Live Journal Exercise – Learning to Trade an Edge like a Casino

[Mike B 624]

Hello Everyone,

I just finished three months of live trading this past Friday, and about two weeks before finishing I came to the realization that something had to change if I was going to make it through the learning curve. After reading “Trading in Zone” and watching Mark Douglas’s “How to Think Like a Professional Trader” on YouTube, I decided I would create a 20-trade sample set to work on three areas of my trading.

     (1)    Thinking in probabilities

     (2)    Discipline to not give into FOMO

     (3)    Holding my winners longer

I figured since this is basically testing out a theory presented in one of the recommended Psychology books, I would make the results public so everyone in the community can see it. The desired outcomes I am looking for at the end of the sample set are:

     (1)    Getting away from thinking trade to trade, and start thinking in a series of trades

     (2)    Taming FOMO, so I do not get over excited and enter a trade too early

     (3)    Confirm my profit taking plan is profitable over a series of trades.

All of my indicators, confirmations, and risk analysis that defines my edge is based on information obtained in Andrew’s book and the lifetime Webinars.

Edge Defined

Strategy: 15 Min ORB – I chose this strategy specifically to force myself to deal with FOMO each and every day. I will caution that my edge does not appear every day, so there will be days that I do not take a trade. While tracking 5 Min ORBs and 15 Min ORBs for the last three months (total of 165 Stocks), I was surprised to see that 15 Min ORBs that meet my criteria appear more frequently than 5 Min ORBs. The percentage of them working is almost the same.

     5 Minute ORB Pullback

          Met Parameters - 52 of 164

          Total trades within parameters that have worked - 41 of 52 (78%)

     15 Minute ORB Pullback

          Met Parameters - 55 of 165

          Total trades within parameters that have worked - 41 of 55 (74%)

Stocks for Watchlist: I select up to three stocks to watch based on the following criteria

     % Change – Gapped at least 2% but not more than 10%

     Catalyst – Needs to have fundamental news of sort.

     Vol – >100,000

     Float – High or Medium float (> 50 m)

     ATR - .50 to 2.00

     Trading – Must be trading higher than normal volume

     Exchange – I prefer Nasdaq over NYSE

Edge Criteria: I have three parts risk analysis, indicators, and confirmations

                Risk Analysis: 1:2 or Greater

                Indicators: Must meet 2 of 3

                                Trades within the ATR

                                Small share size with high volume

                                Has a direction upward or downward (higher highs, higher lows, lower highs, lower lows)

                Confirmations: Must meet 3 of 4

                                ORBO closes above VWAP/ORBD closes below VWAP

                                No large wicks/candles (wick cannot be larger than body, candles body not larger than ½ ATR)

                                Closes near VWAP (needs to be within $.30)

                                Has a pullback prior to breaking the opening range (cannot go past planned stop)

Profit Taking Plan: As I am with CMEG, I have found you have to be very selective on when to take profits otherwise you are giving the money you make back in commissions, so I developed strict criteria for taking profits.

                Plan A – 1/3 out at just a little above 1:1 (this allows me to be at break-even if the stock moves back to my entry point), all out at profit target (+/- $.03)

                Plan B – 1/3 out at just a little above 1:1, 1/2 at profit target, all out at technical level or my first out

                Plan C – 1/3 out at just a little above 1:1, 1/2 out near the profit target if stock stalls near it, all out at the profit target or my first out.

Share Size: I am taking share size based on a fixed dollar amount. Thanks to KyleK29 & fjmocke for the hotkey setup.

Daily Trading Goal: My daily trading goal is to trade only within my edge, stick to my profit taking plan, control my emotions, and be disciplined. If I meet these then it is a green day regardless of what my P/L says.

Edited February 5, 2019 by Mike B

[Mike B 624]

I actually started this sample set on January 30, 2019. I was able to take 2 trades within my edge on Wednesday and Friday of last week. Today nothing appeared so I had a no trade day. 

If you click on the image it should bring up a clearer image, so you can read it.

$MU - January 30th

$GE February 1st.

[Mike B 624]

February 5, 2019 $AMD (3 of 20) - Stopped out

Sample Set Results

      P G S 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Picked the wrong stock to enter today out of the 2 that met my edge. Not getting a full night's rest definitely made it hard to focus this morning.

Edited February 5, 2019 by Mike B

[Carlos M. 230]

Hey Mike really impressive notetaking journal you got going!

Putting in that work off the trading screen is huge for improvement. Great job.

[Mike B 624]

6 hours ago, Carlos M. said:

Hey Mike really impressive notetaking journal you got going!

Putting in that work off the trading screen is huge for improvement. Great job.

Thanks Carlos, I got a second part above that portion that tracks my morning/evening routine, rule following, and how I feel each day. I am check box kinda person as it keeps me on focused and on track.

[Mike B 624]

February 6, 2019 - No Setups on my Watch List. 

Sample Set Results

      P G S 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

I was watching $ATVI, $GM, $SNAP. My trade analysis that is off to the right is based on these three stocks. I have $MU on the chart side as it did met my trade criteria, but due to not being on my watch list I did not trade it. I added to show that the setup produced a trade that would work.

 

[Mike B 624]

February 7, 2019 - . $MU (4 of 20) - Hit near profit target.

Sample Set Results

      P G S G 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

[Mike B 624]

February 8, 2019 - Did not get to trade today. Below is an image of the post trading analysis of two stocks I had on my watch list prior to getting pulled into work early.

Sample Set Results

      P G S G 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

[PeterNL 6]

Hi Mike,

Respect for your way of organizing and trading!!

I'm now one month in sim and the only thing I do is jumping from one trade to another. I tell myself this is all for practicing. What stocks do work for me, which strategie, what hour of the day works best for me, etc etc. But I know there has to come a time that I have to go back to basics and get more organised. Your posts are a great reminder for me. I probably won't do things as extended as you do, but it might help me to take some steps in that direction.

I also read Mark Douglas and it gives me confidence that I can survive the learning curve. Great to see that other traders (you for example) practice it in the live trading.

Thanks for sharing, Mike!!

Regards, Peter

[Mike B 624]

7 hours ago, Peter de Beir said:

Hi Mike,

Respect for your way of organizing and trading!!

I'm now one month in sim and the only thing I do is jumping from one trade to another. I tell myself this is all for practicing. What stocks do work for me, which strategie, what hour of the day works best for me, etc etc. But I know there has to come a time that I have to go back to basics and get more organised. Your posts are a great reminder for me. I probably won't do things as extended as you do, but it might help me to take some steps in that direction.

I also read Mark Douglas and it gives me confidence that I can survive the learning curve. Great to see that other traders (you for example) practice it in the live trading.

Thanks for sharing, Mike!!

Regards, Peter

Peter,

I remember doing the exact same thing in sim. Jumping from one strategy to another as I saw things pop up, always having a fear that I would miss the trade. If there is one thing I could recommend to you before going live is to clearly define your Edge (trading strategy) that works for you. The emotions you will deal with when you go live will only be compounded if you do not have full confidence in your entry and exit strategies.  

If you find yourself having issues with FOMO, I recommended facing it head on by limiting yourself to more extended time frames. You can always go back to shorter times frames once you have it under control.  Once I get through this sample set, I am looking to incorporate the 5 min ORB back into my trading. My end goal is to trade 5 min ORBs, 15 min ORBs, followed up by "Robert H the great reversal", as all these build on another.

[PeterNL 6]

Hi Mike,

Good to read that you did the same. With us probably thousands and thousands others :-).

Thanks for your advices. It makes me think about which way to go! Happily I have two more months before I plan to go live.

How are your trades going now, compared with before?

With jumping in and out I usually end up a bit in the green, but the commissions eat me up haha

[Mike B 624]

February 11, 2019 - $AMD (5 of 20) - Stopped Out

I held on to my loser too long. I should have exited before my planned stop when the stock failed to make a new 5 minute low. Although you should not alter the sample set after starting, this is a rule that should have been in there before I started.

New Exit Rule - If after I enter the trade the stock moves against me in the area between my entry and stop, I will exit if the stock fails to make a new 5 minute high/low. I will re-enter if goes back in my direction.

Sample Set Results

      P G S G S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

[Mike B 624]

6 hours ago, Peter de Beir said:

Hi Mike,

Good to read that you did the same. With us probably thousands and thousands others :-).

Thanks for your advices. It makes me think about which way to go! Happily I have two more months before I plan to go live.

How are your trades going now, compared with before?

With jumping in and out I usually end up a bit in the green, but the commissions eat me up haha

Peter,

After a few months of finally getting tried of trading just to trade, I have been able to develop a solid set of criteria that must be met before entering a trade. I wish I had done this in Simulator. It has definitely cut down on my FOMO, calmed me down while in the trade, and has allowed me to focus on developing my trading skills. Once I can get to a spot were I can trade both 5 minute orbs and 15 minutes in the same day, I think I will be at a spot where I can start to increase my risk per share. 

[Mike B 624]

February 12, 2019 - $MU met my trade criteria, but I did not get a pullback to enter on.

It popped up right after the close of the 15 minute candle. Rule 15 for me is that if I miss the entry cut my losses at $0 and move on. In the past my biggest losses have come from chasing a stock after I miss the entry, which then messes up my risk/reward ratio. I had to fight the urge to stay out of the trade but managed to do it. Instead I dealt with the should have, could have, but did not. To manage that I just went back in the journal to my biggest losses and said to myself that is why you did not enter.

Sample Set Results

      P G S G S 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

[PeterNL 6]

On 2/12/2019 at 3:36 AM, Mike B said:

Peter,

After a few months of finally getting tried of trading just to trade, I have been able to develop a solid set of criteria that must be met before entering a trade. I wish I had done this in Simulator. It has definitely cut down on my FOMO, calmed me down while in the trade, and has allowed me to focus on developing my trading skills. Once I can get to a spot were I can trade both 5 minute orbs and 15 minutes in the same day, I think I will be at a spot where I can start to increase my risk per share. 

Thanks for sharing your experience, Mike! I will adjust my trading as from today (at least, that is my plan. You never know with us traders hahaha). I don't have a straight plan yet, as you have, but I think I will at least look for a setup (ORB, ABCD, VWAPreversal) that meets all the criteria. And I will also downgrade my size and risk, thanks to a post from Kurt.

And yes, I am now also on the point that I am trading just to trade. And it starts to get bored. No pleasure when I make profit, more by luck than by a good setup!!

Trade well and safe today!

Edited February 13, 2019 by Peter de Beir