[kyle]

I have been struggling with my own pyschological side in trading. I seem to have a bad habit of overtrading and always trying to chase the markets.

I went through alot of articles and resources from several sites and found this to be a newbie trait. I have a question to the more experienced traders here. How did you manage to overcome overtrading? How many trades should I be looking to place as a day trader? Thanks

[torero]

I think on average I see 2-3 good trades a day (excluding trendless days where ranges are too small to bother) and I'm a trend-follower. But I'm not a scalper so I can't say for you if you are or not. Scalpers trade more at high volume. My trades can be from 10 mins to an hour depending how trendy the market is. The trait of my trades are the winners stay in position longer than losers. The counter-trend trades (I do little of them) are quick ones since I determine they are scalping trades.

If you're overtrading, it may be because your entries are off (this may be from chasing) and your stops might be too tight, getting kicked out too prematurely so you enter. If you hold off from chasing, you'll start to see ideal entries (high reward/low risk trades) don't come that often.

You have another psychological weakness is that chasing is caused by greed or envy. You feel the market (and profits) are going without you. Need to curb this emotion. You need to see the downside (risks) from trade. You tend to see the profits but not the losses. Need to consider the losses first. Once you keep this in your head, you will start to trade less because you will be aware of the potential loss from the trade. To consider your loss, you need to set your stop loss order, it's a real loss if you take the trade and consider it gone if you take it. Mental stops are fine if you're an expert but I still make physical stops (I am and will always be a newbie!). Try it.

One other problem you may also have it not knowing where the trend is and range is (thus overtrading due to thinking every moment is an opportunity moment). Need to work on your chart reading or study and research the indicators you're using more. Test them out and find if they work in certain conditions and not in others.

Need to go back to paper-trading to work on your entries to prevent chasing. When you paper trading chasing, you'll see for youself how unprofitable it is and maybe this will open up your eyes to the problem.

Good luck.

[kyle]

Thank you for the reply torero. I truely enjoy your comments. I do often get stopped out just to see the market move in my favor.

From my observation this is what I see: My entries are poor and it conflicts with the fact that I use tight stops. Like you mentioned, I need to work on my entries so I can continue to use tight stops.

I often hear of professional traders using more mental stops than physical. I am curious to know what the advantages and disadvantages of physical vs mental stops.

[torero]

If you have the discipline in place to consistently use stops, then mental stops are ok; this is why I say only experienced traders use them because they already have the discipline to cut the losses when it's time to the pull the trigger. For people like us, who still require the discipline, physical stops are a must. When we will the mental stops the slack from time to time. But those are the times we lose more than we like, bigger hole to get out of.

The best way to find the stops is to use pivots (higher highs higher lows and lower highs lower lows) I mentioned in other threads I posted today. I usually place my stops just below the previous low pivot for longs and previous high pivot for shorts. Research this for yourself and see if it fits into your plan. If you have tight stops, move to a timeframe where the low and pivots are closer together to your range of stops. But keep in mind, the lower the timeframe, the more difficult it will be, you have to keep higher timeframe in mind on direction.

[Soultrader]

Hi Torero,

Read your post and something popped out in my mind. I was always curious to know the exact stop placements traders use when using pivots. How many ticks away do you usually place your stops above/below a pivot? The markets do have a tendency to test the highs or lows and even violate it by a few ticks.

[torero]

Originally Posted by Soultrader »

Hi Torero,

Read your post and something popped out in my mind. I was always curious to know the exact stop placements traders use when using pivots. How many ticks away do you usually place your stops above/below a pivot? The markets do have a tendency to test the highs or lows and even violate it by a few ticks.

This is an example of my trade last Friday. I chose 600 because the tendency for prices to fluctuate between pivot high and low is 2-4 points. So my stops are usually 1.5-2.5 pt.



I took my short at 758.1 and didn't exit until 754.1 where there was resistance 1 pt away. I move stops until the target is hit or my last stop gets hit.

[Soultrader]

Thanks Torero. Alot more clear with the chart you posted. Your entry point would be the test of the high (double top failure)?

I have also found the 600 tick chart to work fairly well on the ER2. Thanks for the tip on this... also pretty looking charts you have there.

[torero]

The entry would be the break of the low of the previous bar on the second top with the stop at the highest of the 2 tops.

Yes, since I'm a big believer that charts say it all or charts don't lie, what better way to talk about markets than explaining using charts? I spend alot of time drawing charts and making note and saving them for myself to study later on. Best way to learn about your skills levels on how you view the market at that moment in time.