The key drivers of my trading goals were:
- Getting most of the big moves of the day
- The ability to sit through a trade, without panicking when it goes against me
- Predictable losses that I can control
- Few good trades vs many marginal trades
- Trying to get all moves: Low win rate, small profits
- Momentum trading: Needs large stops, hard to sit through.
- Dollar cost Averaging: Unpredictable big losses
- Scalping for a few ticks: Good for my broker, not me.
Trading every possible swing is fatiguing to the mind and is not something you can do day after day. Therefore, I chose to focus only on the big moves. That way, one to four trades a day were sufficient for success.
On entering a trade, I learnt that often I would be shaken out when the trade went against me. I deduced that this is because my body reacted viscerally to the open loss during a pullback. I realized that to be able to sit through a trade, I would need to trade with a fixed stop. Over time, the body gets de-sensitized to a fixed loss and you will stop reacting to it and you will be able to execute without emotion.
These observations led me to focus on the open as a source of good trades since many large moves are at the open. Trading the open also has the benefit that I can choose to trade only an hour or two and quit for the day.
Its a viable trading plan to only trade the opening setups. If the open ends up being some sort of trend, it may be worthwhile taking with-trend trades. I generally avoid trading trading ranges or barb-wire. They are notoriously difficult to read correctly.
In future posts, I will describe my setups and trading reports in detail.