Jan 19, 2009

My pledge

So here are the facts:
I've been trading full-time for close to 3 years now.
I've essentially traded only gap stocks.
I've used the :15 OR for most of my setups and...
I've used the fibonacci levels for my targets.

Now the question I have is - why haven't I made consistent enough profits to convince myself that I can daytrade for the forseeable future? I have really struggled with this question as I know I have the knowledge, the tools and the capital to spot and enter good trades. So why, in my opinion, haven't I been able to take the next step to consistent profits?

For me, it comes down to patience. I guess since I consider trading my defacto full-time job that I feel I need to enter trades every day and try to make money any way possible. What I end up doing is forcing trades and losing focus. Straying from my plan. Yeah, I have a plan. Sometimes I stray because I missed an entry due to distractions or being away from the computer. I take a gamble which is not where I want to be right now.

Here's my pledge: I, OONR7, pledge to only take setups that meet my criteria. I will not stray no matter how bored I may be. I will not force trades because I missed some. I agree that it's better not to trade than to force a trade. And lastly, I agree to only trade setups that match the following charts:

Hangin' out:
After breaking through the OR, price consolidates in the lower (shorts) or upper (longs) part of the breakout bar and near the OR.


F-U:
As price approaches the OR and prints a strong countergap candle (ex: hammer for shorts, shooting star for longs) look for the following bar to say 'F-U' and breakthrough the OR with a strong/weak candle.



Brick wall:
After breaking through and on the first pullback, price reacts strongly to the OR. If the first retrace fails to recognize the OR then ignore the trade. There are other setups... don't obsess.



While all these charts are to the downside it's only because that's what the market's been giving lately. Same rules apply to longs.

16 comments:

Eyal said...

Good post. I think I have a similar issue of forcing trades or going for sub-standard candidates.

In my case I think I need to tighten my definition of a setup, to remove as many discretionary elements as possible. It'll make it easier to follow the plan.

PDT said...

Good luck with your new plan. Unfortunately its a lot easier to come up with a plan than to stick to it.

I get the same feeling to when you've been watching a bunch of stocks all day. You start to rationalize "I've been watching these charts for hours... there has to be a trade here or I just wasted my time".

Good luck!

OONR7 said...

eyal: I think that's the intention of my post. I had been wearing the trader's cap and kinda of piecing trades together... a little of this setup, mixed with that setup. Now, I'm going to look for just 3 setups... all happening pretty much at the OR or during the first retrace back to the OR. There may be a day or two where I don't find any but I'm going to be patient and wait. I know they happen.

PDT: It's not so much a new plan as it is a promise to be patient and wait for the exact setup I'm looking for. Thanks for the well wishes.

Closet Daytrader said...

OONR7,

Did you do any 'Paper Trading' prior to jumping in actions with your real dough? If so, how long did you Paper Traded, and how did it go?

Thanks!

The A Trader said...

OONR7, You said it very well. I have the same problem and I am sure there are thousands traders out there that have the same issue. Setting goals and planning are half of the game and sticking to them is the other half. For me sticking to the plan is the hardest part. I set rules and pushed myself to follow them but after a while somehow I lose my focus and broke them. It may sounds funny but I found out the reason that I break my rules is "there is no one out there to monitor me (other than myself)". I found out as a human being most of us (not all) follow rules and obey them because we afraid to be caught while breaking them and have to be punished for them. Although in this environment the punishment is right away (losing the money) but unfortunately it is not stopping me from breaking my rules. Sounds stupid but it's true.

Self discipline and following rules in this open environment are crucial , which I am lacking them. If you find a way to do that please share it with rest of us.

Good Luck ;0)

Josh said...

On your 3rd chart, you said: "If the first retrace fails to recognize the OR then ignore the trade".

Can you be more specific? What types of set-ups would you ignore?

Also, how do you plan to take profits? 100% position exit at Fib? Or partial?

Thanks, Josh

OONR7 said...

CD: Before I started trading with real money I did papertrade for a little while. Of course, I didn't have the tools I have now to give me a better idea of what has the potential to work or not. My first ever trade I hit out of the park. It was an absolute fluke as the following day I lost the most I've EVER lost in one day.
As for current strategies... unless I'm dealing with something completely unrelated to gappers then I will paper trade for a good amount of time.

A trader: My pledge is not as easy as it sounds. Charts and patterns sometimes look much different as they're developing then when you see them at the end of the day. I really like how you pointed out that there's no one on top of us to keep us in line. So true. Losing money should be enough of a deterrent to stray but at the time of the trade we're not thinking about losing money but the money we're about to make. When you're making money everything's all good... when you're losing - time to batten down the hatches.
I consider sticking to my pledge the same as trying to quit smoking. It will be tough at first but then it will just become habit. I will make sure every one of my trades fall into those three categories or I WILL NOT TAKE THEM.
Thanks for wishing me luck. And if I can do it... anyone can.

Josh: In the 3rd chart, I consider the move before the entry to be the first retracement back to the ORL. While not ideal, price did show that the ORL was considerable resistance. However, if my entry bar would've closed above the ORL I would have ignored the trade for the rest of the day. I'm strictly looking for the first retrace setup. But remember, just because it's not setting up on the 5-min doesn't mean it won't set up on the 15-min chart.
As for exits... yes, for now I will exit completely at the fib. ext. I want to get some good trade down, build up my discipline and then I can try some new stuff (which I already have in mind).

OONR7 said...

CD: Before I started trading with real money I did papertrade for a little while. Of course, I didn't have the tools I have now to give me a better idea of what has the potential to work or not. My first ever trade I hit out of the park. It was an absolute fluke as the following day I lost the most I've EVER lost in one day.
As for current strategies... unless I'm dealing with something completely unrelated to gappers then I will paper trade for a good amount of time.

A trader: My pledge is not as easy as it sounds. Charts and patterns sometimes look much different as they're developing then when you see them at the end of the day. I really like how you pointed out that there's no one on top of us to keep us in line. So true. Losing money should be enough of a deterrent to stray but at the time of the trade we're not thinking about losing money but the money we're about to make. When you're making money everything's all good... when you're losing - time to batten down the hatches.
I consider sticking to my pledge the same as trying to quit smoking. It will be tough at first but then it will just become habit. I will make sure every one of my trades fall into those three categories or I WILL NOT TAKE THEM.
Thanks for wishing me luck. And if I can do it... anyone can.

Josh: In the 3rd chart, I consider the move before the entry to be the first retracement back to the ORL. While not ideal, price did show that the ORL was considerable resistance. However, if my entry bar would've closed above the ORL I would have ignored the trade for the rest of the day. I'm strictly looking for the first retrace setup. But remember, just because it's not setting up on the 5-min doesn't mean it won't set up on the 15-min chart.
As for exits... yes, for now I will exit completely at the fib. ext. I want to get some good trade down, build up my discipline and then I can try some new stuff (which I already have in mind).

TraderAm said...

Good post. I like the F-U one. Just out of interest, are you trading both 5min and 15min charts ?

fir3ant said...

It takes a lot of courage to put it on writing and to be totally exposed to the public. Many of us traders are suffering from the same symptoms and just can not overcome it.
I wish you all the luck (although luck is not what you need here) in the world and may we all, in a few years from now, look back at this period as if it was just a bad joke in our successful trading career.

OONR7 said...

TA: yes, I will use the 5 and 15.

fir3ant: maybe subconsciously that's why I put the post up. To be held accountable so I don't wander off during the day.

Anonymous said...

thanx OO.
I read so many books on trading.Van tharp, O neil, Murphy, Lefebre so on. This is the first time someone made it so simple and yet so obvious. The beauty of this plan is in its elegant simplicity.
This was the holy grail i was looking for, all along.
Thank you OONR, i cannot thank you enough.

regards,
--A trader who would soon be multi millionaire.

Anonymous said...

the flaw in you reasoning is this:
some traders may condier first 15 min, some 30 min & some even 45 min as OR. Since there is no intrinsic OR to begin w/ , a trade based solely on that is bound to disappoint.

OONR7 said...

anon 1: while I sense sarcasm, I still wish you well.

anon 2: you may be right. But more often than not the first :15 usually coincides with a pivot low/high. I'll take my chances but thanks for the word of advice.

niki said...

do you consider the 5ma ?
or any ma?

OONR7 said...

niki: for entries, I am not looking at any moving averages or pivot points. However, once I enter a position I switch over to another view with the 5ema and the 34ema along with the intraday pivots. When price closes above/below the 5ema or 34ema I may consider scaling out of my position. Same goes with the pivots... if price clearly uses them as support or resistance I may either stay in the trade and bail. Hope that helps.