Working on a Trading Weakness

From the Journal of a Stay-At-Home Trader: Struggles on the Journey 

I’ve been pondering something I wrote a short while ago:

“See, the way I look at it, a weakness in this context is something that can be strengthened through study, practice, perseverance and lots of good, old-fashioned hard work. It is similar to one’s muscles getting stronger through focused weight training.”

It’s funny how the exact same thing can be both a strength and a weakness. I’ve always been very detail-oriented. I love researching things, having 15 tabs open on a single browser window, just waiting for me to absorb all the knowledge that I can devour. My love for details has been a strength for me on my options education journey. It is that love that propelled me, once I got over my initial fears, to delve deeply into the Greeks. I had such a desire to really understand them.

Yet, that love for details was also a hindrance. Since I was trading off the daily timeframe, I was only performing my technical analysis on the daily charts. Focusing on the day-to-day movements meant I wasn’t stepping back to look at the overall trend, nor was I zooming in even more to look for optimal entry points. A common result of this was taking counter-trend trades I didn’t even realize were such.

I found a quiz once that was supposed to help a trader pinpoint weaknesses and areas to improve. No surprise, the results were that I had a lot of things going for me, but I would never become a successful trader until I learned to grasp the big picture. In other words, I needed to learn to examine the forest and not just stare at the bark on the tree trunks.

That is when I turned to technical analysis on multiple timeframes. I organized my charting platform so I could have multiple views of the same underlying, all on the same page. To the left of my daily chart, I set up a weekly chart; to the right, I set up a 15-minute chart. Although I can easily toggle to different timeframes on a single chart, it is very convenient and time-saving to have the different timeframes side by side. I forced myself to look at the weekly chart first: Is there an obvious overall trend? If yes, bullish or bearish? If not, is there “tradable” chop and slop in a well-defined channel that has been respecting horizontal support and resistance? Or is it just the kind of chop and slop with big candles and ugly gaps that should make me tell myself, “Move along; nothing to see here”?

Only after I got a sense of the big picture did I allow myself to turn to the daily charts. If the weekly chart was bullish, I only allowed myself to look for bullish trades at a favorable entry point, like a reversal off a moving average or a horizontal support line. If the daily chart looked extended, then I made myself move on. No more counter-trend trades! If the weekly chart was bearish, same thing: only bearish trades allowed, with an ideal entry being a reversal off a moving average or a horizontal resistance line. Tradable chop and slop on the weekly was a little trickier. I had to be aware of potential breakouts above or breakdowns below the channel’s support and resistance. But at least I knew the possible pitfalls and that I had to monitor these types of trades more closely.

Finally, I turned to the 15-minute charts to see if there were any other “hidden” support and resistance levels — hidden, that is, on the daily but very clear on the 15-minute. Breakouts and breakdowns around these areas sometimes gave me greater confidence to enter a trade — more edge, more putting-the-odds-on-my-side.

My technical analysis will never be perfect. But any weakness I can pinpoint and strengthen is one more tool in my toolbox, to carry along as I traverse the path to the trader I know I can become.

By A.K. 

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