Trading Business a-ha!

15 October, 2010

On reviewing my September trading it has come to me that by designing a discretionary day-trading system with a requirement that I sit with perfect psychology, analyse charts and place trades for 90 minutes I have designed myself ONTO the factory floor.

Successful business owners have a strategy for releasing themselves from the day to day ‘manufacture’ of the profits their business generates not the other way round. Cash Flow Quadrant by Robert Kiyosaki explains this concept as a move from employed/self-employed status to business owner and investor status. Well worth reading.

I have been developing the ES system for a year and it didn’t dawn on me that I would be shackling myself to the manufacture of profits. This is probably more obvious on a down month than an up month but never the less requires a conscious decision to be made regarding whether one wants ones returns to be proportional to the time put into ones work… I had not consciously made this decision and now that I am asking myself whether I want this arrangement… I don’t.

At my present level of trading skill it is more effective for me to develop mechanical signal and position sizing systems that are traded for me than attaining a level of day-trading skill that require I sit and repeat the same actions each day.

So. For now. The ES 90 Minute system is on hold.

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This month was a fab learning experience. Really ‘got’ the power of a time stop and $TICK extreme divergences as exit strategies. I also realised my psychology is not yet ready for intra-day trading. Also had a massive a-ha regarding my trading business which I will share in the next entry.

To the review. September stats continue to confirm that the actual average risk levels are smaller then initial risk set-up for the trade and winners go against the trade by less than half the initial risk. Exit signals are capturing about 40% of what is possibly available. Interesting.

Reasons I lost money this month:

I chose to take a lot of low probability set-ups.

I did not wait for the high probability set-ups I just jumped in at the earliest opportunity. That said I had not rated which set-ups are higher probability in the rule set.

Not trading every day

My rules state that I cannot trade if I don’t feel in the perfect trading state and then only when I have completed all of my daily pre-market tasks. On a two days I had not come to trading having completed my mediattion routine so SIM traded instead. Both these days were positive days. One to the tune of 8R…

Not trading for the full 90 minutes

Some days I chose to trade through the continued stops to let the r-multiples eventually come in my favour and ended with a negative day whilst on other days I took a loss/profit and walked away when there were more trades to take that would have boosted the P&L. I have a rule of trading for 90 mins so should trade for 90 mins…

I did not concentrate as much as I could have in the 90 minutes

By being less than fully committed through the 90 minutes I missed some very profitable opportunities.

An example of this was on 30th September. My psych went wonky after taking a B/E on the first contract and -.8R on the second contract when I SHOULD have followed my rules and taken the $TICK extreme  exit signal for a +.5R on the first contract and -.25R on the second contract. I then missed two winning trade set-ups and chose weak set-ups that turned into further negative R results.

There is a lot to work on here both technically and psychologically.

Here is the ES September 2010 – Trades spreadsheet

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Total -2.88R before commissions


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Total 4.85R before commissions

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Total 4.13R before commissions


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