twelvespot's Blog

2005 Trading Plan

What specific Trading Strategies will I use?

I will only scalp. My primary focus will be tape reading. I will use a 3 minute chart as a reference for support/resistance. Because I am a scalper I must always cut my losers quickly.

How much money am I going to allocate to each day?

My loss limit is 1000 a day.
My max quantity is 16.



What execution methods will I be using?

The primary focus this year will be exiting losing trades quickly.

My goal this year is to stay focused. I must rememeber as a scalper my primary focus is to exit losers quickly. Because I will be making small profits on several trades I cannot let one trade destroy my hard work.

What are my drawdown rules for 2005?

$1000 a day drawdown
If I have two losing days in the week that are greater than $1500 total including commissions I am done for the week.

What are my Profit rules for 2005?

My daily profit target is $750. This equates to $150000 a year.
My goal is to have five $1500 days a month. This will give me the opportunity to take a day off.

If I make $3000 including commissions in one day I will take a day off.

When I have made $60000 profit I will take one week off.


What will be my daily procedures be to stay disciplined on a daily basis?

After making $3000 in one day always take the next day off. Begin each trading session by gradually making money(don't make large trades until I am in a groove). I must use all of my brain power to concentrate. I must remember that to scalp properly my main focus is on tape reading(the book). Charts are only a reference.

As I begin my trading day I will have the p/l box covered. I must train myself in 2005 to focus on trading efficiently. I know from past experience that if I focus on my p/l I tend to get emotional and attached to the money. Because my TT front end is set to $1000 loss limit I do not have to look at my p/l during the trading session.

I have a gut feeling the topic of the last paragraph will be the make or break issue of 2005. Will my focus be on becoming a better trader or will I obsess over every dollar gained and lost? The answer to this question will determine if I am consistent .


FINAL OVERVIEW OF DAILY RULES
1. Exit losers quickly -- Do not let one trade destroy me.
2.Actively concentrate on the tape. If cannot concentrate have the courage to walk away until I am ready to trade with concentration.
3.$1000 daily loss limit
4.If I have two consecutive losing days greater than $1500 take the rest of the week off.
5. If I make more than $3000 in one day I will take a day off.
6. My p/l must always be covered. If I look at my p/l I must take a five minute break.

12-27-2004

Followed every rule I set for myself. I took a five minute break after checking my p/l. My first trade I sold for a loss and then reversed. The discipline and speed at which I reversed provided a good mental framework from which I made all of my subsequent trades.

I quiet early because I was a little agitated that I did not hold a small long position after the market made new highs. After I exited my trades the market jumped another 5 points. I would have kepted trading, but I noticed that my mental picture kept replaying the "what if" trade where I exited at the high of the day.

I also understand the following rule I set. When I wrote the rule I did not understand why it was so important.

My primary focus will be tape reading. I will use a 3 minute chart as a reference for support/resistance.

Click to expand...

A chart is not dynamic. It should only be used as reference. To scalp properly the mind must always be fluid. The minute a thought controls the mental process I am not in the present moment. I am stuck in the static picture in my mind. For example, the reason I quite trading early is I could not clear my mind of the move up to the new highs. Emotionally I was attached to an event that already happened. If I kepted trading I would have traded the past event instead of what the current tape was telling me.
Also at the same time I had not only checked my p/l as a reference, but I had transfered my p/l into my final results of the day. Another way to put it is I became emotionally attached to the profit. If I lost even one dollar of this sum I would have felt pain.

commissions 110
profit 850

12-28-2004

I am disappointed in my trading today. I began the day down $400 and then after a couple of trades I was up $300. After I was up money I began to look at my p/l every couple of minutes. I did not take the five minute break after checking my p/l. After reflecting on my mental state I think I was focused on the money instead of reading the tape. Because of my obsession with the money I added to a loser instead of exiting the trade. This trade destroyed my day. I remember when I added to the loser I had a gut feeling(from wathcing the tape) that I should have reversed.

I think unconsciously I fear consistency. In a sick way I enjoy picking myself up after I fall. Well tomorrow I will trade with disclipline!

commission 220
loss 420

12-29-2004

I began the trading day with fear because of my undisciplined trading yesterday. When I trade with fear I usually get into trades a couple of ticks late and exit trades a little early. When most of my winners are 1-4 ticks it makes it hard to make money. Thankfully I concentrated on the tape and followed my rules and everything worked out. That is not to say I did not see red today. For the first hour I was down 100-600, but even with being down my fear began to dissipate because I was exiting my losers correctly.

I learned something today frrom my fear. I am not afraid of losing money in a disciplined mechanical manner. My fear is a distrust of my own capabilities. I am afraid that I will not exit losing trades. Basically I am afraid I will implode!

Today the market opened higher and sold off hard. After seeing the lows taken out a couple of times with large size I decided it was not smart to trade from the long side. I kepted selling when the buying on resistance seemed to exhaust itself. Sadly, my first second and third attempted at doing this failed. I exited with one tick losers three times. Even though I was losing money I felt I had the right approach given what the tape was telling me. Finally when I sold for the fourth time the market cracked. I did a good job was scaling out of the trade. I even held a couple when the market made new lows. I did this by entering an OCO(order cancels order). After this trade I was able to trade disciplined.

Also today when I began to look at my p/l obsessiviely I realized it was time to stop trading.

A negative emotion that seems to creep in when I scalp is a feeling that I missed something. Because of my high volume of trades I usually sell the top and buy the bottom. After trading if I look at a chart I can usually say 'If I held this trade I would have made five times the profit I made scalping'. This 'What if' scenerio is very dangerous for many reasons.
1. If I let this question fester I will unconsciously change my trading style. I have tried different trading strategies and scalping is the only one that I feel comfortable with.
2. I am ignoring the reality of my scalping. I might have also sold the bottom and bought the top on the same day!!!
3. This question does not allow me to be content with a good disciplined trading day.

The 'What if' question is another demon I must tackle if I desire consistency.

commissions 240
profit 1260

12-30-2004

I think a pattern has developed! After I make money I lose my disciplined approach. The day after I lose money I begin trading with a clean slate. I do not think the market owes me a penny. I am actually happy with any profit! However, this morning after making my first trade which was profitable I automatically thought I should be up $1500. An anxiety built in my head which forced my trigger finger to fire away. I still sense the market direction, but my entry points are horrible. Also because I deserve the $1500 after 5 minutes of trading my size increases. The only way I am going to make $1500 in five minutes by scalping is rolling the dice!! One day I am a trader the next day I am a roulette player. The only time I will be considered a professional trader is when I show consistency.

I am puzzled! I am a confident individual. I was not always. It took a lot of work to remove the negative self assessment I had of myself. It took me many years to mature and actually enjoy life. In my arrogance I thought I had this game of life licked.

Everything was neatly organized. On one side was the negative, depressing, insecure aspects of me. On the other side was the positive, happy, secure aspects of me. I thought all I needed to do was work on the negative. After the negative was gone the positive would remain and thrive.

I always thought the dream world I lived in when happiness was present was a good thing. It provided a future bright and glorious. A place devoid of the negative.

To my regret, I have to destroy this dream state to be acknowledged as a professional trader. I have to admitt that when I think of my life without my dream state I see a boring existence. In a way I am addicted to the world I designed. I enjoy the roller coaster. It always provides me with something to overcome.

My mind is all over the place as I am writing. The one question that keeps popping up is ''How do I modify my dream state?''. It is something I enjoy. A place I have always treasured. Obviously looking back on my personal history this dream state has enslaved me in this mediocre existence.

I guess the answer remains simple FOCUS ON THE TAPE. This solution is simple to follow after my ego has been destroyed by a day of bad trading, but I enjoy living in my head when things are going good.

I will end this journal entry with these observations.
---- I will take Friday off
---- I guess in my heart I only thought I had to follow the rules when things fell apart
---- the dream state is holding me back
---- honestly I do not feel I have committed to the dream states removal
---- the only solution I can honestly say I will commit to is
===FOCUS ON THE TAPE AT ALL TIMES===

commissions 160
loss 1120

01-03-2005

I had a good day trading today. Started the day trading small. Did not want to start the New Year in a black hole! Thankfully I was able to ride the trend up. I had a tough time transitioning from the early trend up to the to the slow grind down. I lost almost 40% of my gains. I was able to make some good trades when it finally bounced. One negative after trading for an hour I did started to focus on the p/l box too much. On the positive side I did stay alert and exited my losing trades quickly.

I must keep my feet grounded in reality and stay focused on the fundamentals tomorrow. I have to remind myself before I begin trading that the market does not owe me any money. Each day is a new beginning(yuk sounds so mushy!).

commissions 340
profit 2370

01-04-05

My cycle continues. I began the trading day without being mentally prepared. I was in the hole early. I hit my loss limit after 30 minutes of trading.

I am embarrassed by my lack of mental preparation. Before I began my trading day yesterday I repeatly reminded myself to be patient. When I entered trades I was ready to exit for a small loss, etc. Today I just started to trade.

On the positive side I did not hold any losers. I also am still up 1000.

commissions 100
loss 1000

01-05-2005

I am writing before I begin trading today. I was really disappointed in my performance yesterday. My confidence is shot. I will have to start very small and build a base today.

Hi twelvespot,
This is just an observation from someone who has struggled with the same emotions. Your problems seem to mostly be tied to the money and its affect on your trading. Have you considered reducing your position size to the point where you are not thinking so much about the p/l and maybe just getting into the flow of trading and the feel of the market. You should know what that position size would be and then work up from there as your comfort level increases. Just and idea and good luck.
mojo