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It's been a rocky few weeks but I think I've finally started to pull myself out of my trading slump. Both my win percentage and account balance have been steadily increasing, and I feel like I'm finally starting to hone in on a trading system that works for me. 

For this week's newsletter, I wanted to share four things that have helped me turn things around:

Studied Historical Price Action

During my three-week losing streak, I was having a difficult time reading price action. It seemed like every time I entered a trade, $SPY would head in the exact opposite direction and I'd get stopped out within seconds. To regain my confidence, I began studying old charts. I went bar-by-bar through hundreds of charts and slowly but surely, I began to figure out the ebbs and flows of the market. It's boring and it takes a lot of time but it's worth it.

Reviewed My Old Trades

Last week, I added all of my trade data to a spreadsheet because I wanted to see which trade setups were making me the most money and which ones were losing me the most money. Knowing that information has been extremely beneficial, but there's another benefit to the spreadsheet exercise that I didn't expect:

To create my spreadsheet, I had to assign a trade setup to each of my old trades. That meant pulling up the chart and reviewing each trade. As I did this, I started to notice subtle differences between my winning trades and losing trades. For example, one of my favorite setups is the bull flag pattern. While reviewing all of my bull flag trades, I realized that the best ones had these things in common:

• $SPY had just made a quick move up and broken through a resistance level.
• $SPY was moving sideways or slightly down for at least 3 candles.
• The candles that made up the flag had a very tight formation with small wicks. 
• The CALLS option chart was showing a clear support level where price continued to bounce.
• The PUTS option chart was showing weakness and trending down
  
  

Now I know that if I see a bull flag with those five characteristics, there is a better than 75% chance that the trade will go in my favor.

If you can put together a list like this for each of your trade setups, you're odds of success will improve dramatically. 

Adopted a "Less is More" Mindset

After analyzing all of my past trades on a spreadsheet, it became clear that a small number of trade setups were accounting for a disproportionally large number of my wins. Ever since seeing that, I've made it a point to focus only on those setups. It might not be as fun and exciting, but taking 3-5 great setups per week is far more profitable than taking 15-20 "pretty good" setups. 

Put an End to Emotional Trading

The vast majority of my losses (from a P&L perspective) have been the direct result of emotional trading. To fix this, I've made it a priority to get my emotions in check before entering a trade. Here are a few rules/habits that have helped me do that: 

1. After a trade gets stopped out for a loss, I force myself to take a 10-minute break from trading. During those 10 minutes, I either go outside or I do a few minutes of light exercise. Then I read through my trading goals, rules, and reminders before returning to the charts. Doing this has all but eliminated revenge trades
2. I've started doing 5-10 minutes of guided meditation before I start my trading day or whenever I start feeling frustrated, fearful, or greedy. This helps me remove any biases or negative thoughts that could lead to poor decision-making.
3. I only allow myself to have 3 losing trades per day and I only allow myself to have 1 losing trade after 11:45 AM EST. If I hit one of those numbers, my trading day is over. This rule has helped me avoid overtrading - especially later in the day when I tend to give back profits by taking lower percentage trades. 
   
   

Alright, that's it for this week's newsletter. As always, I hope I've shared something that will make you a more profitable trader.

Have a great week ahead!

- Eric