Post 24 EWU Observations from a New Student

Hi Jody,

It has taken some time to get back into the saddle after my road trip.

I updated my business plan this morning. My goal is to update it monthly. This morning’s update was basically a re-write. When I wrote my first draft a month and a half ago, it was mostly fantasy and I knew it was fantasy but that did not diminish its value to me. Now, I begin to realize the type of trader I really want to be, at least in the near term.

I’m still very much in learning mode. I have a good feel for trading the setups, but there is a lot about managing my trades that needs practice. I took a real-money stock trade this week. I had to have extreme patience with it. I thought it was setting up before I left on my trip, but it did not happen, so I wrote it off, thinking I would just have to miss the move. But when I got back, it still had not set up! In fact, it took until Thursday morning for me to get the confirmation I needed. The interesting thing is that when we had the final PW, I knew it in my bones. My entry was more sloppy than I would have liked and my exit was way too soon, these are the things I need to learn through practice. I’m quite content with a respectable profit knowing that I missed a lot of the move.

I realize, in updating my business plan, that I am really wanting to be three traders. One, my bread and butter for the moment, is as a trader of the S&P through 3x ETFs. Two, is to follow the Ultimate Signal service trades. Three is to learn to trade the Forex by trading Demo to capture moves based on strategies that I develop through regular analysis on the currency pairs.

For the bread and butter trades, I don’t want to try to weave in and out of the swing move, I really just want to catch Royal Semaphore to Royal Semaphore on the 15-minute chart. Not that I want to try to catch the final Royal Semaphore, itself (although that would be the optimum), I just want to take a meaty portion of each move across the Tunnel. There are three of these moves per month, on average, in the S&P500.

The big shift is becoming comfortable with the level of trading volume that I intend. I can see me taking three or four well-constructed S&P trades per month, putting on a fairly sizable position to catch a worthwhile move. I can also see taking all of the Ultimate Signal Service trades that tweet when I am available, I find them quite easy to manage. I can also see myself taking one or two Demo Forex trades each week based on my own analysis. So, instead of quantity of trades, I want to really stress quality.

The risk that I’m taking, even on my Demo trades is extremely low at the moment. I have 3% of my net worth available for trading. I’m currently only risking 1/4% of that 3% on each trade. I like the idea that I could lose 400 trades in a row before getting tapped out! I do have plans to increase my risk profile from 1/4% to 2% over time, but I need to see consistent winners in order to risk more.

In my first ten real-money trades since trading the Wavy Tunnel, I have seven losers and three winners. But my average loser has been 0.00125% of my trading capital and my average winner has been 0.00563% of my trading capital. That’s 4.5 to 1. I don’t think I’ll continue to lose 70% of my trades. Many of those early trades were very poorly researched, strategically challenged and loosely implemented.

I’m still spending at least an hour every day getting organized. I have a well-defined schedule for organization and it is now investing the time and slowly crossing each T and dotting each I. Just having my trade logs and trade history organized is a boon! It is much easier to move forward in an organized manner when I have a specific schedule, process and standards for recording my activity.

All-in-all, I feel very positive about my progress. I’ve come to embrace taking things slowly. It is my nature to break out of my shell one small strategic peck at a time. There was a great deal of discomfort in the urgency that I had been feeling prior to my trip. It was as though, on the one hand, I needed to put all of this study into action as quickly as possible; however, on the other hand, I was asking myself to take on too much, too soon.

I have a lifetime to master this material. I certainly need to push myself in order to grow, but I need to be careful of expectations that don’t match my inner compass.

-dave

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