My biggest challenge that I faced with my trading is to develop mental strength and believe in my trading system while I’m having a loss and do not go out from the trade just before the great run. If you have any recommendation on how to improve this, please let me know.
What strategy and time frame are you doing now?
I never thought that you’re going to answer my email! I love your podcasts and just sent an email as you said in your podcasts since you state that you are going to send a free video (which I didn’t receive yet) and the right steps for trend following. I just started to trade last year. I have been through the IBD CANSLIM approach which is a good methodology for stock picking but time consuming, also part of the buying and selling process is discretionary, so emotions come into the trade and sometimes must be executed during my working day which are both weak points for me. So I decided to search for a trading style that could fit better to my personality and time availability. I was looking for a system on which I can keep all aspects of trading simple, mechanical (no emotions) and invest the least amount of time possible. In order to achieve my objective described above and based on my short experience, I use a very simple system using the 21EMA as my entry and exit point based on the closing price of the day with MACD indicator as confirmation, with just one security which is TQQQ. As you may know this year Tech stocks didn’t go well, so I tried to use other Leveraged ETF’s to keep on the market, but sometimes I made an entry according to my system but after a small shakeout I went out losing the great run. When I made a post analysis of what happened I came up with the following conclusions:
1. I’m using some ETF’s or stocks which are very volatile and the swings are so wide that I can’t stand seeing my account bleeding during the day; then I force the exit, violating my own system. After looking at the closing of the day nothing happened, it was just noise.
2. Sometimes I see a great run happening and I force an entry (since in the model is already crossed up 21HMA) knowing that a pullback could happen, and guess what the pullback appears…. I can’t call it FOMO entirely since the trend is up but I lied to myself that it will never end…
The improvement points that I think that I need to make:
1. Improve the psychological side of trading.
2. Stay with only one security and wait until it works or develop a diversified portfolio with a proper leveraged ETF selection system.
Right now, I want to explore and know more about Trend following in order to improve my current system. And the best starting point is to start with the best book that you can find it: I believe chapter 6 of your book can help me to address improvement point 1. I hope you could give me some recommendations on where to look to improve point 2 regarding the ETF or stock selection system based on market trends.
Let’s reduce this. You need:
• Exact rules for selecting your tracking portfolio.
• Exact rules for entering your trades at the right time.
• Exact rules for exiting your trades with a loss.
• Exact rules for exiting your trades with a profit.
• Exact rules for how much money to bet on each trade.
Don’t have? That’s where to start.