Back in 2006 when I first started blogging it was ostensibly to keep an online journal of my trades; but the real reason was to check myself.
I figured that the way to make sure that I didn’t stray from my trading rules, especially since I was trading for a living at that time, was to put everything out in public for all to see.
These days I don’t post much publicly, if at all, about trades I make for a number of reasons.
First off, there are many other traders out there who do analysis better than me. Secondly, since I have a full-time job, two small kids, and an awesome blog, I just don’t have the time and energy to post trades I make. But but the biggest reason that I don’t is because it screws with my head.
I’ve learned that when many eyes are on me, even if they are friendly eyes, it changes my mindset when trading. I don’t know why, and though I could spend many years and thousands of dollars unravelling the psyche behind it, I would rather just accept it, adapt to it, and relax with a beer instead.
What I do like to post about are ideas and concepts relating to trading. And the fact of the matter is that even though it makes me very happy when get feedback from readers about posts on my blog that help them improve their trading skills, I really write every post for an audience of one……me.
In the same way that taking notes helps to imprint an idea from a lecture better than just listening to it, when I write about the markets, that act in itself helps me to reinforce my trading discipline.
There are a lot of traders with very “clean” blogs, meaning if you read their posts you would get the sense that they have attained trading perfection, never make stupid mistakes, and are ALWAYS profitable. Okay, whatever. My blog is about being honest, so allow me to “bleed” publicly a bit here as a reminder to myself what not to do in the future.
Wednesday after the $NQ_F got done with what I thought was an overreaction to the numbers from $CSCO, I took a position, with the intention of holding overnight. Price grinded up and successfully held support twice, and made a nice run towards the open.
And that is when the trouble began. Here is what I did wrong.
1. I didn’t acknowledge the fact that a double top had occurred.
2. I didn’t respect the large inverted red hammer that formed the second part of that double top.
3. I didn’t add in the importance that the two points above occurred at an obvious (and already drawn) resistance level from the previous day’s high.
4. I didn’t factor in that the first two points happened after an extended run.
5. I didn’t give weight to the MACD already having crossed over and trending down.
And of course that inverted candle hammer was a top.
Ignoring one obvious sign is bad enough, but five? What the hell was I thinking?
Earlier this week I wrote a post about using pain to become a better trader, and one of the suggestions was to go back through your trades with the mindset you had contemporaneously to try and figure out what you did wrong. Let me follow my own advice here and take a shot at it.
I was greedy. I had been thinking we were due for a big bounce, and the fact that the futures were green and $NQ_F had shrugged off the $CSCO news made me think it was here. That of course means I was trading off of a script, BUT not marrying it with technical and price action as I have spoken about many times before.
I was also doing a number of things near the open and not putting my full attention on the management of the trade. I rationalized that by thinking I was giving it “more room to run.” That extra room cost me about 25% of my profits.
On the plus side, it was a winning trade, I sold before things got too out of hand, and I can identify what my mistakes were.
Trading is a process, and a never-ending process at that. Being honest about your mistakes and understanding why you made them will help to ensure that you always get better at that process.
What bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).