September 21, 2014

Structured Trade Analysis

I decided to download my trading data from my broker and analyze my trades in response to some of the lessons I've learned in Dr. Steenbarger's book, The Daily Trading Coach. I took the data, put it into Excel, and created some charts. So let's go over my period of performance covering 8/1/2014 to 09/09/14:

My initial reaction is wow, displaying raw trading data visually can really simplify the process of analyzing past trades. Analyzing my past trades as well as the impact different market variables have on these trades are essential to understanding my strengths and weaknesses as a trader. So let's focus on my best and worst trades for this period.

My most profitable trades were GIGA, TROV, and VRNG--two shorts and one long. I did trade recaps for GIGA and TROV on this blog so let's cover those.

As you can see from the GIGA trade recap, the daily chart had just broken out and I wanted to be a part of any pop into the close, gap up, and follow through momentum. Some of the things I did well in this trade include:

  1. I analyzed the daily chart well and prioritized my attention on this ticker.
  2. Identified good risk v. reward, although I didn't set a specific reward price, I only set a prediction of a pop into the close--not concrete and not good trading.
  3. I took half profits into the $3 test, and the rest after-hours at historical resistance near the $3.20s.
In the TROV recap, the stock was overextended on the daily chart, so I began a comprehensive analysis of historical resistance levels that could introduce selling pressure. Some things I did well here include:
  1. Once again, thoroughly analyzed the daily chart and focused on a good daily chart set up.
  2. Identified good entry and exit price before getting into the trade--although I didn't stick to my exits as I should have. :( 
  3. Let the trade come to me.

SGOC was my worst trade for this time period, and I also did a trade recap for this stock. In SGOC, the stock was up big for the day and I was looking for continued momentum the following day. I identified a good entry point using the previous day's support and identified a good stop out price--i.e., the amount of dollar risk I was willing to take.

The issue though, I noticed, was that I had a second entry if the stock dipped further beyond my initial entry. In hindsight, I don't think adding to a losing position was a good idea if my hypothesis/prediction was continued momentum. I think one major support level test is okay but two different support level tests seem excessive for a momentum stock, at least in my novice opinion.

In summary, this structured trade analysis helped me identify my best trades--and the strengths behind those trades--as well as my worst trade--and the weaknesses behind that trade. The identification of strengths behind my best trades helps me set goals that include using these strengths more often in future trades. And vise versa for my weaknesses by setting goals that include avoiding them more often in future trades. Basically, I've fairly quickly and accurately identified what behaviors led to my worst trades and what behaviors led to my best trades.


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