Key Takeaways from Trading Notes

1. Market Conditions:

   • Nasdaq Drop: Nasdaq fell by 1000 points (5%) in the overnight session.
   • VIX Surge: The VIX spiked to 50, indicating extreme market fear, comparable to the COVID-19 period.
   • Liquidity Draws: Both weekly and monthly liquidity targets were hit overnight.

2. Trading Challenges:

   • Volatility Impact: High volatility led to larger-than-expected losses on trades.
   • Asset Focus: Sticking to the Nasdaq despite changing market conditions led to significant issues. Consideration to switch to ES was noted but not acted upon.
   • Technical Failures: Trades based on the MONTH VWAP and H6 trends resulted in losses, indicating a need for adjustment in strategy.

3. Emotional and Financial Strain:

   • Account Blowout: Loss of funded account and a deep sense of frustration and disappointment.
   • Doubt and Pressure: Questioning the viability of trading as a career due to consistent setbacks and financial strain.
   • Sacrifices: Personal sacrifices for trading are causing considerable emotional and financial stress.

4. Lessons and Adjustments:

   • Market Context: Extreme market conditions (like high VIX) require a reassessment of strategies and expectations.
   • Adaptation: Need for adapting strategies based on changing market dynamics and avoiding rigidity in asset focus.
   • Risk Management: High volatility necessitates revisiting risk management practices, including adjusting stop-losses and trade sizes.

Personal Advice and Recommendations

1. Reevaluate Your Approach:

   • Strategy Adjustment: Given the extreme volatility and its impact, consider revising your strategy. Look into trading assets with lower volatility or adjusting your stop-losses and trade sizes.
   • Backtest New Rules: Before implementing new rules in live trading, paper-trade and thoroughly backtest them to ensure they work under different market conditions.

2. Focus on Risk Management:

   • Adapt to Volatility: In high-volatility environments, ensure your risk management strategy is robust. This might include widening stop-losses or reducing position sizes.
   • Diversification: If possible, diversify your trading assets to spread risk. Transitioning to less volatile assets like the ES might help stabilize your results.

3. Mental and Emotional Well-being:

   • Take a Break: Consider taking a short break from trading to recharge and reassess your goals. Sometimes stepping back can provide clarity and prevent emotional decision-making.
   • Seek Support: Reach out to a trading mentor, coach, or therapist to discuss your struggles and develop strategies to cope with the emotional aspects of trading.

4. Evaluate Long-Term Goals:

   • Reassess Goals: Reflect on your long-term goals and whether trading aligns with them. It’s crucial to be honest with yourself about the feasibility of achieving your goals through trading.
   • Explore Alternatives: If trading continues to be unprofitable and stressful, consider exploring other career paths or investment strategies that might offer a better balance between risk and reward.

5. Develop a Comprehensive Plan:

   • New Trading Rules: Implement and paper-trade new rules focused on displacement and liquidity draws. Ensure these rules are adaptable to varying market conditions.
   • Document Everything: Continue to journal and analyze your trades to learn from mistakes and refine your strategy.

Summary

The trading environment has shifted dramatically, and it's clear that your current approach needs adjustment. High volatility, such as seen with the VIX at 50, requires a different strategy and careful risk management. Additionally, addressing the emotional and financial toll of trading is crucial for long-term success. Reflect on your strategy, adapt to current market conditions, and ensure that your mental and emotional health is a priority.

8:26AM. I just got to my computer and checked the markets. WOW. WOW. WOW. Nasdaq is currently trading down 1000 points in the overnight session, which is around 5% in a few hours. We might witness a stock market collapse at this pace.

and the VIX is trading 50. I have not seen this since COVID. Both of my week targets and draw on liquidity have been hit in the overnight which was a draw on the next month and quarterly draw on liquidity. 

9:03AM. Simply going to trade with Fridays key intention in mind, staying in the direction of the H6 & H12 Trend, & validating any bad data drops with the 15 minute chart. 

Blew my funded account.

8/6/2024 I came back the following day because I was so disgusted that I blew this account after how hard I have been trying. This one was a real let down for me, and I spent a large portion of the day yesterday contemplating that I seriously may quit trading. Im not sure how much longer I can bear putting this much effort into something that simply isnt paying me back. And the worst part isnt even failing the account, its getting these small indicators of success, such as passing an evalutation, yet when it really counts, when all I have to do is get the ball across the finish line. I just simply come up short every single time. All I want is a simple payout after 6 years of hard work. All I want is to just have some semblence of something to show, so that I can at least silence those around me and buy some more time to make this work. Im really running out of excuses for needing to borrow more money from family, or to put off a 9-5 job. And its not only the thought of quitting that is about to take me out of this game, but its also the fact I simply dont have any more money to keep throwing at this. The magnitude of levels of sacrifice I have been putting myself through to make this work I wouldnt wish on my worst enemy. From sacrificing food in my stomach, to relationships with friends/family, all for what? What has it givin me back at this point? The answer is ABSOLUTELY NOTHING. I feel robbed of my time, and Im seriously unsure of which path to take. How does someone just throw in the towel after 6 years of effort, money, time and energy all for nothing? All of the time spent screen watching and getting that screentime in. All of the screen recording, journaling sessions, backtesting, strategy testing. I have just put in so much. If i give up on this, after giving 100 percent of my effort, knowing it still didnt work, is deeper than just quitting trading. Its knowing that im actually not good enough, that hard work doesnt actually pay off, that dreams dont come true, that I will be stuck at a 9-5 the rest of my life at a job I dont want to work, listening to someone else control my life, getting underpaid not able to afford anything. And it would quite literally take my last bit of faith that I have towards acomplishing the American Dream. If I give up on this, its over, for good. Because my faith will be gone. I know I will never put this amount of dedication and effort into something else, because I will forever be stained that it was all for nothing, and will be. Its very simple, If I could put 100% into this and it not work, why should anything else work? If someone claims to succeed in trading, what are they doing that Im not? Why can they do it but I cant? It simply doesnt make sense, yet I still dont succeed. It honestly feels like a generational curse, or a vendetta that the universe has against me. It actually feels like a spiritual battle im in. Some type of force outside of myself trying to hold me back. So the question is, do I quit?

Regardless of that, I want to go over what I think my reason for this loss was.

Well, not only was the VIX at 65, which is almost COVID level fear in markets, but the volatility was extremely high, and normal 1 minute and 5 minute chart executions with stops would usually take me out of the trade at an 80-100 dollar loss, and in this currently market context, those same stops are taking me out at 350 dollars. which is completely unacceptable. Because beteen the trailing drawdown, and the amount of trades I have to take when the stops are that wide, are simply too much for a 50K account to bear.

I knew many times in advance I probably shouldve switched to trading the ES because I would be able to stretch the timeline of trading losses further, but I just didnt make the switch, because I have been focused solely on the NASDAQ for the past 6 months plus, and I got funded on this evaluation account trading the nasdaq, for me to have to switch assets in the middle of being funded isnt something I wanted to do. It was just realy unfortunate that the market had to change so drastically, to where the news channels were calling for a recession. Its just unfair.

The next reason I think I took a loss, was because on the 5D 5M MONTH VWAP, the move was expanding from the loweband extremity. I didnt take it much into consideration, because the friday prior, I played a lowerband extremity move from the MONTH VWAP lowerband, took the long trade, and was stopped out for a full 350 dollar loss. 

From that point I looked into fridays loss, and it suggested that because the H6 trend never flipped, to head towards the H12 LIS, I should have never taken the long because the trend wave was far against me.

Now here I come into this trading session, with that EXACT INTENTION in mind. Dont go against the H6 trend, Dont long off of the MONTH VWAP Lowerband extremity. Well what do you know happens? THE LONG TRADE WAS IN PLAY. And it squeezed me out for the duration of an entire 6 Hour candle that was trending down in my direction. So not only was to volatility too high, but I also had a trade go the exact way against me, in the way it didnt work on the friday session, so no matter what I journaled, it got me both ways.

So now I will have to develop a trading rule based on where each move in the market is coming from. Based on the VWAPs, or specific key levels, supply and demand, orderblocks etc. I think it will be smartest to mark the positions that people are in based on how the price action has played out, to gauge when to get involved in a trade, and when to sit out. 

Also, the lower draw on liquidity that I had market for the monthly and quarterly draw were hit in this single overnight trading session. A massive 1000 point drop on the nasdaq, and at its worst point, it was down over 6%. That was a draw on liquidity I had for the ENTIRE MONTH of august, hit in a single overnight session. Insanity. 

So I will also have to develop a new trading rule around caution after the draw on liquidity has been hit. Because it obviously showcased that reversals can take place off of them in a drastic way.

So those are the next 2 trading rules I will papertrade and journal for the time being. To continue building out this strategy without taking any more risk. 

NEW TRADING RULES FOR TECHNICAL ANALYSIS/KEY INTENTION

5. Displacement

Price Displacement:

• Identify Rapid Movements: Look for significant price movements that create gaps or imbalances in the market.

• Assess Market Control: Determine whether buyers or sellers are dominating in the areas where price movements occurred, and identify their likely targets. This helps in positioning yourself on the right side of the move.

• Timing and Direction: Wait for the completion of a move before considering a position on the opposite side. Alternatively, align with the directional bias of the move to capture potential gains in the direction of the trend.

• Marking Displacement Areas: Use Green or Red ovals to highlight displacement areas, indicating where market participants are positioned. Confirm the strength of displacement with fair value gaps.

• Significance of Displacement: Recognize that displacement often signals strong institutional buying or selling, and can indicate potential reversals or continuations in the market.

so this will be our next key intention for the next trading day. To mark the areas of displacement on top of our current technical analysis approach.