to be trading with clear setups.  I think one problem is that I was relying too much on "When a stock tries to break the VWAP but cannot, you can short the stock..." (1st book), which I was regarding as a setup, and it was not effective.  So I was going short if a stock returned to VWAP, touched it or briefly went above, then closed below it.  

For example, DSW, SJW the 3rd time, AMZN.

Similarly I was waiting on reversals to close below the VWAP rather than taking them at the engulfing point or at a signal of weakness, hence the appearance of chasing some trades (apart from some that were genuinely late entries even based on that setup).  I have decided to stop that also.  I recognized both of these behaviors didn't seem to be suggested at all in the second book.

For example, AEO, PBR, CORT.

A couple of the trades in the pictures above I'm not sure what I was doing in retrospect.  The rest were mostly ORB.

Some action steps I've been working on:
- avoid lower float stocks
- be wary of too many moving averages or levels converging together (which has been difficult because it seems very common)
- cataloging my trades under strategy, stock, setup quality vs mistake, etc
- not entering ORBs that seem overly extended
- accepting that I missed an entry if it's no longer near the signal point
- trying to identify mistakes or patterns that led to failure and then avoiding it

For a few weeks following my first post, this seemed to be going well, but it hasn't held up over subsequent weeks.  I must be doing other things wrong that I am not recognizing:

 

Thank you for any helpful input you can provide.

Edited January 24, 2019 by rsthomp

[NickAbrams 11]

Oops.  Sorry RSThomp.  Here it is.  This was a huge piece of the puzzle for me.  William H talks about how Support and Resistance levels represent Buyers and Sellers.  And when the support gives way,  the price may test that old support as resistance, but this time, there is no Buyer.  So it is a potential Short.  I look at charts and Moving averages with more understanding and feel I can make a plan based on if this or that happens.  Being proactive instead of reactive.  Just another piece of the puzzle.