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Quick update: I have officially moved everything back over to my TD Ameritrade account where I will be trading from moving forward.

This year I started off with the goal of running a portfolio with three different strategies: premium selling, swing trading and buy-and-hold stocks. Due to an unforeseen medical emergency I had to liquidate all of my stock positions and withdraw a little less than half of the cash out of my trading account. While I was initially disappointed that I needed to do this, it turned out to be one of the best things for me.

After closing my positions and withdrawing some funds I have had ample time to really figure out how I felt about this three prong portfolio I have been running for 3 short months. After some thought these were my basic takeaways:

  • I had lost somewhere around 2 – 2.5% on my buy-and-hold stocks
  • I am near break even, +/- 0.25% with options selling
  • I have made around 1.5 – 2% swing trading.
  • I started doing the buy-and-hold thing in 2019
  • I start selling options premium in 2018
  • I started swing trading in 2013
  • I get annoyed when I am in a trade for more than a day or two
  • I hate sitting on losing positions and watching the losses grow each day

The conclusion I came to was that I need to completely remove buy-and-hold from my strategy book. Firstly, I have the least experience with it. Secondly, ex-stock positions, my portfolio would be up a few percentage points right now. Thirdly, I actually stopped swing trading(the most profitable strategy so far this year) because the losses from the stock holding had put me in a bit of a mental/emotional funk. Fourthly, I just have no patience for it. It simply doesn’t fit how I like to trade.

So in a nutshell I am going to put my mental, emotional and actual capital into the things that are making me a profit and that I am interested in continuing to do. So my 3 prong strategy has become a 2 prong strategy.T

My Approach

I originally didn’t want to hyper focus on trading since I wanted to give all 3 of my strategies equal attention. Now that I have decided to move forward with just the 2 strategies: premium selling and swing trading, I will go into a little bit more in depth on the swing trading side.

Explaining how I trade usually elicits virtual eye rolls and sighs. Maybe because it doesn’t sound mechanical or objective enough? I am not sure. It’s really simple though. I look at the charts, get a feeling about it, look for an entry signal, and set my order. Here’s the problem, it’s mostly subjective. That subjectivity is pretty much based on how I feel about the market, based on price movement. I can tell if a chart is tradable within the first few seconds of looking at it. If it looks tradable then I will spend an extra few minutes digging in and finding optimal entries/exits/hidden risks.

I can teach someone the little signals that I always look for and some of the trade management rules, but what I can’t teach is that subjectivity that I base most of my trade analysis on. Without that piece, it wouldn’t really work.

Candlestick Study

Since I won’t be meticulously tracking my 3 prong portfolio I decided to make good use out of my time another way, which is doing a candlestick study. The last time I tracked and analyzed each one of my trades was back in 2014. This month I decided it was the right time to once again to meticulously track the setups I take and use that data to try and improve my trading. A few ways I am hoping this study will improve my trading are

  • Help optimize my entry mechanics
  • Help optimize my risk management and exit mechanics
  • Look at my losers and figuring out if there are certain common denominator I can find in the price behavior to avoid sub-optimal setups.
  • Study the minutia of each setup. For example, if price closes inside of a support and resistance zone, or it closes outside of it, how does that affect success rate, velocity of price movement, price retracement, etc.
  • Help me understand my portfolio trade metrics: sharpe, risk-of-ruin, profit factor, r-squared, etc.

These are just a few things I am going to use the study for. What this study is not, is a journal. I am not interested in journaling about my trades or tracking my P&L, but rather I am interested in interrogating the absolute performance of the trades I take. One of the big things I want to walk away from this study with is to understand how much % of my account I should be risking on each trade. I am currently risking a very small % and want to have confidence in increasing it.

What My Trading Looks Like

I currently risk somewhere between 0.1 – 0.5% on each trade. One of my goals with this study is to understand if I can safely raise that to 1% or better. I currently measure my trades by risk and reward. I always start a trade with a maximum defined risk, and as the trade progresses the stop loss is moved per my mechanics or a subjective decision. I have price targets based on areas of the chart I have subjectively chosen to take profits where I may take part of all of the trade off the board. With this study I am measuring my overall performance by understanding how many rewards am I actually making per risk I am taking on average. Combining that with a win rate and some other info I can begin to understand a lot about the performance of my trading.

My approach also doesn’t yield trades very often. I look for a specific type of setup and signal, and don’t trade anything else. It can be feast or famine. Sometimes I will go weeks without a single setup and then suddenly a half dozen setups will appear in 1 week.