August review

The first half of August was decent, but the second half was like molasseses. It was one of those periods where I kept thinking my quotes were frozen up since nothing was moving. It's also the first time I actually felt bored because I knew it wasn't a good trading environment and that I was better off not trading. But it was still my most profitable month yet. I set new records for expectancy and win ratio as well. I credit this to recognizing the change in conditions and the drop off in volume and being more hesitant to trade. In the past I would just charge ahead or get frustrated. But if the market is giving you lemons, don't try to make lemonade. Just sit back and wait for the market to start giving you -insert favorite fruit here-. Another good motto is "when the going gets tough, stop trading". The bulk of my profits in August came from the first two weeks, and instead of giving back those profits in the last two weeks, I made very few trades and preserved my capital. I switched in to observer mode and started thinking about how I could adapt to the changing conditions. Half of the stocks on my normal watchlist weren't trading with enough volume to avoid major slippage, so that reduced the number of opportunities. I noticed that Trader Jamie started trading more gappers, so this will be my focus in the future when we hit a low volume period. Gappers normally have an unusual amount of volume and ignore market direction for the most part.

I'm looking forward to September when traders come back from their vacations.

Friday trade - AAPL

I liked my entry on this inverted cup and handle. Obviously, the exit could have been better. My 3R target was 169, but the whole morning was trending and very pessimistic after the personal income data and Dell gapping down, so I just tightened my stop to 170.2. I didn't notice the second cup and handle at 170 in real time, which would have made me quicker to exit at 169 due to the shallowness of the cup. But I got 1.81R out of this, and ended the month on a good note. I've noticed that Friday's trade much differently then any other day. It appears that many traders like to take a half day. Usually traders go out to lunch around 12, so they start covering at 11:54ish. On Friday's, there isn't mass closing of positions until 12:30-1.

Wednesday trade - RIO

Wednesday was utterly choppy, and today is looking even choppier. I've adapted by focusing more on sectors and being quicker to take profits and/or tighten my stops. Oil made a big move down in the morning after the inventory report at 10:35. Then it started basing and turning around. When oil is going up, I decide whether to short a transportation stock or bank, or to go long in an energy stock. I found a nice base and break setup in RIO. I liked how it carved out a shallow cup before the breakout point of 26.62 and I thought that oil was likely to continue rising until it neared the morning's ORL. RIO broke out so fast I exited with a 1.93R profit after being in the trade for only 14 minutes. This isn't my normal style (really more of a scalp) but I don't trust this market, so I'll take what I can get.

When I'm trading at my best, I weigh several factors before entering and exiting a trade. My reasons for exiting this trade were as follows:

1. Oil nearing ORL, likely to slow (RIO was moving in sympathy with oil).
2. Time approaching 2:30, when open outcry crude oil trading ceases (less volatility).
3. RIO approaching upper trendline and psychological resistance at 27.
4. Choppy, low volume conditions.
5. Order flow was slowing, only one or two prints at 26.91.

Achieving Consistency

Every trader should strive to be consistent. But what does consistent really mean, earning X amount of dollars every month? I think it is unrealistic to think you can make a certain amount of money each month, and dangerous to set this kind of goal. The market can be inconsistent and fluctuates between trending and choppy. There are some months that will offer more opportunity for your particular style of trading. I think a better goal is to aim for a certain win ratio, or expectancy. This is where discipline comes in, because you shouldn't be trading when the market conditions are not ideal for your trading style. So on those months where there is less opportunity, you can still have x percentage of winning trades, but on less trades, by being more selective.

It's simple really, but the two keys to consistent trading in my opinion are:

1. Only trading the best setups.

2. Only trading when the market conditions are favorable.

Wednesday trade - WB

I traded WB as a double top. I was pretty confident that it was going to break down at least to the 15 level. That level proved strong though and it took some time to break through. After it broke through I wasn't convinced it was a clean break so I tightened my stop to 15.06 for a .91R win. If 15 was broken it should have served as resistance, preventing WB from hitting my stop. The market action has been underwhelming Wednesday and Friday (low volume) so I've been quicker to tighten my stops to protect profits.

Monday trade - MOS

This was a nice 3.4R trade. Notice the heavy volume contraction and NRIBs after the big move down in the morning. Oil was coming down, even with all the Russian news and commodities tend to move with oil and inversely to the dollar. You can't kick yourself for not being omniscient. In retrospect, you always could have done something different to make a trade even better and it often feels like you're leaving money on the table. I exited because it looked like oils decline was slowing and possibly putting in a bottom. I was right but it took over an hour for oil to consolidate and eventually reverse.

Monday trade - DRYS

This is an example of a good entry (inverted C&H) but a hasty exit. The market has been choppy this summer and this day was no different. So I took my 2.56 R profits at the round number 69. Energy stocks ended up being very linear this day, far exceeding my expectations given the overall market conditions.