Focusing on Consistency and Your "Niche"

After a two month break from the blog, I have decided to start it up again for this month and see how things go (I am going to be gone for most of the day today, so I won't be posting today, it will be starting tomorrow, August 4th).  I hope that it can greatly help my trading again as I did for me when I first started it in March.  Before I continue posting, I want to give a bit of a recap of the last three months and talk about how my trading has been and also the things I want to implement this month to improve my trading.

I have not been happy with with all the "big PnL swings" that I've experienced in May, June, and July.  Despite posting many huge green days the past three months, my overall gains on a monthly basis have ended up being less than my initial two months doing the blog (March and April) where I was trading a lot smaller and more consistent overall because I never had those 5k, 10k, 10k+ red days that set me so far back.  The last three months, I've basically been on an endless cycle of making money for a week or two and giving it back in a day or two, just as I had been for the first six months of my trading until I started the blog in March.

In the first two weeks of June and July, I was up quite a lot, then both times, the following week, I had two really big losing days and I pretty much gave it all back, and ended up finishing out each month with not a whole lot to show for considering "where I was" at one point.  

This constant struggle to "get back to where I was" can really take a major toll on your overall psychology and can have a major impact in your trading, then one thing can lead to another and you end up digging yourself an even deeper hole.  I think it's really important to develop better trading processes and rules for LONGTERM success in trading.  I feel that my sort of "reactive" method of trading and scaling in and out without any real set rules will continue to give me very mixed results as I have had the last three months.  I'm basically "one bad trade" away from losing a week or a month of gains, and that's not really any way to trade, and it's very difficult to accumulate those gains when I take a loss every 1-2 weeks that sets me right back where I started.  

At the start of July, I told myself it was a "fresh start" and I was to FOCUS ON DAILY CONSISTENCY, even though I was still far off from "where I was" in the middle of June.  This worked for a few weeks and I was fairly consistent overall and had a fairly great month going only a few weeks in.  Then I took a 3k hit on VLTC, that wasn't too bad, and could have been worse, and I made it right back in the next few days.  Then came a -6k+ loss on LOCK, that was a little harder to make up for, and I could already feel myself trading differently because of it, and not being happy with 1000 in a day, and forcing things too much and trading a lot more emotionally than I should be, this lead to another -6k+ day on ITEK two days later, and just like that, I had almost given back almost my whole month in one week of trading from two bad trades.  The month finished out okay, but really, after all the fees, I was up nearly the same in the first two days as what I finished at.

This last month, I have "given back" insane amounts of my morning profits either midday or ESPECIALLY in the last hour on stupid things that I really have "no edge" like UVXY, LOCK, FELE, etc.  There were a few days where I just took my $1000 bucks and left for the day and those were great, but I still have that massive "overtrader/gambler" tendency in me and I find it very hard to just leave for the day, I'm always not wanting to miss opportunities.  This leads to me entering "sub-par" setups midday/end of day, trying to make a "quick buck".  As long as you have a PLAN and a SET RISK and SMALLER SIZE, there's nothing wrong with taking more trades in a day, but it's when you have NO PLAN, and are careless with size, "oh, I'll just add a little", then it goes a little bit more, "oh, I'll just add a little more", and before you know it, you are in way too big on some random trade and you just gave back most of your day (that's sort of how it has been for me anyways).

The point is, trading needs to be FOCUSED ON LONGTERM SUCCESS, not trying for those "huge gains" everyday and forcing things when the opportunities just aren't there.  There will be a handful of GOLDEN opportunities every month to take advantage of, some from this month were: TLOG, KONE, OHRP, MNOV, NYMX, VLTC (long and short), ITEK (long and short).  These are the plays where you can use more size (when you are extremely confident in the setups) and keep "hammering it" with the "houses money" and trying to be patient with a winner, etc.  Really trying to focus on these "NICHE SETUPS" as much as possible and trying to trade much smaller on everything else is really the key to success I feel.  What happens when the next "golden opportunity" comes and you just lost a large portion of your account the day before on some random trade?  You may not have the BP and/or the confidence to be able to take advantage of the opportunity to the fullest.  This "niche" is different for everyone, and takes time and experience for all new trader's to "find it", but once you do, it's about REALLY FOCUSING on it and trying to avoid everything else (or at least trading a lot smaller on everything else).  This is something I still majorly need to work on and hope to improve for August and for the months to come.

My new rules/plans for the month of August (for now, I may make adjustments later in the month):

• 2k max loss set into my account so I can only give back 1-2 days, not a week or more which ends up creating a "slump" of emotional "get back" trading (I have this set into my account but I am not entirely sure how it works yet)
• Smaller size on anything midday/last hour as to not give back my earlier profits (as I have done so, so many times this month and other months) (1-3 entries and 1-3 exits, no "add, add, adding", have a SET RISK and PLAN in mind ALWAYS)
• Trying to avoid the "news plays" as much as possible (LOCK, FELE, etc.), SET RISK and SMALLER SIZE ONLY if I'm going to trade it at all (no trying to catch the bottom/short the top/top of the bounce)
• NEVER BEING STUBBORN PAST 10:30-11 AM, if the stock has RECLAIMED VWAP at this time, there is a good chance it will continue much higher throughout the day (be long biased and never be "stuck short"), once it breaks HOD, it's usually "off to the races", like ITEK "day one" and VLTC "day two".  A convincing VWAP reclaim is WHERE TO BE stopping out on a short (this would have saved me on PTBI, SGYP, ITEK, and others) (use hard stops if needed, to stop out on these "crossovers")
• Being extremely careful on the short side on "Day One", where the stock is trading at 10:30-11 AM is a usually a good indication of which direction it will continue the rest of the day (TLOG and MNOV, well below VWAP, near LOD's, they faded the rest of the day) (PTBI, SGYP, ITEK, had reclaimed VWAP and were trading in the top 25-50% of the trading range, they continued much higher throughout the day)
• Implementing hard stops into my trading, on anything midday as much as possible, and also when trying to "ride a winner" (or to not turn a winner into a loser, hard stop at breakeven, etc.), manually moving a hard stop down so that you "lock it in" if support is reclaimed, etc. (this is to help with my habit of readding more shares "trying to make it work" if I missed covering into a dip and it pops right back up, it's often those readds that really get me into trouble, when I ruin my average then end up turning a nice winning trade into a big losing trade)
• Trying not to "top tick" parabolic's and "bottom tick" washout's as much, morning emotion is still okay (because that's usually where I am the best at/make the most), but anything after that, try to wait for the trade to set up with more of a set risk with a lower high for a short or a higher low for a long
• Paying attention to where VWAP is after the first 1-2 hours and really respecting it as your bias (more long biased above, more short biased below)   

Those are the things that I am implementing for this next month and I hope to be able to achieve consistency on a LONGTERM BASIS (monthly/yearly), rather than having a bunch of huge days but ending up with not much to show for at the end of the month.  Consistent green days really do add up.  500/day = 10k/month, 1000/day = 20k/month, 2000/day = 40k/month.  My best month is still 19k in April even with having a lot of 3-8k DAYS throughout the last 3 months, because I haven't been able to take a small loss or a small losing day, most of the time, I ended up giving back a week or more in one day, and taking a big hit to my confidence, my psychology, and my account in the process.  I'm going to try to be green every single day as much as possible, even if it's $500 bucks or whatever, it doesn't matter, I'm really trying to prevent all the "give backs" by using much smaller sizes and set risk on any trades after the first few hours, and also being able to "leave for the day" and protecting what I've got, sure I may miss some opportunities but it's literally IMPOSSIBLE to give back what I've already got (I think if I left after the first 2 hours everyday this month, my month would have been 3-4 times more profitable).    

Anyways, long story short, trading is all about focusing on LONGTERM CONSISTENCY and FINDING YOUR NICHE and FOCUSING ON IT.

Here is a great post from Nikkos (https://twitter.com/Nikkorico_) about this topic:

http://nikkoricoo.blogspot.ca/ 

Here is a great post from Nate (https://twitter.com/InvestorsLive) about this topic:

http://www.investorsunderground.com/consistency-vs-dollar-profits/

Here is a great post from Alex (https://twitter.com/AT09_Trader) about this topic:

http://www.twitlonger.com/show/n_1sn4918

Here is an AMAZING SPEECH from Michail Shadkin talking about "after 11 AM rules", focusing on "golden setups", and other extremely useful trading information: 

https://www.youtube.com/watch?v=nAStJmFLM60

These guys, Brandon (https://twitter.com/crawfish_poboy) and Christian (https://twitter.com/stock_choices) are "masters of consistency" I feel.  Sure, they may not post that "massive day" all that often, but they really understand what consistency is, and their results continue to show, month in, month out, it's really amazing what 1-3k/day can do, when you are green almost every single day.  

I hope you found this post helpful, I really wanted to express some of my thoughts on my trading the last three months and about these topics.  I will be posting daily on the blog again for the month of August, with the hope that it will once again bring me more accountability and consistency in my trading, and also help with my "over-trading" and "give back" struggles recently.