Shenanigans

This last 6 months has been one of the most difficult trading periods I've experienced. I haven't lost money but nor have I made it. I was away for nearly 6 weeks and I certainly could have done better overall, having become slack with my disciplines, but nevertheless it's been tricky. Much of the action has been driven by politics and the seemingly insurmountable debt problems. Stock specific stories are mostly ignored and valuation standouts don't seem to gain traction because future earnings are discounted massively on the basis that world trade must suffer from the strong chance of another GFC.

I've been thinking about what kind of trading is appropriate in these conditions. Anecdotally, quite a few traders think that no trading is appropriate right now and they're waiting for better conditions. They could well be right but my thought is to get back to what I was doing in a much more disciplined way before the last 6 months. That is to take entries where my stop is very close, to use a dollar amount to determine the position size and to trade only one swing. As an example, if I was to buy a stock at 105 and my stop was at 101 then I'm risking 4 cents a share. If the amount to be risked on the trade is $1000 then the position size is 25,000 shares. (25,000 * 0.04=1000). In addition, if the trade goes my way, I stop out once momentum has stalled, using either a very tight trailing stop or a straightforward exit on a doji bar.

The other part of this updated trading plan is to make trading as stress free as possible and to limit the time I spend doing it. I no longer want to do any intraday trading as it's a small part of my income for the largest chunk of time and energy. In the same vein, I've been thinking about other elements of my trading that I don't like and working out how to get rid of them. One of the worst situations is to have entered a trade which quickly goes wrong. With that in mind, I'm leaning closer to trading as late in the day as possible. If I have to stop out the next day, it's much easier to handle and far less likely to snowball.

There are other aspects too. I'm weighing up the problem of stopping out. What if I'm a few cents from a stop? Do I sit at the screen all day just in case I need to act or do I simply stop out on the close with some sort of disaster protection for the position that bursts through the stop? In that situation, do I still stop out if the stock has gone through my level but retraced? These are all common situations that I deal with on an ad hoc basis and maybe that's the way it should be but I'm pondering whether it's more efficient and less draining to have a clear plan.