My Roadmap to becoming a Consistently Profitable Trader (CPT)
Thought it would be a good idea to clearly map out what it would take from this point on to become a CPT. That’s what this post is going to be about. Most things will stay the same since they are general to the path of becoming a CPT. There are others though that are more specific to my strategies since I recently started trading in a different way.
The Holy Grail Way
The more and more I think about it the more I start to realize that I was actually looking for the holy grail. That was until I decided to go with a ‘simpler’ method of approach. I had read so many articles and done my own thinking on indicators and was convinced that because they are lagging they didn’t make any sense to use on the smaller time frames. By the time you get in based on your indicator the move has already played out or you get in too late which results in a terrible risk to reward ratio (R/R). I then set out to learn trading simply based on price action. I’m smarter than most. Surely, I can do this. Well… No, I’m not. BIG SURPRISE! Well not really.
Anybody out there?
So why did I change my ways I hear no one ask! Well, I’m glad you ask, my imaginary friend. I actually wrote a blog post about this already and I’m hurt you haven’t read that! So hurt. Here’s (http://bearmarkettrader.com/2018/11/27/guess-whos-back/) the link so go pretend to check it out 🙂 Basically, I went on a long trip on which I couldn’t stick to my disciplined routine and basically took a two-month sabbatical from trading. When I came back to it, it had actually opened my eyes. I had been telling people for such a long time that the way I drew my trend lines was consistent with the way moving averages behaved and thus I didn’t need them. Well, wouldn’t it be easier to already have a visual representation of that what you’re needing already? Well, DUHH! So I decided to play around with them and now it’s part of my strategy. I’m not going to discuss my strategy in-depth here but if you’d like to know what my strategy is I’ll be happy to share it with you. Just hit me up with your email and I’ll get in touch. What was good about just looking at price action is that I have learned how price moves and can now put that into context with my indicators. So it was definitely worth it, but can’t say at this time if it was definitely necessary to do so. Probably not, but it definitely helped! With that out of the way let’s continue.
I’ve seen the light (I think. Could have been headlights, in which case I’m dead now and ARE seeing the actual light?! Getting confusing 🙂 Back to this parallel dimension.
My strategy consists of finding points of interests (POI) I call them. What this basically means is that I look for points n the chart where I think it is more likely that something will happen. For example a break out. When you have a Triangle pattern nearing its apex that would be a POI. A break out is more probable to happen there. I like taking the contrarian trades which basically means I wait for the market to make its move and then I take the other side when it reverses. Basically, what I am doing is deciding if a market is overbought or oversold and more probable to reverse. However, I am not married to this strategy because I will also take what I call continuation moves. That’s when price hits overbought/oversold territory but doesn’t show signs of a reversal. Remember, my imaginary friend, when the market is overbought or oversold it doesn’t mean it has to reverse at that moment. It can stay there for quite some time. Don’t ever forget that.
So uhm… Roadmap?!
Yes yes, getting to it. Now, that I have my ‘new’ strategy. I have to backtest it. Which I am doing manually so it’s time consuming, but I definitely feel that I have something. You know what, let’s sum up the things I have to do first and then I’ll discuss the finer details if necessary, shall we?
- Backtest setups (ongoing process for the time being)
- Swing reversal
- Squeeze / KC VWAP divergence
- Write ‘playbook’ setups (ongoing process)
- Have 1 up week and scale up in sizing
- Currently I am using the following sizing (which I will call ‘conservative’)
- Experimental / extra cautious trades = 1 micro lot
- Cautious trades = 5 micro lots
- Confident trades = 10 micro lots
- After scaling up (which I will call ‘optimistic’)
- Experimental / extra cautious trades = 2 micro lot
- Cautious trades = 10 micro lots
- Confident trades = 20 micro lots
- After scaling up (which I will call ‘confident’)
- Experimental / extra cautious trades = 2 micro lot
- Cautious trades = 10 micro lots
- Confident trades = 20 micro lots
- After a down week I’ll scale down again
- After 3 consecutive up weeks I’ll double the sizing of ‘confident’
- Currently I am using the following sizing (which I will call ‘conservative’)
- When my account is at break even I’ll increase my account size. Right now I am at ‑33% of my account.
- As soon as I break even I will double my account size.
- Reassess at the end of April
- I’ll write another post on the hard questions I will have to ask myself at that time.
This roadmap is likely to keep evolving as I go on and I’ll be sure to keep you posted.
Share your thoughts
Get in touch with me and share your experiences. Day trading is a very lonely endeavor so why not share the path to becoming CPTs?