A) My Personal Faults
One of my biggest personal faults is patience, or lack thereof I should say. I can't explain why but I've always been the type of person that needs to be active, and when I have something on my mind, I want to go after it right away. Although this same drive is the reason why I'm at where I'm at in life right now, I also realize that when it comes to trading this can have a negative effect. Anybody familiar with swing trading knows that being patient is a key component to being successful. The time it takes to identify and predict a possible setup, then wait for price action to reach that mark can literally be anywhere from days to weeks. Not to mention the time it takes for the trade to play out once you're involved. When the market would be in a heavy trend or in no-man's land, presenting little counter trend opportunities I would often find myself bored and frustrated (especially if I was down money for the month). These feelings lead to me either going through a list of exotic pairs searching for opportunities, or continuing to shrink the timeframe until I found something that looked tradable. (I don't mind doing this now, since I have much more experience trading, but at the time I wasn't polished enough to be doing so). After coming to the realization that I was heading down a bad path with my overtrading/revenge trading (whatever you want to call it), I knew something had to change. While doing the daily update for my website (www.iambusiness.info), I came across a quote that hit home pretty good. I don't remember it word for word, but it dealt with not worrying so much about changing who you are as a person, rather accept who you are and work on a creating a situation that benefits you the most and will allow you to succeed. This was reason number one.
B) Consistent Profit Stream
Like most traders, a major issue that I faced as a trader was consistency. I would go through a streak of very good months, but every once in a while I would have a murderous month that would just hammer my account. Now, normally this wouldn't be a problem because the profits from the streak of good months would heavily outweigh the drawdown from the murderous ones. However, due to my financial situation (you can read my introductory post for the details) I'm often not able to grow my account as much as I would like because I'm forced to take money out each month in order to pay the bills. (Not to mention, planning for my wedding). Anyway, when deciding to implicate a day-trading strategy, I wasn't looking to avoid those losing months, because I accept the fact that, that's part of the business. However, by having a strategy that is different from my main strategy, but can be used alongside it at the same time, I would be able to salvage some of my losses from the swing trading (hedging in a way). What I was looking for was a consistent profit stream. No big winners. No big losers. Simply something I could use to earn enough to pay the bills, so I can let my swing trading grow my account.
Earlier in the year I attended a free mutli-session presentation by Todd Brown on his "Big Mo" system. I usually check out anything free that Triple Threat Trading has to offer so I started playing around with it on the hourly timeframe. After adding and subtracting filters (and back-testing of course) I was able to create a portfolio that was pretty consistent and profitable. The only problem was dealing with the signals that contradicted what I was seeing with my swing trading. I thought of two solutions to this issue. A) have separate pairs for each trading system or B) set a specific rule that places one signal over the other. I saw downfalls with both of these choices as I could see myself getting upset that If A) a perfect countertrend pattern appeared on a pair that was only to be used for the Big Mo system or B) if I suddenly caught a streak of losers on one system, I would start to tell myself "Man I would have been up so much money if only I traded the other way." Therefore the solution that I found was trading it on a small enough timeframe that it wouldn't conflict with my longer term swing trades. With that being said if I ever do face a point where I have a swing trade order pending, or am involved in one I simply don't trade that pair using the day-trading system. This is also how I'm technically following the trend and going against it, but not really. Even though the Big Mo system is a trend following system, since the timeframe is so small, and my profit targets are so tiny, I rarely see any contradiction between what happens on the 5min and the 240min. They really have nothing to do with each other at all for the most part.
The greatest thing about trading is it gives us the freedom to run our business the way we want it. There are thousands of ways to trade the market and deciding which one to use is entirely up to you. I trade the way I trade because of my personality. Once you understand yourself as a person, it makes it much easier to understand what trading style will work for you in a way that won't drive you insane when the tough months arrive.
As always thank you for taking the time to read this post, and I really appreciate all of the feedback from the previous posts. As long as you keep reading I'll keep writing.
Akil L. Stokes
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