02.29.20 Month in Review

What a wild close to February. The Dow dropped more this week than ever in history! The sell off was caused by the Corona virus in consistent panic selling. Like a ripple effect, the panic selling created wild volatility to the downside for most of the market with the exception of a few tickers. I'm excited I didn't let the noise scare me away from trading and kept focus to close the month on a high note.

This month I noticed a couple big things that I need to change: I need to stop looking at my P&L entirely. Not during my trades (which I'm pretty good about) and not at the beginning or end of any day. Prior to February I was constantly in tune with where I was in my P&L. Was I up or down? How much up? How much down? I was letting that effect me mentally to an alarming extent. I've been reviewing my previous months trading via a trend line chart and all over the place it flat lines immediately after taking a losing trade. When I finally initiate a trade after flat-lining I get overly cautious and close my position in complete defiance to my trading plan even though no new information came about causing me to do so. Closing my positions against my plan is something I've known I was doing but I didn't realize how drastically it was effecting my performance. I was at a point closing January where I was ready to throw in the towel, close my account, and move on with my life. Before I did that I decided I needed to take one last, real shot at executing my plans. If I could close February profitable I'd keep at it. If I kept being an idiot, game over.

My plan for February was to do three things: 1) size my risk down to a point where had I lost every single trade it would be insignificant overall; 2) ignore my P&L entirely and; 3) execute my trading plans precisely unless new information caused me to change my plan. For the most part I executed this plan perfectly and am more proud of myself for doing this than I have been about anything in a long time. It's so incredibly hard to remain emotionless while trading, even when the money piece doesn't matter. It's painful to be wrong and lose in a trade no matter the amount of money. In the middle of the month I had a double loss day where I lost twice in full sized positions. I looked at my P&L on that day and for the next week I was overly cognizant that I was up on the month and playing defense against my profitability.

If I'm writing in my journal (here) every day I know whether or not I'm doing well or poorly and should be unaffected by the dollar amount in either direction. Doing "well" means I'm executing good trades. Doing "poorly" means I'm trading less than ideal setups or trading with emotion. "A good trade isn't always a profitable trade." I think that's a quote from Mike Bellafiore's book One Good Trade but I may be paraphrasing. As a trader we're constantly looking for one good trade and then another, and another. When I'm trading well I should be playing offense and sizing up in my risk. When I'm losing, that's the time I should be playing defense and size my risk down.

Looking ahead into March I'm going to maintain my current risk, execute my plans as I have been, and this time not look at my P&L at all until I finish trading on the last day of the month. If I make it through March trading well I'll look at systematically sizing up starting in April. If I get overly emotional and trade poorly then I'll regroup. I can't let that happen.