A Day Traders Results of not Sticking to the Plan! feat. BoeingAt times I find myself locked in to trying to find a better entry while my trade plan is setting up during the day. More often than not, when the internal battle is won by the impatient voice in my head,
I sneak into a trade early and pay the price for it.
Well... today was one of those days
I'm not sitting here saying that my set-ups are always right, nor am I saying I'm some trading savant that wins every trade. What I am saying is the important part is to have a plan and follow it. In doing this, it eliminates a lot of the emotion that can go into the decisions being made throughout the trading day. It allows for well-thought out entry and exit points, manages exposure of losses when wrong, and provides a picture of what the profit/loss will be depending on if the analysis is right or wrong.
Below is just an example of a position I took today in which I didn't follow my plan and ended up being on the wrong side of the trade. The technical analysis explained is simply included to describe the approach and thought process I had in entering this trade. In no way am I suggesting for anyone to use these types of set ups, nor am I claiming these set ups are a successful way to trade.
SPOILER ALERT: The price action would have given me my entry if I would have stuck to the plan.
This morning I posted the trade idea image below before entering a trade in BA
At this point I had been patient and let the 1st move settle. I noticed that the price action was stuck dead in the middle of a battle between two previous action zones; one supply (top gray-shaded zone) and one demand (bottom green-shaded zone). I was licking my chops knowing that this was setting up perfectly for a day trade. I anticipated that the price action would give me a good point of confirmation before making its move either to the up or down-side.
The plan that if the price broke up above the supply zone, entry would be triggered at a rejection of downside re-entry into supply. Or to enter a long put position at a rejection of upside re-entry back into the demand zone, following a break below.
The confirmation of a call entry would give a change of about 3 delta to the upside while placing my stop-loss at a break below the supply zone, giving a delta of -1.5. Profit target was decided by an above descending trendline in which the angle was produced by previous highs of supply resistance connected to the following confirmed demand zone before a lower supply was formed. So, a higher supply based resistance would be drawn to a lower demand-found support, angling down towards but above the current price range. My thought here is that if there is downside rejection to a previous supply zone, the sellers are currently no longer there. Inversely, an upside rejection to a previous demand zone shows that the buyers are no longer there.
The confirmation to enter a put position provided the same risk/reward profile as the call entry. Similarly, the profit target was decided by the inverse of the supply to demand (descending) trendline. Which results from a previously lower supply zone connected to a higher confirmed demand zone, ascending towards but below the current price action.
Whether it was because I got impatient, or maybe I thought I had solved the Rubik's cube equivalent to arbitrarily drawn trendlines for intra-day breakouts... It didn't matter, I didn't really have a plan.
Below is where I decided to enter the trade. - I posted this chart as an update to the trade idea shortly after I entered.
I wasn't sure what resistance would be produced from a break of that level and I wasn't really sure at the time where my stop loss should be placed. After entering the trade I realized that the entry would give me higher negative delta to reach my stop (increasing it to as potentially high as -2). I still really wasn't sure where price would find upside resistance, so I just used the same resistance as the original plan.
So what came as a result?
After a break of the supply zone failed to hold, a higher low was found but was quickly met with a rejection to break back into supply.
The result? A potential diamond top developing!
Translation = quick, everyone long simultaneously set stop losses on a break below the bottom trendline support.
Next up. You guessed it
Stop was hit and I exited the trade for a loss.
The result of entry from the original plan is as follows.
Lessons to be learned-
1. Yes, although in this case my original trade plan would have given me my entry and produced the expected profit, this will not always be the case.
If a trade plan is created and it doesn't end up triggering your intended entry, GOOD! you were wrong anyways but you didn't have to lose money this time to figure that part out.
Take this as an opportunity to review your trade plan. See what indications you may have missed to enter or not to enter. See where you can improve your edge.
2. Maintain control of your emotions during price action, don't let quick moves produce a reaction.
If a move is already happening quickly, guess what you're late to the dinner party. Don't try and convince yourself that the stale crackers and warm coleslaw left is the meal you really want to be eating.
3. If you miss a trade or your plan doesn't produce an entry, try an identify where others entered and why.
4. Look at both sides of every trade.
-If you intend to go long ask yourself if you already held a position what would keep you from selling at your entry, or what would reasons would there be to add to your position here.
-If you're short ask yourself "why wouldn't I buy here" or "why would I want to be quick to sell at this level?"
5. The best part about trading is learning. At times, it is more rewarding to learn than it is to win.
-I have included the link to my original BA trade idea
