The Art of the Deposit, While Learning.
Currently I have an entry system that works for me. It is tailored to my needs and it speaks to me. I can see in a glance if the market is long, short or undecided. This is what each of us needs. A system that when we look at it, we can tell, almost instantly, whether the market is long, short or undecided.
Once that is achieved the entries become a matter of following the system.
However, I have a very real problem with exits. I want to discuss a couple of things in this piece. Things I am fairly certain are correct, well, at least correct for me, but things I need to incorporate into my being a little better.
My history is that I tend to work hard when I undertake a task. I now believe that has harmed my trading in two ways.
First, I believe that if I am not sitting at the computer watching charts and trading that I am not working. It doesn’t feel like work. This act of watching and not doing anything. I need to be working. This is not a good perspective and causes me to force trades. It does so by creating an underlying feeling of guilt that I am not “doing” anything. If this venture is going to provide for my family and me, it seems to me it should be hard work. Either physical or time spent. However, trading does not have to be that way and is one of the reasons I am attracted to trading. Heck, you could “work” for two hours in the morning and call it a day! That has got to be appealing to everyone. This underlying notion that I have learned over time that work has to be long hours or strong physical exertion must be removed from my mindset.
In fact, it is now becoming apparent to me that although this is hard and study must be had continuously, once you bank a lot of time in the venture, that bank of experience comes back to you one hundred fold. This venture no longer needs to be a massive consumer of time and energy. I am not saying once you get it, you can give up study and hours in front of a computer screen, but it is possible to back off and trade only for an hour or two a day and still meet your goals.
Second, when working on this the last few years I have spent hours trying to find the holy grail. Part of that search was that if I found one thing that worked a fair amount of the time, but not always, I would add to it to eliminate the times it did not work. Then I would add something else and another indicator or chart to look at. Eventually my workspaces were a jumble of things that I had to check and cross check on each trade. I made trading into what I believed it should be: hard work. Now what I have is two charts, a 3 min and a 5 min. They tell me whether or not the market is long, short or undecided. They also tell me when to enter. I do check three other charts in a 5, 10 and 30 minute time frame. Those charts are simply a quick glance. They tell me whether or not the primary 3 and 5 minute chart has a good chance to run, or if the move is about extended or perhaps if I should pass on the current signal and await the reversing signal that will come in a bit. It is simple, elegant and “easy.”
This brings me back to my original point of this post, exits. How many times have I studied the compounding of capital in this trading venture, especially with the ramping up of contracts. I mean if you can trade each day for 2 points, consistently and you trade 10 eminis at a crack, one trade for +2.00 is worth $1,000. Considering 250 trading days a year, you are pulling down over $200,000 per year.
As of today I have set a short term goal for myself. It is not great guns, however, if I consistently do it, day in and day out, all my goals will be met. I keep falling into the trap of watching the trade AFTER I exit the trade and saying “what if?” That is terribly detrimental. What is causes is blinds spots. The next treade instead of taking 2 or 4 or 5 or whatever the market gives you, you want 10 or 15 or 20. All of a sudden instead of taking small consistent bites, the market is slowly and consistently taking small bites of your capital.
Until I become better attuned to exits and stop thinking about 10 pointers and 20 pointers, I am going to set my limit exit when I enter the trade and if it gets there I am going to be happy that my current daily goal has been met. I will continue to study the art of the exit and hope to improve, but until I know I have it down I will allow the market to fill my account with my small consistent daily goals. Perhaps over time I will become less interested in the 10 and 20 pointers and realize fully that achieving small consistent daily gains is in the end what this game is about. I realize it mentally, but my trading actions have been saying that I have not integrated that thought process into my trading.
After all, isn’t it backwards to set a stop, say 4 points, and tell the market, “Mr. Market, you may take 4 points out of my account, but no more” and yet not tell the market, “Mr. Market, I would like you to deposit 4 points into my account?” It is the act of the deposit that grows the account, not the act of the withdrawal, but most of us are conditioned to only set stop losses and profit limits.
For now, I am going to let the market deposit to me and I will work on improving exits.
Thoughts?
SE
