- Did I make money - yes/no
- Did I trade the plan – yes/no
- If #2 question was no - If I had traded the plan would I made money – yes/no
- If #2 question was no and I made money on the trade the way I traded it, would I had made more money than I did – yes/no
- If #2 question was no - What was the main reason I exited the trade pre-maturely? ( try to answer as honest as possible)
- I read or heard someone else’s comment and second guessed myself...
- I feared losing what profits I had
- I feared losing more money
- I felt physically sick
- I did not like the trade to start with and entered impulsively
- I entered the trade based on others comments but really did not like the trade.
You can add other reasons but the exercise is to keep this in your journal so you can identify patterns with yourself. The Trader is 80% of the equation and if the trader cannot function properly in the heat of the battle, the battle is difficult to win.
With the AAPL trade, I looked at the charts about 5 different times since the trade was entered on Monday. All were looked at based on pre-determined alerts and the system alerted me to look over the chart and make the next decision. I was in meetings most of yesterday, no need in micro managing a trade. Either the plan works or it does not and if it does not, I have identified up front how much money I am willing to lose. A trader can only control when he/she enters or exits a trade. Nothing else.
With the AAPL Swing trade example...
Did I make money = yes
Did I trade the plan = yes
Would I make this trade again regardless of profit and loss = yes
Since the trade was traded as planned and I made money and I would make the trade again regardless of profit or loss, end of analysis, next trade.
One should practice doing this exercise on every trade. YES I know, it is mundane, boring, and I rather being making trades. This exercise will help you make better trades and become more comfortable managing the trade. I did not have to be stuck in front of the screens watching 5 minute charts for this trade. At the moment It appears I will leave money on the table, but I don't mind when I leave some money on the table, as the Trading Gods get pissed off when you don't.
In all seriousness, the only two options I have when targets are met is either take my money and run or move to a momentum trailing stop on a smaller time frame. Being that the swing part of the trade was to be closed by end of day due to earnings and I could not find a trailing stop I was willing to use to stay in the trade, I was happy to close the trade and take the profits that was given since Monday afternoon. It is an idea trade for me.
Low risk entry, very little draw down during the trade, and target hit within 3 days. These are the trades that I try to be patient and live for. AAPL gained about 15 points in profits if traded you the shares and if one traded the $310 June calls as mentioned those gained about 10 points on a $28 dollar purchase.
REMINDER: When using options to trade higher dollar stocks be careful with choosing the month and strike prices. You want a 70% Delta at least two months out. It is not being used for leverage, these calls are being used to allow one to trade $300 dollar stocks without tying up all that capital for the stock. It should only be used when one feels they obtained a winning edge.
