UNDER A TRADING REHAB !!
I AM UNDER STRICT REHAB RULES UNTIL I PROVE CONSISTENCY
REHAB RULES:
1. TRADE TWO SETUPS ONLY.
2. DO NOT TOUCH ANYTHING THAT IS NOT AN “A” SETUP
3. GET OUT OF POSITION AT THE FIRST SIGN THE TAPE IS AGAINST YOU OR IF YOU FIND OUT YOU MADE A WRONG ENTRY. NEVER MAINTAIN A POSITION HOPING.
4. IF A STOCK IS NOT GOING IN THE RIGHT DIRECTION WITHIN 5 MIN OF YOUR ENTRY, LEAVE THE POSITION AT FIRST OPPORTUNITY.
5. MOST IMPORTANT: HAVE A CLEAR DEFINITION OF AN “A” SETUP
Summary:
It’s been a while since I lastly posted here. I only started paper-trading again a few days ago. That might have been an interruption of any trading activity for maybe a year.
What I learned for the last few months is: “In trading the best losers win”
Accepting and managing the downside is what it means to be a good looser. Kristjian Kuillamagie has a win rate of 25%, which means out of every 4 trades, he is positive on only one ot them. Yes, he has a setup, yes, he has a good stock selection process and deep understanding of market conditions, but what really is the core of his trading is a tight stop loss and frequent but minimal losses. Most of his trades are losses. He compensates with 10, 20 or even sometimes 50 times reward to risk ratio.
Circling again back to risk management – what is your behaviour when the market goes against you. How quickly you cut a losing trade? Where is your stop, is it strategically placed, is the size based on the stop and the recent volatility fo the stock? How many trades do you have in a red day?
Here are some rules that will help my manage the downside based on today’s red day experience:
- in a red day, stop trading after 3 trades
- do not trade a stock with 2 losing trades on it, take it off your watch list
- size the trade based on your risk calculator
- Do not deviate from your risk management algorithm: am I in a good mental and emotional state; is the market sentiment favourable; is the stock smooth and easy to read (my favourite stock today was choppy as hell, heavy with lots of sellers and big sellers at that and all this was obvious – I decided to play and take risk, prove my righteousness, instead to trade only the easy stocks and stop trying to prove I am smart); is the stock giving me a double ot triple support to play off it; how close is my entry to the support; how good is the R/R ratio, how far am I from resistance
- Adopt this mindset – I am always wrong, there is nothing I need to prove here. The market will always outsmart me. So, plan accordingly for the stop loss. Have that realistic stop as close as possible so the loss is minimized. Then enter and be ready to get out ASAP.
I AM ALWAYS WRONG, SO HOW DO I MINIMIZE MY LOSS?
This is the right mindset to have at every entry – how do I minimize the loss?
Main lesson for the day
- I AM ALWAYS WRONG, SO HOW DO I MINIMIZE MY LOSS?
Have one bold line on the chart – my stop loss. Calculate and plan everything from there.
Dae’s comments from today:
- i use support and resistance first, but EMAs always helps
- [3:08 PM]and the Fib today gave extra confidence
- [3:08 PM]it seems like 5min pivot with EMA and Fib is a pretty strong area
- [3:09 PM]but this is only my first day using them and they wouldn’t be any use for me when i trade momo
- [3:09 PM]only for bounces which i don’t trade as much any more
- I really do love momo, it is by far my favourite way to trade, but I learnt trading slowly on 5min using just hammers
- [3:18 PM]Over time I added EMAs and 5min pivots and maybe now add fibs as well
- [3:18 PM]Good to have a few strategies to trade
Javicho — Today at 3:07 PM
I will start using fibs more, I usually look at the 0.5 fib level but don’t really pay attention to 0.61 specially if is under 50ema on the 5 looks bearish to me
What can I turn into a system/procedure/habit/tool so I save time and eliminate decisions?
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