How I Overcame my Fear of Taking Trades

A fellow trader asked me to do a blog about how I overcame my fear to take trades.  I have to admit that it was a long process for me to truly overcome my fear of trading.  Once I realized that it is natural to feel the way I do because to be a successful trader you have to react contrary to human nature.  This caused me to go out and try to understand what is happening in my brain so that I could figure out how to retrain my way of thinking.

The reason why I believed that I could retrain my brain is because when I was in college I was diagnosed with dyslexia.  I had been able to mask the problem up until that point because I learned how to adapt to my disability and function in school just like an average student.  My teachers nor my parents ever knew.  Then when I started college I had a professor who wanted us to write in pen because she wanted to see our corrections.  That wouldn't have been a problem if we did it out of class but we had to write essays in class.  So I tried to adapt again and buy erasable ink pens.  My professor knew that trick. Needless to say she once she saw all the corrections I had to make she knew I had a problem and referred  me to be tested.


What I Learned

Once I began getting help with my dyslexia I began to gain confidence in myself and I was able to take more chances and risks as it related to my scholastic career.  All this was made possible because they helped me reprogram my brain as to how it processed the information I was taking in and the information that was coming out of it.  So once I made the connection with the fear I had in trading and whether or not I was seeing the patterns or the setups correctly with the same fear I had with my schoolwork, I knew I needed to do some research on the psychological aspect of trading.

So in my research I found something called Neurofinance.  This studies the relationship between the brain and money. Studies have shown that trading activates the same primitive centers in the brain that are responsible for self-preservation. These are the primal emotional and defensive layers of the brain that do not respond very well to will power (self talk). In fact, the brain is hardwired to prevent you from turning off its primal circuits, its core defensive and reactive processes.

Why? These processes, such as fight, flight and pursuit have great survival value. When these primal parts of the brain are in control of your trading you are most likely to automatically do the opposite of what you consciously intend. It may feel like self-sabotage, but it is not diabolical… it is biological. It is just your self-preservation instincts taking control. It is difficult to manage an instinct, which is one reason why so many traders under-perform and eventually fail.

Normal human instinctual fear, which may be worsened by your genetic makeup, will interfere with trading success because it will make you more reactive to the randomness in the market. Winning traders are either not afraid or carefully manage their fear.


Most traders who trade scared are also trading scarred.  Normal losing trades and periods of drawdown are processed normally, as expectable--if somewhat disappointing--events. When losses are substantial, however, they can be processed as traumatic events. Instead of being processed through normal, explicit, verbal channels, they activate the flight/fight emergency mechanisms of mind and body, leaving their emotional imprint. Later, events similar to the traumatic losses--even normal ones--can trigger the emotional and physical reactions of emergency, including paralyzing anxiety.

Once trading becomes associated with painful experiences, traders come to expect losses and betrayal by the market. Because risk cannot be eliminated from trading, the inability to tolerate risk works against you. It makes you late in pulling the trigger (waiting for confirmation) or makes it impossible to stay in a good trade and let winners run.

To trade successfully, you need to reduce fear to a level where it is healthy, i.e. you respect the reality of risk, but your judgment and behavior are not impaired by fear.  To eliminate self-sabotage, you have to reduce your fear to manageable levels. You can’t trade well with a scared brain.


How I Overcame my Fear to Take Trades

Once I realized the problem I had to think of ways to train my brain to have a trader's mentality.  The first obstacle I faced was the confidence in my ability to identify a setup, plan, and execute a successful trade.  My confidence was shot because of what I explained a little earlier.  My emotions kept associating the painful experiences when I wanted to enter a trade.  I had suffered some losses and had lost over 1/2 of my account.  I started believing that I really didn't know what I was doing, which I didn't.  So my first step was to become educated.  I picked 1 strategy to learn, which was the ABCD long setup that Nate teaches in his DVD.  I learned and I practiced using the On-Demand feature on the TOS platform.  I practiced making a trading plan by establishing entry and exits and using position sizing to establish the correct risk/reward. Once my education was complete I was ready to move on to the next step.

I then had to convince myself that losing was OK.  That taking losses occasionally was part of the business and there was no way around it.  It was even more difficult convincing myself because my account was so small.  A few small losses and I would have been done.  This is the 2nd largest reason most new traders fail or quit.  The ones that are smart enough to get the education often only have a little money left to fund an account so mentally it is very difficult to accept losses.  Human nature makes you want to protect the little capital you have

I had to look at it this way.  I give myself about $150 a week for gas, food, and personal incidentals. I would play the lottery every week spending $100 to $150 a week.  I figured that If I'm willing to throw that money away for a million to 1 chance of making any decent money and I was OK with it, then I should be OK risking $50 in a trade to make $100 on something that I have a better than average of coming out a winner.  In the lottery I had no control over whether I won or not outside of picking the numbers or the scratch-off and buying the tickets.  On a trade I had a lot more control over the entry and the outcome of the trade.  The lottery was a gamble, the trade was an investment.  

With that I didn't have much trouble entering trades but then another problem surfaced.  When I was in the trade I was a nervous wreck.  I would consistently take the trade off as soon as I made over $25 if the price action slowed down.  I didn't use the exit strategy I had.  I found myself watching my P&L.  If I was up $40 or $50 and I saw my unrealized gains dropping I immediately sold.  I began to hide my P&L and traded the chart and tried to stick to my plan.  Some I did well and some I still got scared when I saw too many red candles print and I took it off early.  What helped me get better with letting my trades work was studying the charts of my trades every night and seeing how my plan worked but I didn't trade it correctly.  I guess the only good thing that happened during this time was that I was sticking to my stops and not letting losing trades get out of hand.  

This is how I programmed my mind to become a trader.

1. I got educated.  Even being an educator I sometimes forget the value of education and how important it is to have someone help you organize the information so that it makes sense.

2. I learned and became proficient with 1 setup at a time.  This helped my confidence as well.

3. Practice trading.  I admit I practiced with my money more than I should have at first but once I learned how to use the on-demand feature on TOS I began practicing trades at nights and on weekends.  The more I practiced the more entering and letting trades work become automatic

4. I used small position sizing at first to reduce the effect of my emotions.  I was more inclined to let a 100 share position size have the room it needed to work.  I was able to stick to my plan and let my winners run.  I had to in order to make $ with a 100 share position!

5. I hid my unrealized gains so that I couldn't see whether I was up or down on a trade.  This also helped to keep my emotions in check and focus on the trade.

6. I never traded alone.  I needed to be a part of a community that trades my setups because when I was new, and even today, I need support throughout the trading day. I could always ask a question to a moderator in chat when I felt lost.

7. I found a mentor to give me in depth individualized instruction and feedback.  Again I wanted someone who trades the same setups and has the same trading ideology that I have

8. I stopped watching my TweetDeck and chat trying to catch every move.  Just because there are people on Twitter and in chat calling out trades all day doesn't mean I'm not looking at the right stocks.  I just stuck to my scans and my setup.  Besides, 60% of whats called out is BS anyway.

Once you have your education out the way, the key is staying small until you are ready.  There is no shame in making $50 a day to start with on 100 share positions when you are trading the entire move. Slowly increase your share size and risk making sure you are completely comfortable at every step letting the trade work.  That is what I did. Stick to your stops.  1 missed stop can destroy months of hard work.  Remember, no one is perfect.  You will make mistakes.  I make mistakes.  But if you stay disciplined and trade within yourself, you will make it.  You will minimize the effects of your mistakes.  Work with a proven guru and community.  One that fits your style of trading.  Everyone knows I have found mine and how it has improved my trading.  I know now what they mean by "this is a marathon, not a sprint".

I hope this helps and that this is what those who asked me about this wanted.  As always just shoot me an email if you want to.

Which Statistic Do You Want to Be: 90 or 10?

I know this may be a blog that you may not want to read.  Maybe by now you are in "education overload" because everyone and their mother is stressing and offering education.  I also know that you are tired of hearing that 90% of all people that try day trading fail.  I have been hearing that for years as well and I am sick of it too.  But I sat back and thought about it this week because our state is in the process of changing the way we evaluate teachers.  Now, teachers will be evaluated on the success of their students.  I wondered why in the last 5 years there hasn't been an improvement in the 90% failure rate of day traders.  We have seen a boom in the last few years in gurus offering "education packages" to help you get started in the right way.  And still, we are stuck with the 90% rule.  So why can't we get past this.  As a professional educator complete with advanced degrees, I can say without a shadow of a doubt that most of the education being offered by these gurus to aspiring day traders is missing the mark.

 The largest fatal mistake an aspiring day trader makes has to deal with education.  Some believe that they can watch a few free videos and webinars and then they are ready to attack the market.  Then you have some that choose a guru and education package that is based on glitz and glamour and the promise of money and freedom that do not produce.  Or you have those proud individuals who believe they know what to do and that they do not need anyone to tell them how to trade because it's simply buy low and sell high.  How hard is that?  But those individuals that really drives me crazy are the ones who are too lazy to want to learn and just wants to pay a guru to provide them with alerts.  Since I have started my journey into trading several years ago, I have associated with many aspiring traders and I can count on 1 hand those who are still trading with me.

Here is what I know; education is the key to success in day trading.  You cannot expect to master a skill if you skip through a curriculum and not fully educate yourself.  This profession requires lifelong learning.  Above all of that, you must choose the right educational package and guru.  You must make sure that you take it serious and not take any shortcuts. While most gurus and their educational packages out there are horrible and just want your money, there are good people that truly want to help.  The hard part as a person brand new to this industry is to know how to navigate though the sea of gurus.  I am writing this blog to help those who may be lost at sea in this to find their way home.

Education, experience and knowledge are 3 of the most important factors when it comes to beginning your trading career.  You do not need to try and save money on education by ignoring it's importance. This is why you need to invest in your education and knowledge.  I would recommend finding a coach or mentor to help you get through this period.  Someone who is not trying to sell their own trading education packages but someone who knows and understand what you are going through during this time.  I feel that this is the most important time in a new traders career dealing with expectations and emotions.

The next step is to research professional traders and get to know their style of teaching and trading before you purchase any education package.  The best traders will have free lessons posted on YouTube or their Web page so that you will be able to "test drive" their style.  You want to find someone that actually trades everyday and that trading is their primary source of income.  Also you want to find a community with several professional traders with complementing styles.  This will give you a good chance for a well rounded education.

I have found a community with excellent and complete trading education packages that are written by traders who actually trade everyday. In fact, I can see their trades, scans, and charts on my screen in real time as I trade throughout the day. I would rather learn from successful trading educators who are willing to apply their knowledge, strategies and education with their own capital rather than just talk about it.  The community I have found is Warrior Trading.  Ross, Mike, and Jeff are trading and teaching real time throughout the trading day.  Unfortunately I found them too late to take advantage of the packages with the simulator. The content is second to none and I have experienced all three of them teaching so I can say beyond a shadow of a doubt they are the real deal.  They have occasional free chat days and you can find some great videos on Ross's YouTube channel.

At the time I wrote this I was a subscriber/member of the WT community and not a paid affiliate so my thoughts and feelings were genuine and based on my own personal experiences.  I am now a moderator in the chat room and one of the Warrior Pro instructors and my feelings has even grown stronger because I have input in the education we provide.

The Warrior Pro Bundle includes 3 live small group mentor sessions a week.  You will hear from Ross, Mike, and myself in these sessions.  This is invaluable because we will be trading and teaching the same setups that you just learned about.  We can help you analyze your trades and walk you through what you did right and what you did wrong.  You will have more confidence when you know you have trading mentors behind you as well as with you all day in chat.  Getting a mentor was the smartest thing I have done to date in my trading career.  I trade less, get bigger moves, and make more money now.  I have to thank Mike for mentoring me and for helping me become a better trader.  Remember, to be successful in trading you must be willing to learn throughout your career.  Even the gurus have a mentor that helped them get to where they are and stay on their game.

I really feel the biggest reason traders fail is because they do no get the proper education from the beginning.  Every new trader I meet and get to talk to I try and get them to understand that getting the right education is priority one.  If you have 2k and want to start trading look at investing in your education first and start saving up again because if you take a short cut you will be saving up again to pay for your education.  I don't care what anyone says you do not learn how to trade by blowing up your account.  The only thing you learn by blowing up your account is that you need to get educated before you trade again.  People that say that and say they are just paying tuition to the market to learn are just trying to make themselves feel better about the money they lost.  I know because I used to be that person.

Take it from me.  Education is the key to your sustained success in trading. Period.

What I Learned This Summer

Now that the summer has pretty much come to an end, I feel that it is time for me to reflect on the things I learned this summer.  I started out the summer full of excitement and enthusiasm and I truly believed I was ready to trade full time and make a living at it.  However, the very first lesson I learned was that you cannot have these types of emotions in trading.  They prevent you from making sound decisions when trading.  The first thing I had to do was to get my emotions in check so that I could approach this with my eyes wide open.  Once my eyes were open, I saw just how much I didn't know and how unprepared I was to do this full time.  You see, being consistently profitable for 6 months is just part of the equation. It is an important part, but understanding how to adapt to the changing markets and managing emotions on a daily basis were skills I lacked and it showed because the day I went live was the beginning of the summer lull in the markets.  Now I see that it was the best thing that could have ever happened to me.  Some people say blowing up a couple of accounts are the best thing but for me,this summer was it.

The next emotion I had to deal with was disappointment.  I fully expected to make twice as much as I was making before since I could give trading my full attention.  When things started out slow I started forcing trades and really got frustrated.  Once I slowed down and began to define myself as a trader and establish my go-to setups I began to settle in and start trading without emotion.  I had to learn to react the same toward a $50 loss as I did toward a $500 gain.  I had to approach each trade the same with the same focus and discipline regardless of the results of my previous trade.  I think a lot of inexperienced traders never get out of this cycle.  I also watched a lot of Clay Trader's videos and they were a big help as well. His motto is "Trade Without Emotion".

I also realized that I needed a true mentor.  Even the very successful gurus still have mentors that they talk to and work with every day.  Having a mentor really gave me more insight in my trades and kept me focused on the important aspects of my setups and strategies.  I learned the true importance of support and resistance levels and how to trade off of them.  I also learned how to use the moving averages for my intraday trades.  Both helped me be more selective in my trades.  There is always something new to learn about my setups and how to trade them in different market conditions.  It also helps that my mentor is in Warrior Trading chat everyday teaching.  It has made a tremendous difference in my trading.

I was also introduced to another "guru" that had a similar trading setup to what I trade.  Kunal from Bulls on Wall Street produced several free webinars, one being 4 days long.  His chat seems to be set up similar to Ross's but it is on steroids.  He is smart and is all in when it comes to trading and education.  I didn't try his chat because I feel the DTW community fits my personality better but I always catch his webinars and videos he posts on YouTube. I learned how to identify and the importance of the daily levels from my mentor Mike in DTW, I learned how to enter early and trade off of support or resistance versus waiting for confirmation candlestick patterns from Kunal's teachings.

I tried my hand at making video journals of my trades and I have shared a few on YouTube.  Talking through my trades seems to help me analyze them a little better. It seems like after a few weeks I forget small details from key trades but with the video and the chart it will keep it fresh in my mind.  It's also a better way for me to share what I am doing with others and get good feedback on my trades.  All of this helps me continue to improve and grow as a trader.

I didn't intend on going back to work but I received an offer that I just couldn't refuse.  I can still trade in the morning but just not at home.  I only use a laptop and an extra monitor and it helps me focus on only the best setups.  Since I went on vacation a month ago I have not used my trading station.  I have only used my traveling setup and my trading has been more focused.  I think I will stick to this until I get more solid in my trading.  I think I went too big too soon.  If I can make good money with this setup, I will continue to trade with my laptop and extra screen.

I guess everything that I learned this summer can be summed up in one word; education.  It doesn't matter how much capital you have, what tools you have, or what market you trade.  Without education, you will not succeed. Period.  But, there is so much information out there you have to know how to use it and put it together where it makes sense.  That's where choosing the right community to become a part of and having a true mentor comes in to play.

I feel I have turned the corner and I'm ready to start another chapter in my trading life.  I've even toyed with the idea of starting a trading coaching service for brand new "average joe" traders like me who are wanting to get started in trading but are overwhelmed with all that is out there.  But, I will continue learning and growing as a trader because this is what I want to do the rest of my life.

Profit.ly Stats for the Summer                                            All Trades           Long             Short

Total Net Profit	$27k	$20k	$6,659.49
Gross Profit	$29k	$21k	$7,109.76
Gross Loss	$1,809.72	$1,359.45	$450.27
Profit Factor	15.8	15.8	15.79
Total Trades	146	110	36
Percent Profitable	79.45%	80%	77.78%
Winning Trades	116	88	28
Losing Trades	30	22	8
Avg Trade Net Profit	$183.40	$182.88	$184.99
Avg Winning Trade	$246.43	$244.05	$253.92
Avg % Gain	3.54%	3.49%	3.7%
Avg Losing Trade	$60.32	$61.79	$56.28
Avg % Loss	0.86%	0.95%	0.6%
Ratio Avg Win to Avg Loss	4.09	3.95	4.51
Largest Winning Trade	$2,512.00	$2,512.00	$1,362.00
Largest Losing Trade	$196.21	$196.21	$119.00
Largest Winner as % Gross Profit	8.79%	11.7%	19.16%
Largest Loser as % Gross Loss	10.84%	14.43%	26.43%
Max Consec Winning Trades	13	13	11
Max Consec Losing Trades	4	3	3

My Trading Station/Updated

I have been asked a few questions about how I have my station set up because it is a little different than most traders.  Everything is powered by laptops.  I think I did a post several months back on my set up at the time but I have substantially upgraded.  I started with 2 laptops, then 1 laptop and 3 small monitors, then to 1 laptop and 2 larger monitors, then 2 laptops and 2 large monitors, then to what I have now; 1 laptop powering 5 large monitors for charting and platform and 1 laptop and 3 monitors for chat and social media.  I found it easier to be able to watch all of the tickers on my watchlist on individual monitors versus continuously switching screens back in forth to monitor them.  As you have read, I have tried different configurations to try and find my comfort zone.  I am happy with what I have finally come up with.

So to answer the main question I get; why a laptop?  Simply, I want portability.  I like to change scenery.  Sometimes I like looking out of the front window, sometimes out the back, and sometimes I like sitting on my front porch.  I even like to roll my desk out on the patio on a pretty day.  I wanted to be able to trade anywhere.  So I started out finding a desk that was light, sturdy, and had wheels.

A lot of people have said that I shouldn't use a laptop for a trading station and that I need more power.  Now I'm not a computer wizard or a professional anything with computers, but I'm an engineer and I believe that I can understand information and data and make a well educated decision on just about anything technical. I also like to simply everything and look at it as if I were a child so that's is what I did in this case.   The reality I came to is this, the trading platforms and charting software don't need anywhere near the power that these PC gaming systems need, but a lot of people seem to connect the two and say you need these high power trading computers to be successful.  In a way I set out to prove them wrong, but in the end I just wanted something that I liked and felt comfortable using.

The first thing I ran in to was that a laptop video card is limited, so hooking more than 1 or 2 monitors to the laptop video card can overwork/overheat it which will eventually lead to premature failure.  However, most laptops today have at least one USB 3.0 port, which can transfer up to 4800 Mbps or 4.8 Gbps.  Contrary to popular belief, they work great for extra monitors. All you will need is a USB 3.0 to VGA or HDMI adapter.  These work as "mini" graphics cards. The VGA works pretty good but if you have HD monitors the HDMI adapter allows you to take advantage of the HD capabilities. It is recommended that you hook only 2 monitors up per USB port, but I found that if you get a self powered USB 3.0 hub you can hook up to 6 monitors up to a single 3.0 port on your laptop without losing any data transfer speed to the monitors.

I experienced no lag or video issues with any of the trading platforms I use.  My laptop does not get hot and it runs all day.  I would't recommend this setup if you are trying to set up a PC gaming system.  I didn't design it or research it for that.

Now lets look at my laptop specs.  I have 2 Asus - 2-in-1 15.6" 4K UHD Touch-Screen Laptop - Intel Core i7 - 16GB Memory - NVIDIA GeForce GTX 950M - 2TB HDD + 512GB SSD.  I found that for live streaming and video recording that a SSD drive is needed.

Like I said earlier, I needed at least a 7 port, 3.0 USB hub.  It needed to be self powered because I didn't want it to rob power from the computer.  Then I needed 3.0 USB to VGA or HDMI monitors.  I started using all VGA adapters because I started out with traditional flat VGA monitors.  I did not have any problems when I used that setup but i figure if I have HD capability now why not use it.  I use the j5 create brand but I believe this will be a personal preference.  Because my charts works so well with these 2.0 VGA adapters initially that further proved to me that I didn't need a $2500 trading or gaming computer to be successful at trading.

I have 3, ASUS  VS247H-P Black 23.6" 2ms LED Backlight Widescreen LCD Monitors that I use to chart the tickers I am watching, (6 max) and an ASUS VE278Q - 27" Widescreen Flat-Panel LED-LCD HD Monitor - Black on top that I run my scans from. Since I have started the chat community, I have added 2  Asus VE228H 21.5" Full HD HDMI LED BackLight LCD Monitors.  One is powered by the laptop from my main trading station and the other from my social media and chat designated station.  I had to use the 21.5 monitors because of the oversized 27" monitor I am using on the top.

This is the monitor stand that I use

This is the two that I added to each arm to support the new monitors

My social media laptop and monitors are on a separate lap top roll cart that I modified to hold 2 extra monitors. The third monitor is part of my main trading station and I will use that for when I have the Morning Show or Sneak Peek Wednesday in the other room.  The specs for this computer were given earlier and these are 3 more 21.5" widescreen monitors that I hook up using USB to VGA adapters. (2 monitors on my cart and the other one on my main trading station. Didn't see the need for the added expense of getting the HDMI adapters and cables. Nothing special about it.  It has my secondary chatroom/classroom and other social media running all day.  This is also my travel trading station now.  When I go out of town all I have to do is unhook the laptop and monitors.  A couple twists of a knob and the cart is in 2 pieces.  The cables stay attached to the cart so it breaks down and assembles in less than 5 minutes. It works great.  This is actually the setup I traded when I was out of town for a few days last month.  I am very comfortable trading with this setup as well.  It forces me to to focus more on tickers that offer the best setups.  This is also the one I roll outside on the patio when the weather is nice.  I just unhook from the monitor attached to the main station and I am outside enjoying this beautiful SC whether while it lasts!

Last but not least I needed to get the fastest internet that I could possibly get.  A lot of people who have problems with their charts lagging have them not because of their computer, but because their internet download rate is too slow.  I had the lagging problem when I first started but when I got the fastest internet I could get in my home, my problems were solved.  Also, I do not use WiFi.  My laptops are hardwired to a dedicated ASUS high speed modem.

Well this is my trading station at a glance.  Hope it answered all of the questions.  Another thing to note is that it took me many months to buy everything, and then  I take a % of my profits to invest in the business for upgrades as they are needed.  You never know when a computer or a monitor will take a crap and leave you hanging.

Happy Trading!

Who Are You?

Recently I was asked, "who are you?" by a veteran trader.  Not in a derogatory way but in a way for me to look inside myself and try to determine who I am as a trader.  It was in response to a post I made earlier in the week concerning my mid-week struggles.  Another question he asked is if I had a journal or a blog that I could go back to and figure out who I am.  So I mentioned in my last blog that I went back to my blog and found my way back rather quickly.  But, the question he asked me first has been eating away at me all weekend.  I'm sitting here watching NASCAR, as I usually do all weekend.  If there is a Camping Work truck race and an Xfinity race during the weekend, I am there. It's really a good weekend if there is a drag race on TV as well.  But I just couldn't get that question out of my mind.  So, I decided to put my thoughts together in a blog so that I can have a quick reference guide to go to in case I forget who I am as a trader again.

It's good that I have reminders that guru's have shared posted on my desk but how do I directly relate them to me. What are my thoughts concerning these rules and common mistakes that new traders make and how they relate to me. How do I define myself as a trader?

Well, first and foremost, I am an "Average Joe" hence the screen name I chose.  I am a long biased trader.  Now that may change over time but this mindset has brought me to this point.  My big loss last week was on a short that ran away from me quick and I didn't have a plan for that.  Should have had my stop in, went in with a smaller size, plus other things I didn't do right. So if I had a set of "rules" specific to me, what would they be?  I figured I should work on some and these should be posted as well so I won't get lost in a stupid trade that doesn't go with my style.

Intra-day Trading Rules

1.  Focus only on the best setups that I am familiar and consistently profitable with.

2.  I need to make sure I have a plan for each trade before I enter any trade. I have to have a defined entry and exit strategy and a defined stop.

3.  Keep my plan simple.

4.  Use the price action, volume, RSI, and VWAP to establish my plan for the trade

5.  Make sure the trade is definitely a quality setup.

6.  Never get emotional in a trade.  If I do, I'm in with too much size or I do not have a solid plan that I understand

7.  Never follow anyone else into a trade.  Never! Always make sure I vet every ticker I trade.

8.  Losses are good if I learn from them.  Focus more on my losses and failed trades

9.  Cut losses quickly. Use position size correctly to establish correct R/R:  At least 2:1

10.  Be prepared to improvise, adapt, and overcome in the changing markets.

Quick Reverence Guide

1.  My Setups

     - 15 Minute Opening Range Breakout - Pre-market gappers

     - 15 Minute Opening Range Breakdown - Pre-market gappers

     - Bottom Reversals

     - Top Reversals

     

     Sub or Secondary Setups - Patterns I normally look for after I have traded the initial move

     -Trades off of the VWAP (above for longs and below for shorts)

     - ABCD set-ups for long trades - typically a secondary move for my pre-market gappers.

     - Gearing and perking to break key resistance areas, HOD, R/G moves

2.  Best time of the day for me to make profits is 9:30 to 12 so that's the time for me to be aggressive.  Later in the day will need to make sure the setups I trade are solid and take profits quickly.

3.  Make sure I know where the SPY is trading.  If it's trading below the VWAP, take caution on long trades.  If trading above take caution on trades to the short side.

My setups are simple so I do not need a lot of indicators to help me trade.  I like to get in and get out as fast at the trade allows.  As I develop as a trader, I will swing more and take trades with plans of holding for longer time frames.

I'm Ready! Or Not!

Going into Monday I was focused on remembering one main thing; do not change a thing.  Stick to what got me here.  This is just another day in the markets.  In reality, everything was different.  I'm looking at 4 monitors with my TOS platform and charts, my laptop w/Das Pro on it for order executions, and another laptop and monitor with chat and all my social media running on it. I only got to use this setup a couple of times since I put it together earlier in the year.  It was easier to look at the charts without flipping from one screen to the next to see my charts like I did at work, but at times it was overwhelming.  But, I was comfortable and happy, and ready to take on the markets.  My first trade was an out of the park HR, which is probably what threw me off.

To begin with, I didn't want to change what time I got up and what time I did my watchlists so I still get up at 6am and I am at the gym by 6:30.  I work out and take a shower at the gym and I'm back home fresh and ready to go by 8, about the same time I would be getting to work.  I'll go through and make my watchlists, (which I will go over in detail later in this blog), brew my coffee, and wait for Ross to come to work.

So to start my Monday out I was looking at trading the Gap and Go, a strategy that I haven't traded before.  I would watch Ross execute these trades every day, but I was at work with slow internet and an unreliable wed-based trading platform.  But now I was home, had my Das Pro, had my hot keys set up, and I was ready to trade the Gap and Go.  I vetted the gappers like I normally do.  But the one I picked to trade wasn't the same one that Ross picked, so I was on my own.  IMGN put in a pre-market high on 11.48 and it was consolidating around that level about 10 minutes prior to open so I knew that if it pushed 11.50 it would run up pretty quick, hence the Gap and Go.  The bell rang and I immediately saw buyers coming in so I entered into a position.  My share size is small enough to where I get very little, if any, slippage so I market in and out.  I marketed my order and didn't get filled until $11.755. When I got in the ticker it was going parabolic and ran $2.60 in 4 minutes.  I got greedy and didn't take profits when I should have but I still ended up with a decent profit.

$1,098 profit IMGN Long Stock by AverageJoeTradr

I wish I can say it got better but after the first 30 minutes on Monday through Thursday, I traded like a complete idiot.  Forgot about my rules, and I was trading unfamiliar patterns and trying to make something happen because it was so slow. I completely abandoned what got me here. The bad part about it was that I knew it but couldn't do anything about it.  I was really beginning to worry and think I made a mistake.  But, I went back through my blogs and read my rules and reviewed the ones on my setups and was ready to start fresh on Thursday.  Turns out that is exactly what I needed.  I went from all losing trades on Wednesday to all winning trades on Thursday.

What happened to me this week is the main reason I write my blog, I need to leave myself a map just in case I get lost.  I was able to quickly identify what I was doing wrong and refocus on what I needed to be doing.  I actually wrote it with the expectation that hardly anyone would see it, but the fact that it has helped and inspired so many is just more motivation to me to keep documenting my journey; failures as well as successes.

I realized that I can make money with simple strategies and that they are adaptable to the changing markets.  Sure some days I won't make as much but the profit potential is still there and it it scale-able which will allow me to increase my position size as my account grows.  This in turn can produce larger profits.  I just have to trade in my comfort zone.  My daily goal this month is $500 a day, which is more than enough to keep the job away.  But, I do not focus on that during the trading day, or at least the first 3/4 of the day.  I only focus on finding the best setups and trading them correctly.  If you do that, you will hit your goals.  If you are doing that and not hitting your goals, the answer is not to trade more, it's increasing your position size on the strategies that are successful.

I try to keep this in mind every day

The mistakes I made this week:

1.  Trying to force trades to hit my daily goal
2.  Trading with too much size trying to make a larger profit
3.  Not trading my setups and trying to trade on "feel"
4.  Not having a complete plan before I entered a trade
5.  Not sticking to my R/R plan

So really, I broke rules 1, 3, 6, and 7.

Here's some other pictures I have taped to my desk

So once I read my blogs and taped these pictures to my monitor I was on my way to getting back on track.  I credit my ability to get back on track so quickly to these pictures that Nate @ InverstorsLive sends out and Ross @  Daytrade Warrior teachings.

This is how I start my day:

I wake up a 6AM, wash up, grab my protein drink, water, gym bag and daughter, then head out to the gym.  I get my muscles heated up in the sauna for 10 minutes then jump on a cardio machine.  They all have TV's so I watch CNBC while I'm on it.  Now Monday, Wednesday, and Friday I only do cardio for about 15 minutes because I work out with the weights those days.  On Tuesdays and Thursdays I stay with just cardio.  My workout is finished about 7:30, I take a shower and my daughter and I head home.  I am energized and refreshed which I believe gives me the best opportunity to do well.  Ok, I know you didn't want to hear all of that so now to the good stuff.

I get home, fire up my trading station, cut on CNBC, grind and brew some coffee, and start looking for some gappers.  The first thing I do is go to  http://thestockmarketwatch.com/markets/pre-market/today.aspx.  This give me the tickers that have gapped up or down from their previous close.  I used to use Equityfeed for this but since I am doing this as a business now, if I don't need it I'm not paying for it.  I tested this prior to me dropping Equityfeed and it didn't miss a beat, and it is continuing to do well.  All I have to do is refresh the page every 10 minutes to get updates to the list. I vet these the same way I did in the past: http://averagejoedaytradr.blogspot.com/2015/03/how-i-vet-tickers.html

Now the blog post has the Equityfeed filters but I use the same vetting parameters.  The only difference is I check the volume and news on TOS instead of Equityfeed.  Once they are vetted I put them in my watchlist, I have a separate one for gap ups and gap downs, and I wait for Ross to come to work an put his screen share up.  This is usually around 8:45.  I also have a Benzinga newsletter that I get every morning and I read it at this time.  I sometimes find the tickers they mention on my watchlist which will move that ticker further up on my list.  After his scans are up I just look as his gapper scan for updates because it has the volume, float, and the other technicals I like to use right there.  Now the reason I look at gap downs is because some recover and run out of the gates similar to a gap and go we see from the ones that gap up premarket.  I do check the news on these but I do not fall in love with it.  I will usually post what I'm watching on Twitter.  How I usually trade the gappers is explained here: http://averagejoedaytradr.blogspot.com/2015/05/my-gapper-strategy-explained.html

I do plan to start shorting the gappers that go the other way on my 15 minute opening range breakdown strategy as well as trading more Gap and Go's with Ross since I am home.  I will keep the gappers on watch until 11:00.  Then my main focus will be on reversals.

My reversal strategy is simple.  My first choice is to catch bottom reversals but I have been studying top reversals as well.  The top reversal setup is just the opposite of the bottom reversal setup.  I have a scanner for both that feeds live to a watchlist on my TOS platform.  I am also learning how to use more of the tools in my TOS platform.  My only complaints so far is that it will not scan premarket.  Here are my scan setups for my reversals;

These are simple scans that have given me good results.  All of the tickers that hit are not good setups so I just follow my setup parameters to identify the ones I plan a possible trade for.  This blog shows some examples but I have modified what I look for based on the changing market conditions.  My modified explanation is below.  http://averagejoedaytradr.blogspot.com/2015/04/explanation-of-reversal-setup-472015.html

Here's what I look for: When the ticker bottoms and makes the first new low after at least five red 5 minute candles, I note the RSI, the volume, and the candlestick that made the new low.  Sometimes it will have a doji or a small green candle that did not make a new high compared to the previous candle and it would make you think it's trying to reverse.  I try not to fall for this.  I will want it to print a candle to make a new high relative to the candle prior to the one that made a new low.  If the RSI is above 25 and the volume is still flat, I look at this as a short opp and will take it if Level 2 shows more sellers in line than buyers. I will wait until it tries to bottom again where I would get another doji or small green candle that may make me think it's starting to reverse. I look at the RSI and volume again.  If it is lower than the previous RSI but not below 15 and volume is still flat, then I will still think short.  If the RSI is higher than when I noted it previously and the selling volume has gradually picked up, then I will look to exit my short position because I expect the reversal to come soon. (I know it sounds backwards but I have studied my charts from the past month on these and that is what I have seen and it has worked every time I have tried it.)  But, the bottom line is that I will let the chart and price action tell me what it wants to do.

I have my setups and parameters to try and give me and edge but the fact remains that the market is always in control.  I have to have at least five red 5-minute candles in the row before I consider the setup.  The RSI has to be below 20. My planned entry needs to be at least .50 away from the VWAP.  The VWAP is my first profit target on a reversal so there has to have enough of a potential move for the trade to make sense.  Meaning if I have a .20 stop on LOD and only a .25 potential move to the VWAP, the R/R is not good enough to take the trade.  I like my stop to be on LOD for all my reversal trades.  This does change based on setup conditions though. Before I enter I have to have a 5 minute candle to make a new high compared to the previous candle, and the next candle has to open higher than the close of the candle that made the new high.  That's my trigger to enter. It's conservative but it keeps me from making too many mistakes.  I am looking at a 2 minute setup but I feel more comfortable with the 5.

Also, one of the key factors in me entering a bottom reversal trade is where the SPY is trading. If it's trading below the VWAP or showing signs of significant weakness, I will be very skeptical about taking the trade.  Everything else would have to be perfect and if I do take the trade I will treat it as a scalp.  In all of my research of the trades I have 80% of the time instead of reversing the ticker will stop fading and consolidate or give a small move to the up side and then consolidate.  Like anything else, this market indicator is subject to change but it has worked well for me the last few months.  When I do trade and the SPY is trading below the VWAP or is weak, I will take smaller profits and exit positions quickly if I do not like what I see.  I take small profits and do not give a ticker too much room.

Some examples of my reversal trades are here: http://averagejoedaytradr.blogspot.com/2015/05/how-i-use-candlestick-patterns-on-my.html

Lastly, I have two other scans that I run all day to give me a feel of what is going on.  I look at these tickers and sometimes recognize an early setup but I do not do much with these now.  I'm just tracking data and comparing it with my reversal scanners.  They track the largest % gainers and losers throughout the day and feed a live watchlist on my platform.

That's all for now.  I will keep you posted as I develop this month and adapt to trading full time.  Have a great week

Why It's Good to Know Basic Candlesticking

I did not realize it until a few people pointed it out that I had close to an 80% win rate.  Personally I want to believe it is a fluke because in reality I am not that good.  I'm still learning. As I think about it, I have traded scared for a long time.  Just recently I have begun to trust my stops and allow trades to just work.  But I have always been a very technical person and managed my risk by not trading until I have a group of starts in alignment versus just a couple and using hard, tight stops.  I know to continue to grow and make a living at this I will need to take a little more risks and be a bit more aggressive.

When I first started trading, I was a fan of "clean" charts.  I did not use any technical indicators to assist me in making trades.  I watched the candlesticks, Level II, and the volume.  I was moderately successful. The patterns I learned were based on candlesticks forming it, but not true "candlestick patterns".  The fact is you could see those patterns using any type chart.  I only learned the basics about the candlesticks such as what a shaded and un-shaded candle meant as well as what the wicks meant.  This kept everything simple and clean which is what I needed when I first began learning how to trade.  As I progressed and began to develop my own identity as a trader, I began to learn other indicators to help me with identifying setups and when to enter and exit trades. (VWAP and RSI).  If you look at my charts now compared to when I first started sharing them, you will see they still look pretty clean. The reason is I need the cleanest view of the candlesticks as possible because I feel they tell me the rest of the story.

Just for reference, candlestick patterns are a form of technical analysis and charting used in the market. Candlesticks can be used in all time frames, from those looking for long term investments to those who swing or day trade.  The trick is to not get so engulfed in trying to learn all of the candlestick patterns that you lose everything else.  As you will see, I only use a few to aid me in my trading.  For me, I have learned that if I use candlesticks as part of vetting a setup for a potential trade I can decrease my market risk exposure. However, I will not rely on just candlestick patterns to make a final decision.  It is all part of the setup. If there is any interest I will do another blog looking at the ones I use more closely with more examples.  For instance, lets look at a chart of a ticker I traded yesterday:

$370 profit HMSY Long Stock by AverageJoeTradr

This ticker hit my reversal filter around 11:30.  I like to take these short if I catch them early enough but the RSI was below 25 and I typically stay away because there usually isn't enough room to get a decent profit before it stalls or begins to reverse. In this case it would have been a nice short, but I want to remained disciplined because most of the time it doesn't work out that well. I have made bad trades in the past by not being patient and trying to anticipate but not, I make sure I wait for the signal.  In this case I was looking for a reversal so on the 5 minute chart I want to see a doji making LOD, preferably a bullish hammer, then a nice green candle fully engulfing it:

I don't like the green candle after this hammer in this example because it would be too long for me to be comfortable trading. I couldn't get a tight enough stop to give me the proper risk/reward but this give you the idea what I am looking for.  So if you look at the hammer that formed on LOD around 2:10 on HMSY you'll see that the RSI is in the 15's, a nice green candle printed next, and I entered on the following green candle making my stop on the low of the previous candle at 15.13.  It was a little more than the $50 max but I will go up a little if the setups looks this good.  Now, had the previous green candle run up another .10 or .15, I would have not been able to take the trade or I would have had to use a lot smaller position size to get my risk in check.

My initial target on this reversal was 15.55-.60 to take profits, and snipe another move to the VWAP. It slowed in the high 15.30's and I almost took profits, but if I am going to be a trader, I need to stick to my plan. I moved my stop up to break even.  It was so strong when it made it to the 15.55 mark I just moved my stop up to .55 and held on for the move to the VWAP.  Worst case scenario I would get stopped out on my initial target, but still a good profit.  I held until I had to leave to go get my kids otherwise I would have raised my stop to the VWAP and held to the bell.

As you can see, in this trade I used the RSI to determine whether the ticker was a good candidate to short when it hit my filter and that it was below 20 indicating it was a strong reversal candidate.  I used the candlestick pattern, "bullish hammer reversal", to help verify that a reversal was setting up, and I used the VWAP to help me plan my targets.  Also, if a ticket is within .25 of the VWAP I won't take a reversal trade.  I will wait to see how it react around the VWAP and will execute a trade based on that, but that is not my typical strategy.  I also look at the price action (Level II and volume) and all these stars need to be in alignment before I take the trade.  Has to be a solid setup.  Do I slip up and take bad trades? YES! But I use journaling to help me prove to myself that it's best to wait for solid setups.  So what if I'm bored.  I just need to get back to my real job then!

($51) loss HZNP Long Stock by AverageJoeTradr

Ok, here is another trade I took Friday.  Looking for the same reversal setup.  I didn't get a doji on LOD, which is ideal, but I did get a bullish engulfing signal where you have a red candle fully engulfed by a green candle that printed after it.

I got that and a quick scan of the RSI and it was in the high 14's.  I am a good ways away from the VWAP so I get in.  In this case I forgot to line a couple of the stars up.  Number 1, there was no way I could get a decent stop because the green candle that printed had a .35 range. I entered the trade without figuring my stop.  As soon as I did after I took a position, I was stopped out.  I never checked the price action. The volume for me was too light for a late afternoon push.  Not an ideal trade.  I let the RSI and distance from the VWAP influence my decision without fully analizing the candlesticks or price action

($45) loss NVDA Short Stock by AverageJoeTradr

Another example of a mistake I made on Friday by not taking the candlesticks on the chart into account.  This hit my reversal screener about 12:00 and it looked like it was still in a downtrend.  It was close to the VWAP and the RSI was above 30.  Typically I can get a good .40 to .50 move on a short prior to it setting up to reverse.  I completely ignored the bullish hammer doji that printed and entered a short position because the next candle opened lower and it gave me a good tight stop on the high of the previous candle.  Before I knew it I was stopped out.  Then I looked at the candlestick pattern and there was that doji as big as day telling me no, I'm not going to fade anymore just yet.  Another losing trade that I would not have taken if I had followed my rules for vetting a potential trade.  I get excited when I have a couple of good winning trades and then I feel invincible. That's usually when I try and give it back to the market Gods!

I guess the most frustrating thing for me has been I started out with candlesticking being the basis for my trading which everything else was built around.  Everything I have learned and integrated into my trading has improved me and made me a better trader, but when I start crossing the line and leave out fundamental parts, I begin making mistakes.  I will have my trade vetting routine on a post-it on my monitor from now on.  I know I can't be right all of the time but at least I will be right by following my rules.  I can't control the ticker and what it does after that.  

Green Trading Everyone!