How Do We Improve This Trader's Performance?

Hello Mike,

I had a quick question for you:

I’m currently experiencing a small draw down and was trying to formulate a plan on what are the steps I need to take going forward so that I can get back to being profitable. I came up with some questions I should ask myself and some actions I must take to curb the damage.

1) Am I lacking in preparation?
2) Am I making trading mistakes?
3) Am I breaking any of my rules?
4) Is the market changing? Are the current setups I’m trading not working anymore?
5) Am I trading too many “feeler trades”?

These are the actions I’m currently intending to complete:

1) Stop trading

2) Review your trading journal and try and identify what changed.

3) Document your findings and create a targeted plan to address the issue.

4) Going forward reduce your risk and start trading with one-lot sizes only. What type of questions/actions would you recommend?

Thanks, Mike

@MikeBellafiore

How much of a draw down?
What percentage of your trading account is this?
What changes have u tried to make during this drawdown to help you?
What do you think you should do?

Hi Mike,

Thanks for the quick feedback. I don’t expect you to read all of this below, but it did help me flush a few thoughts out.

I’m in a drawdown that amounts to about 2% of my total trading account. It’s not much of a draw down. The minimum trade size for me is 1 Lot = 0.25% of my account. On average I trade about two lots.

Note that prior to May I was not keeping a trading journal consistently every single day. Journaling has really helped me tremendously. Over the past few months I’ve noticed a very distinct patterns. This is a list of what I think is hurting me lately:

1) Every time I have a really good few weeks I tend to get a little too trigger happy and start over trading.
2) Over trading leads to too much risk exposure which then leads to closing out good positions prematurely (WITHOUT A REASON TO SELL) because of the fear of digging a deeper whole.
3) I’ve been having market biases lately, convinced that the market desperately needs a pullback. I got smoked on Friday with an SDS trade, on that short squeeze from A.M. But I know I’m not good at trading SDS, and I still end up putting 3 lots of risk on the trade…WHY ???
4) I’ve also noticed that I’m not as prepared going into a trade as I have been in the past, leading to trading setups that I scanned for during market hours, instead of preparing for one or two ideas the night before and having a plan entry/stop/target levels defined in advance. I work full time so all my preparation should be done the night before.
5) I’ve also noticed that I have violated some of my time stops and don’t close my losing positions quickly enough. I let them hit my initial stop. Not good.
6) I’m having a hard time looking for those setups that used to work for me in the past. Maybe this is an indication that the market is changing.
7) I tend to get wrapped on on one or two losses, and I have noticed that they tend to hurt my confidence.

This is a list of things I have been doing well:
1) I have been consistently keeping a trading journal in Evernote, logging all my trades/thoughts/ideas.
2) I have been reviewing all my trades at the end of each day.
3) I started performing weekly reviews and establish goals to work on for the following week.

This is what I plan on doing going forward:
1) Scan for my setups the night before and only focus on looking for your best setups to trade. Identify entry/exit and target levels the night before. Stop trading on the fly.
2) Stop making mistakes such as violating my time stops.
3) Always keep in check what your overall open risk exposure is and do not add a position if your risk exposure is maxed out.

This is what I believe I should be telling myself:
1) Don’t get wrapped up on one or two losses, what matters is that you consistently execute your best setups over and over again. Overtime you will be profitable.
2) Stop making mistakes and stop trading too many feeler trades.
3) If your setups stop working step a side, the market may be changing, take a break and re-evaluate what type of setups you should be taking going forward.

Thanks, Mike. Looking forward to the next DNA session!

@mikebellafiore

Well, I love your three ideas as a plan for going forward. Focus on these three things and let’s see how the data comes back in a month.

I would add one thing to your daily review. Keep a psychology trading journal. You have made an important revelation in your trading in that you overtrade after periods of success. This is common. We get overconfident and then start to make trades outside of those that brought us a period of overperformance. And then we underperform.

Most never do the review to make this connection or never take the steps to correct this cycle of overperformance manifesting underperformance. When you record your mood before and during each trading session and you are overconfident proceed with caution. Visualize only making your best setups and be ever vigilant to spot any overtrading. If that overtrading does visit, place stops for all your positions, and go for a long ten minute walk. Re-center to a place where you will be making only those trades that breeds success for you, and then and only then restart your trading.

Good work here! There is a great deal of goodness in your trading.

What advice would you offer to this trader for his improvement?

You can be better tomorrow than you are today!