Dealing With Plan Issues
by Cliff Clark
Are you having issues with improving as a trader? It is likely that you are dealing with a faulty plan, you are not following your plan or you simply don't have a plan. You are likely feeling excessive stress and capital draw downs because of these issues and one of them is likely the cause of your issues.
All successful traders I've known have had multiple problems during their development. Even after a you feel you have become successful problems will arise. How you deal with such problems will be the key to your success or failure.
One common approach to problem-solving is doing nothing and blaming the problems on someone or something else. Everything from the market makers, price patterns, slippage, your internet connection and even politicians are blamed for your failures. This approach borders on insanity. If the definition of insanity is doing the same thing over and over again and expecting a different result, then if you continue to do the one thing that causes you to fail you can be deemed as insane. We as traders strive to be consistent, doing the same thing successfully over and over again, but when we realize something isn't working, we need to investigate and make the necessary changes.
Let's say that changes need to be made after a thorough evaluation of your trading activity establishes the need for change. When you build a trading plan, give it some time to prove it can work before making changes. Don't change it after 2 or 3 losses because that isn't a statistically significant number of results from which to draw any conclusions. Test it first on paper and then with small position sizes. Keep a record of your trades and analyze them regularly. Did you follow your plan when you traded it? Is there anything you would have done differently? Then when you have a statistically significant number of results that clearly indicate the need for a change, make the changes!
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.
