Why hello there, how are you. You never call, you never write…oh wait, that’s me.
Hi hi. It’s been a minute! I have indeed been trading since July, but I have gotten VERY lazy about tracking my trades and blogging (obvi), and boyyyy does my P&L show it. My discipline has taken a huge hit over the last few months which may or may not be correlated to my sleep (thanks, baby sleep regressions! And teething! And growth spurts!)…to the point where we are finally sleep training baby boy this week (don’t @ me, I careth not for any of thy parenting opinions). Anyway, I got about 6.5 consecutive hours of sleep last night, and Lord-willing we’ll start trending THAT way. But no excuses; at the end of the day, sleep-deprived or not, I’m still pulling the trigger on some terribly impulsive and undisciplined degen trades, and nobody is responsible but moi.
So here we are! I’ve been doing alllll the degen things I said that I wouldn’t do back in my first few posts (*cough*options here and there*cough*impulse trading*sputter*), but now I’m climbing back on the wagon. Discipline (especially at this early stage in my trading career) requires rigidity; give the degen an inch and she’ll take a mile.
I recently added to my Tweet (X?) list on things I need to improve on:
- Only trade MES.
- Normalize ~$100/day gains (“small” gains/base hits)
- NO RANDOM IMPULSE COUNTER TREND TRADING! (major backtests only with smol size IN CONTEXT of bigger picture)
- Be an evidenced-based trader.
- Don’t affirm bad habits; aggressively eliminate.
For my own sake, I’m going to expound.
- Only trade MES.
ES is the new 0dte SPX options (for me.)
Since trading on the prop firm eval account, I experimented with taking ES trades, because why not? I WILL TELL YOU WHY NOT. Because even though it’s a paper trading account, I am still unable to trade objectively and hold through big swings when price bounces around at $50/pt. My emotions are not ready for this arena yet. I’ve blown through a couple of eval accounts because of sizing up with ES and hitting the max loss — I mean, it’s a tight leash anyway for the max loss in the 50k account ($2,500…which means you can only be wrong for 50 points total, not to mention the dynamic trailing stop for the max loss, blah blah blah…but that’s for another post), but ES is just not something I’m personally ready for yet. While there have been brief moments of WOW MUCH GREEN using ES, when you’re wrong, you reallllly feel the wrongness. This also really impacts my mentality/emotions, making it that much more difficult to trade objectively.
MES allows for far better risk management for where I’m at. I can let a trade have the room it needs to work and practice the Mancini way of taking profits from level to level and leaving runners. My new plan is to use 5 MES as my full size position: 3 as a core (take profit at first level), 1 as a runner (take profit at 2nd level), 1 as a long-distance runner (trailing stop). If my eval account max loss is $2,500, and a fully positioned 15 point loss is $375, then I have roughly 6 bullets in the chamber. So wayyy more wiggle room (and wayyy less stress). (However, if I follow my plans, a fully positioned 15 point loss SHOULD be very infrequent.)
2. Normalize ~$100/day gains (“small” gains/base hits)
This points also reflects the difference of using ES vs. MES. When you start winning with ES, big numbers (relative to MES) become the norm…and subsequently skew my view on what is a “good” gain or not. I am quick to forget that a modest goal of $100/day is $25k a year…which as a noob trader, I would be ECSTATIC about. (Heck, I would be ecstatic to be green at all this year!)
With a full 5 contract position in MES, $100 is pretty attainable: it’s only a 4 point move (5 contracts x $5 per point = $25 per point). Ideally, I’m aiming for roughly 8-10 points on the first move, thus building a buffer for my runners in case things reverse. I want to consider a ~$100 day a respectable trading day and NOT GIVE IT BACK trying to chase down more.
3. NO RANDOM IMPULSE COUNTER TREND TRADING! (major backtests only with smol size IN CONTEXT of bigger picture)
This is pretty self-explanatory, I think. Countertrend trading has very rarely ever worked out well for me, with the exception of playing major backtests. They say trading will teach you more about yourself than almost anything else, and I’m inclined to agree: I think my countertrend tendencies are probably a result of some psychological hangup I have about trying to outsmart the market. But catch enough knives/get steamrolled by enough freight trains, and the lesson starts to get through my thick skull.
When I say “in context of bigger picture” — Mancini often talks about breakouts/breakdowns of multi-month consolidation patterns, and the force of the move behind them. Apparently, within those situations, it’s not unusual for price to melt down (or up) through various supports (or resistances), so your backtests better be major if you’re going to try a countertrend trade. All that to say, “the trend is your friend” truly is great advice. Mancini does a wonderful job of letting price conclude his trade (via trailing stop) rather than his emotions, which leads me to the next point…
4. Be an evidenced-based trader.
Mancini has talked about being an “evidenced-based trader,” meaning he lets price action dictate his entries — not headlines, not data numbers, not Fed decisions, just price action and his pre-planned REACTION to said action. I have made many mistakes of trying to front-run rather than wait for confirmation (evidence) of a setup. I have also made many mistakes of letting myself get shooketh out of trades when there is no technical evidence that indicates that I should jump ship just yet.
I trade only on evidence – I don’t predict. We lost a major support yesterday at 4493 so the evidence states I need to assume all bounces are relief bounces until a resistance reclaims to tell me otherwise. We could set a multi-month low here, but I can’t know that until res reclaims
— Adam Mancini (@AdamMancini4) September 7, 2023
Evidence brings conviction. There has to be a clear reason for the trade, a process that is repeatable that I would take multiple times if the scenario presented itself over and over. Otherwise, it’s all air.
5. Don’t affirm bad habits; aggressively eliminate.
The thing about trading and bad habits is this: sometimes you do really dumb things AND IT WORKS. While these windfalls are nice, if they don’t have a good reasoning behind them, they are a poor decision and a poor quality trade. You can have a green day and still have traded poorly. It gets even more dangerous because it reinforces bad habits (because it worked before!), so I keep repeating mistakes and breaking rules that are in place to keep my account safe.
There’s one bad habit that I’m thinking about in particular:
Okay, it’s more like two; let me explain. The first issue is that I’ll have a poor entry, mostly because I was impatient and chased, and I find myself in the red with MES. So that’s mistake/bad habit #1. The second, more deadly mistake/bad habit is that price then comes to the place where I should have ORIGINALLY entered. My confidence in this bounce spot is greater…so I average down with ES (!!!) because when it DOES bounce (not me predicting or anything like that…no…couldn’t be me…), it will recover my initial red AND get me a profit.
The worst thing that has happened is that this has actually worked out for me a few times.
And thus all the rules flee from my brain when faced with a red position because GOSH DARNIT I CAN RECOVER WITH ES!!! And then when price doesn’t do what you “think” (read: “what you are SURE”) it will do, it is a bad scene. Again, introducing ES into the mix messes with my emotions and I’m unable to hold through even mild volatility because of the amount of money that is being tossed about. It quickly turns into a hot mess.
This point touches on my previous list’s points of “Accept being wrong quicker & cut” and “be wrong but don’t stay wrong.” And again, it probably has something to do with my ego and trying to be smarter than the market…and stubborn about it. So for now, I’ve completely taken ES off of NinjaTrader. I am using TradingView to chart and will watch ES on there, but execute with MES. I’m not giving myself a way to execute ES trades because there’s just no discipline on my part yet. This lack of discipline distracts me from my ultimate goal of consistency in my trading, so no more ES at all for the foreseeable future.
It’s not enough for me to “not do bad habits”; rather than play only defense, I want to go on the offense, too. I’m choosing to aggressively eliminate this bad habit by limiting myself only to MES. I’m also re-reading Maria Konnikova’s “The Biggest Bluff” book (it’s about poker and decision-making in general, but it’s also incredible relevant to trading, too) which has been a nice refresher for my psychology. Next on the docket is Jared Tendler’s “The Mental Game of Trading” which I am quite excited to dig into. (Maria actually worked with Jared and details it in her book!)
So here we are! I may be stubborn and it may get me in trouble with my trading, but the GOOD thing about my stubbornness is that it also drives me to better myself so I can succeed. I have stubbornly stuck with some form of trading over the last 4 years, and I’m going to see it through.