The Types of Trades I Take

I haven’t blogged about it much, but I’ve spent some time formalizing the types of trades I take a little better, so that I can classify them and run statistics on them individually. I’m also hoping this will help me eliminate impulse trades, and stick to only the setups I’ve chosen to trade. Starting in March, I’m going to report on expectancy/winrate/profit_factor on each trade type individually.

Also, I have been thinking that, as I add new types of trades to my repertoire, I’ll start on a trial basis. I’ll trade them at 1/2 size until I have 20 trades in my journal. At that point, I’ll have stats to help me decide whether to keep it, or stop taking those trades. We’ll see if I have that kind of discipline, when the time comes :-)

These are the trade types I have racked up, this year so far:

• mistake: meaning I’ve hit the wrong button. This has fortunately only happened once this year
• dummy: a trade off a narrow range candle, in the direction of the trend, and usually off a chart that fits one or two “dummy”-ish shapes.
• scalp: a trade with a stop less than five cents wide, with intent to get in and out in a couple minutes, riding an expected surge in momentum.
• ascending_triangle/descending_triangle: trades taken based on a triangle chart pattern
• box_play: trades taken against the rectangular congestion chart pattern
• breakout: a trade taken when price pushes past an important number on the daily charts.
• multiday_pattern: a trade taken at the open, based on an intraday chart pattern that spans days
• discretionary: I’m trying to phase these out! Looking over my trades, it seems that I am prone to play breaks of the OR high or low, when there is not a very clear chart pattern or other setup backing up the move.

Breakouts and dummy plays are more general than the other types, and if more than one type applies, these will lose. So, for instance, if I’m watching for a breakout past an important daily number, and on that day an ascending triangle forms at the number, I will label the trade as an ascending triangle play.

In my stocktickr journal, I’ve classified all the trades I’ve made in 2007 so far along these lines. So, each month I can report that month’s results, and the year-to-date results, per trade type.

Also, as part of this independent reporting, and per this discussion in the comments of the blog, I’m going to start journalling R results for scalps against my actual intended risk. I’ve gone back and changed my two scalps for March to reflect this, so at least March will be accurate. An interesting side note I noticed in Stocktickr: Since last September, I have made 25 scalp trades, and 24 of them made money. Cool.