Fatal Mistakes - NQ and ES
Notes from my Trading Journal where I keep a list of My Fatal Mistakes when trading the NQ and ES. My notation of Mistakes starts with "K". This list may not reflect your own mistakes but I've certainly earned sufficient merit badges with these. From Reminisces: "A man can excuse his mistakes only by capitalizing them to his subsequent profit". The cartoon shows how we too often think ourselves in a distorted manner which leads to mistakes.
K-Visualize - It is a mistake to play in your head a market move that you think, feel or even "know" is going to happen. You run the risk of going into a trance that fighter pilots call target fixation and fly right into the target. https://en.wikipedia.org/wiki/Target_fixation. Know the difference between "a priori" and "a posteriori" thinking (intuitive v confirmed). It's best to wait for the preferred setup and it's easier to wait if you don't anticipate and visualize with wishful thinking the move that you hope or your gut is telling you has to happen.
K- Firmly Choose - It is a mistake to artificially take one side of the market. You might be prone to do this after reading a news article about what someone else thinks is going to happen, or use a macroeconomic viewpoint to trade. The market will tell you where it is going if you are willing to listen.
K-Drift - It is a mistake to play in the "Box" when the market is moving in consolidation. This could even be in the middle of a giant move in one direction or another. The fills in consolidation are too loose and overtrading can wipe out profits or even drive the account negative. It's better to wait for the confirmed breakout on substantial volume.
K-GOV - It is a mistake to play Government Reports (generally) outside of the day session, typically pre-market at 8:30am. The move is mostly over in the first minute and certainly over in the first five minutes. If your threshold for a trend is longer than 1 minute, it is mostly better to avoid. The market can move so fast the fills can be really adverse. Sometimes the straddle will work but even then, the market may take both sides and you are left with the loss of the middle. You can make a lot or lose a lot quickly. I would rather play in the day session.
K-NotEnough - It is a mistake to think that incremental gains are not enough and you need to double the account quickly or earn your minimum day's pay. Go for the long build.
K-TradeForPay - It is a mistake to think that you should try to make money in the market everyday like your daily pay rate. Even Edwin LeFevre said as much, that it's better to wait for the best setups.
K-Confuse - It is a mistake to confuse the difference between scalping and holding the trend. Maybe you can use both or the market will require you to use both, but don't continually switch or confuse your best trading style. If you are good at scalping, then stick to scalping. If holding and using stops, then use that. Use both as long as you don't muddle your methods.
K-NoRedeem - It is a mistake not to take the break-even trade when you have been in the hole (negative) during the trading session. Always take the break-even and leave trading for a better day.
K-Mix - It is a mistake to play the Mixed Market. The ES and NQ should move in tandem for the best results. When the ES goes up and the NQ down, for example, wait for them to reconcile which they will do on most days, unless it's a holiday on light volume. The NQ is heavily weighted with certain stocks which can make the NQ behave differently than the ES. The broad market ES will normally pull the NQ, but sometimes the NQ can pull the ES, but wait for them to move together.
Cheers
Posted Nov 13, 2022, 4:06 PM UTC · edited
Good stuff