Continual self evaluation

It seems to me that I am almost perpetually struggling with something. Which is great, because that is what trading is – a continual process of self evaluation and learning. You spend so much time working on getting a rule-based trading methodology to a point where you can consistently generate returns, and then you try something new and it’s like you’re learning to walk all over again.

Day trading is not for the faint hearted, that is for sure. There are 1 001 advantages that day traders have over retail traders, although there are also 1 001 additional skills and disciplines to master in order to day trade successfully.

Two weeks ago I wrote about analysing what went wrong after I took some heavy losses. I speculated that I was trading in too many shares at a time. In other words, I was trying to divide my attention across a number of shares on an intraday basis. I think I now have a clearer understanding of that.

Day trading any one particular stock demands enormous amounts of attention and concentration. When I focus on just one or two shares for the entire day, I manage to get some green on the board. When I try to be involved in too many shares, I get a snot-klap square in the chut for trying to be clever.

I’ve said this before, and I’ll say it again… I need to focus on just one or two shares at a time if I hope to get the consistent green days rolling. Sure, I’ve been up more days that I’ve been down, but when I am down, I’m down more than what I’m up when I’m up. Yeah, that sentence is confusing, but I promise you, reading the tape on just one share can be even more confusing, let alone trying to trade six. Madness.

I think the key difference is that when you trade CFDs on a longer term basis, you can pre-define your risk and use technical analysis (which I completely recommend by the way) to help you navigate the market and identify trades. The shorter-term noise is ignored and you stick to your plan. When you day trade, the shorter-term noise is exactly what you are trading.

Consider this, a 30 cent move on a stock like FirstRand is a big move. The idea is to get a chunky-sized position behind something like that and make some good money off a move that would hardly even break even if you’d done it on your CFD account. It’s just a completely different ball game altogether.

Anyway, progress is being made and hopefully by the next time I write a story I will be able to tell tales of victory and glory and have made Scrooge McDuck like towers of money. Until then, I hammer away at just trying to be a little better each day than I was the day before.

Happy trading!

Petri Redelinghuys