At Chart Swing Trader, Mac looks back over his first quarter of trading for the year, and has some valuable (in my opinion) thoughts to share on the challenges of trading:
As we end the first three months of the year, one thing I wanted to do for my own personal growth as a trader was to examine my trading so far this year and what I need to do to be better. Obviously this has been a very difficult environment to trade in, even for bears, since the middle of January. I have been bearish throughout the year, but that bearishness has not always paid off as well as I had hoped. I am still up overall for the year, but not nearly as much as I was after January 22. Some lessons hopefully learned so far include:
- Overtrading is a recipe for disaster – I have definitely been guilty of this so far this year. I had nice positions that I closed early because I couldn’t sit still, and I took bad positions because I couldn’t sit still. I go back to what I saw in a Dan Zanger interview when he said the market presents about three or four money-making opportunities per year that allow you to make tremendous returns, and the rest of the time is just choppy trading that cause most traders to lose a significant amount of money. January 1 to January 22 was one of those nice opportunities to make money if you were short, and I don’t think we’ve had one since. Perhaps this just takes time to learn and as I progress, I will be able to recognize these profitable times and also show the discipline to sit on my hands if there is no real edge to be found.
- Emotional trading is a recipe for disaster – Looking at my gains and losses for the year, I have noticed that many of my losses came from trades that were taken during the middle of the day or from trades in which I changed my original plan after the trade was taken. I am really focusing on making trades only at the end of the day and also not watching the intraday action too heavily, especially in a volatile environment like February. I also need to do a better of job of setting stops and sticking to them, rather than adjusting them after the trade has been made, which usually just led to bigger losses.
- Avoid trading right before or right after decisions by the Fed – for some reason, I thought it would be smart to make a lot of trades around January 30-31. I closed a total of nine trades those days, and only two were winners. Several were stocks I was stopped out of the same day. These days of course correspond with the first Fed decision about interest rates, which led to an extremely volatile trade that I would have been much better off staying completely away from. I plan on doing this from now – I will not be making any new trades during the few days after Fed decisions, at least not in the current environment.
Basically, I feel I am putting in the necessary work to be a successful trader, and I feel my chart-reading abilities are fairly strong, although I can still improve in both areas. I still need to tighten my overall system and trust some of the indicators I use more. For me, it is still some of the psychological difficulties that I am having, and I know those are issues for many traders. You can’t become a master trader until you’ve mastered trading psychology, trading discipline, and your own personal emotions. These are the hardest skills to develop and master, but I will keep working on them and hopefully improve as we enter this second quarter.
Well said Mac. Thanks for sharing those thoughts!
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