Monday, 18 October 2010

Solve the obvious problems, whatever it takes

As part of the July training my students and the additional students who subscribe to the DVDs, are provided with mentoring from me in various forms.
This is not a commercial for mentoring. What happens during a trader's progress through the program is that they get what I call "off piste", off track (I ski). This happens for a couple of reasons but mainly because a student get to a 70% + win rate and then the irresistible happens - the desire to improve the win rate further.

Now, a good picture has a 70%+ win rate. I can increase the win rate in a couple of ways. One is to reduce the target. For example, in the ES, my all in, all out target may be 3 points. If I make the target 2 points instead, my win rate will increase but probably not my profits. Another way to improve the win rate is to discover a nuance that better qualifies the picture. I get improved win rate and improved profitability.

But entering a trade in accordance with my trading plan, not waiting for my target or stopping myself out for an order flow/momentum reason but because I feel that the trade will be a loser, will NOT increase either my win rate or profitability but achieve exactly the opposite.

This is an obvious problem when I see it. There are a number of others such as trading without back testing, not sticking to a trading plan and so on. When this happens, and it will, a trader needs to pull himself back to his trading plan.

How can you see it's happening? What I do is ask each trader to keep a log and report to me on what percentage of his trades he has made in accordance with his trading plan. I also ask for a snapshot of entries and exits of losing trades. Between these two things, it's easy to diagnose. We then have a chat about what is happening. Usually the next week's report shows a dramatic improvement.

If you don't have a mentor who is tracking your trading then you really need to put things in place so you can do it yourself. That's what the week-ends are for. Doing reviews and market replays and replaying your bad days usually fixes the problems. You may get new problems but eradicate the old ones. Finally bit by bit by addressing each area you will end up having what has been the elusive CP in your grasp.

1 comment:

  1. Perfect post for me today EL. Am on TP 3..........been (sim) long ES for over 2 hours and am + 0.50 pt. yawn!

    been struggling with sticking with the plan! want to scalp when mkt quiet. good to hear this is a common temptation and thanks for highlighting it. will print and paste this one to the wall and will be watching myself in case i get near "the slippery slope"