Weak hands lose money consistently. Strong hands make money consistently but blow out in spectacular fashion. Lesson: Don’t be a strong hand or a weak hand. Instead be a Different Hand or a Smart Hand.
What does a Different Hand or a Smart Hand look like, that is the question. Something different, something smart. Below are some examples of what a different hand might look like:
Trade at least two correlated markets. Whatever market you hold long or short then seek opposite trades in the other market. For example, you think the ES will trend down. So you short it for a day trade. But, instead of taking small stop losses you instead attempt to scalp the NQ long. If the market moves up, you are able to scalp out profits and you hold the short for possible resumption of trend. If the market moves down, you will capture the profit in the ES. This style can reasonably well for choppy markets but less so for markets that move fast. If you choose the initial trend trade wrong and the market moves in fast fashion, you won’t be able to scalp the chop fast enough.
Try to take a balanced number of short and long trades throughout the day.
Have enough systems so that you can trade long/short from signals instead of stop points.
Trade in a different way. Treat short term trades as binary options. Other traders are trying to capture a move, but instead you are trading a defined bet.
When you have a bad trade, don’t close it immediately but instead set a random timer to automatically close the trade within a defined but short period of time. Try random delays for entries, as well. If a trade doesn’t work out within a define time, close it out. It probably wasn’t a good price or opportunity if it’s still available after some time.
Bracket your entries to trade offset from them.
Analyze your discretionary trades on a day-by-day basis. Optimize on a daily basis to find the optimal stop points. Add a tick or two.
Do not take discretionary trades immediately but instead feed them into a secondary system which will take them based on a secondary criteria.
The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at firstname.lastname@example.org.
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