Are You Trading To Much?
By Cliff Clark
We've been talking a lot in the trading room recently about how bad the trading is and how some of us are taking far less trades than we normally would. For years I have averaged around 2.5 trades per day. Since March I have been averaging well under 1.75 trades per day. But I'm also hearing from a lot of people that they are taking four or five and sometimes more trades per day.
I'm wondering how they do that. How are they finding so many trades? My guess is that they are chasing every trade called in the trading room as well as the ones mentioned as potential trades. Is this the right way to trade? Since some of them are messaging me because they aren't making money I would have to say no.
How do you determine the number of trades you should take each day day? You don't consciously. You let your trading plan do that for you. If you are chasing every play in the trading room you don't have a trading plan. You might have something on paper that you call a trading plan but you are not following it. You can't be if you are chasing every call in the room. If you follow your own strategies and still find yourself taking to many plays you may be trying to trade to many strategies. Revise your plan and limit yourself to just one or two strategies and master those. You'll find that you'll have less opportunities but they will likely be of much higher quality.
You can also reduce the number of poor quality trades you take by having a pre-trade checklist. This is the number one thing that I recommend to traders I work with that begins their turn around. You can put a checklist together in less than an hour and it will save you many R's each month!
If it sounds like I am repeating myself in these articles it's because I am. Trading is easy when you have a trading plan and a pre-trade checklist that you can follow. It'll take time to refine them and make them work for you but once you do trading will be easy!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
