The Most Powerful Tool In My Trading

Hint: its not in indicator

In the desire for self-improvement, the temptation is to add MORE to our routines and processes: that new glossy indicator, the 5th high-spec monitor, a sexy new shiny keyboard, or another chatroom with even more information. It’s endless.

However, sometimes the most powerful tool is a lot simpler. 

For me, there is one true medium I turn to repeatedly. The answer, dear reader, is merely this: the written word.

Not exactly enlightening stuff is it? However, you would be amazed at how powerful writing out your thoughts and processes can be in a structured manner. So what is the template for this and how can you use it?

The Daily Report Card:

In this post, I want to introduce the Daily Report Card (DRC). This is not something privy to me but has been used by performance coaches across codes to accelerate learning. It does work particularly well in trading as progress can be easily measured by those big green and red numbers on your screen amongst other metrics. For intraday traders, lots of daily exposure and samples lead to accelerated feedback loops. I have been writing an end-of-day review for multiple years and continue to share it with colleagues to this day. My frequency may have dropped, but its importance remains unquestionable.

Why it works:

The report card is a powerful tool for several reasons:

• it is a structured method for accelerating learning

• it is a form of deliberate practice

• it is a way to make corrective efforts quickly instead of spiraling out of control

• it is a medium for self-awareness and mindfulness

• it is a form of accountability that generates motivation

To genuinely reap these benefits, it is important to make your review targeted with a clear goal. Define the one problem that needs fixing with solutions. It might be that you succumb to overtrading. For others, it may be the inability to take stops. There could be a need to focus on actually building a real edge. Whatever it is, be specific. Where I have often gone wrong and wasted energy is by succumbing to a long narrative. Sometimes it is great to vent on a page. It is nice to also dwell on the good moments. However, focus your real energy on the goal needed. It is only when that habit is fully engrained and integrated into your trading, that you can then move on to the next goal. You can find examples of these in my templates below.

It is also critical to share your review with other traders to elicit genuine feedback. It is these eyes and viewpoints that can open up blind spots and shortcomings in your performance to target for the next round of trading. Having genuine expertise on your side will fast-track your learning and inspire you. Being in the right group overcomes your biases and constructs better mental models. You don’t know what you don’t know unless brought to your awareness.

As an example, just yesterday I received this feedback on my EVN exit management. I covered my short position too early on the first major breakdown below 320:

“if you are gonna sit sized in a sideways pivot you should be adding the break as the probability of success just shifted towards you, so increase the bet on the break, not decrease it…..you wanna pay yourself when it works”

He is exactly right! I am open to receiving this information and do not take it as an attack on my trading. I then integrate this into my playbook for the next occurrence and scenario.

The key to making this all really work is writing consistently.

Consistency:

The reality is writing consistently is hard work. There are some days when I just don’t feel like it. On other days, I have nothing to say as the market were slow. Indeed, just the other day my report card looked like this:

What this really means is that I actually executed my goal as I didn’t throw money at any weak setups that didn’t fit my playbook! As long as I am trying to move forward and focus on those little improvements then my day is a win- this all comes out in my DRC. Did I execute my steps to achieve that bigger goal? If not, what is breaking down? I am far from perfect and I am not a robot. There are times when I miss days but I will be sure to write up the bigger trades and points. My best always comes when I bring the energy and reflection that manifests itself in my review. I have seen the momentum build in others through their own reflections.

Writing is certainly not for everyone. Some of the best traders I know never write and they wouldn’t even know where to find a pen. They are fully immersed in the market and can call upon years of entrenched pattern recognition. This tool is my only way of trying to level the playing ground. I dont know how to code. My tech skills are woeful. It turns out I am not the most talented trader and it is not innate. So, I have to focus on self-improvement regularly to get there.

Examples:

As promised, below are some examples that illustrate the points raised. Tailor them to suit your own needs and style accordingly. Make it achievable instead of a burden.

Template here of my current goal: Sizing DRC

I also show an excerpt from my recent report card on 17/1/24 below.

If you are a developed trader and you are looking for further collaboration on your review, contact me.

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DRC 17/1/24

-P/L: +$11k

1 win for the day:

Adjusting to the EVN price action despite being “oversold”

1 mistake or point of tension:

Exit management. Still being too reactive vs systematic. Time in the drive is optimal. More specifically, my first covers are invariably always early and pure emotion wanting to bank $. In this scenario, just take off 1/8th of my position. This way I am still doing something but it is not impacting my position in any meaningful way. Secondly, time sideways and then break = need time and price in subsequent trend lower.

-Overview:

My morning planning could have been better. I did not really get moving until 9am. I got there but this meant I wasn’t fully across some of the EVN details e.g. COO leaving. No flashes to lean on. I have reset the alarm for 8.45am to focus on my own prep and work.

In summary, one solid chop to kick off the Quarterly season. I did well in gauging the magnitude of the catalyst and adapting somewhat to the unfolding price action. My risk adjusted sizing planner was flashing caution given size of the gap, so I reduced my size. This was a good process and all thought out. However, I would say that real time I could have updated my thesis and sizing to the unfolding action. The CLEAR tip off was that block at 10.05am. This is minutes after the open and it is a clear indication that seller wants volume and happy to take down. When price held below that block, that was my see it moment to double up. The book is thick here. Instead, I added small and subsequently covered 25% of my position in the first bit of weakness. This is a NO NO NO versus my rules. When I have that feeling I want to bank something, my new rule is just to take off 1/8th of my position. That way I am still doing something but it doesn't impact my position in any meaningful way. Another clear learning lesson was on that second breakdown leg through 320. We have just spent 30mins consolidating at 320 with the seller taking down again with another block. Time confirms the price. When we finally crack come 10.50am, need to be holding this for > 15mins given the previous nuances. Done all the hard work so pay myself.

Elsewhere, good discipline doing little although still overanalyzing these Uranium stocks. They are nowhere for me here so just sit and wait. I did try a little breakout pattern in BOE and of course, it didnt work: trading charts without any additional layers or variables is a losing strategy.

Lots of quarterlies are about to drop. Let today be a template going forth and heed the lessons.

-Current Goal:

• Increase my size in my intraday strategies

-Reminders:

• I want to trend toward increased selectivity, increased quality and increased size

-Solutions:

• Re-programme my default brain pattern through emphasis. Start the day with the statement "I need to think about sizing"

• Complete my planner in full

• Identify the playbook. Grade the quality of the playbook. Reference amount of size needed for that combination

• Execute size via automation

• Close the loop. Ask myself if I am the right size as per the checks

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-Trade name:

• Morning drive

-Catalyst:

• Dec Quarterly which was a significant miss across all divisions

• Cannacord (CG) Production estimate 179koz and VA 185; CG AISC $1493 and VA $1352; CG Cash $276m. Actual was 161koz at AISC $1618 and cash $191m.

• Misses were broad based across assets with operational and seismic issues at Red Lake; rainfall events at Cowal and Mt Rawdon

• FY24 Guidance range maintained (dont know how) but Red lake guidance reduced to 40koz to 125-135koz vs 170koz mid. This is 15%+ of NPV

• The company has also announced that its COO will be leaving at the end of March. I did not actually see this pre-open

• I had this as -10% to -15% impact

-Variables:

• Recently raised $500m at 3.80 opportunistically in December 2023 for copper asset. Market now well underwater

• GDX -4.4% overnight (Barrick production miss); COPX -3%

• 345/350 key Daily support. Below that gap fill into 335 then 300/310 low end of the recent range

• No shortbase

-The Trade:

• Open Volume: 782k at 341 or $2.6m. This was a gap of -9%

• Entry: Given size of gap, it was tough to chase size with conviction. I hit 50k on open which was correct risk adjusted amount.

• MAE: 5c on no volume

• Size: As it gapped lower, risk adjusted to 50k. Idealised was 50k open, 50k through 330 as it unfolds OR additional 50k through 320 break. So liquid here and can better manage risk

• Adds: Add momentum entry into 330s post 1st block. Add 2 was on the drop through 320 in time and price. I did not take this with any size

• Exit: Mistake 1 was covering 15k into 330. This is just reactive vs my rules- when I have that feeling to cover some it is always invariably early. Just breathe and relax. I am fine with taking off pieces into true extensions into low 320s which I did. From here the stock just couldn't bounce and consolidates. Seller takes down with another block and time confirms price. Idealised exit post this consolidation breakdown through 320 was into low 310 and low 300s as time in the break + extension from vwap + round number. Stock has done all the hard work above 320 so needs time on that breakdown.

• See it moment: 4m block at 3.35 at 10:05am. This is someone wanting out and early. When it held below here, had to go for it into 330 bid. Further block lower of 5m at 3.225 at 10:12am same trade.

• Notes:  I did the work and knew this was a significant miss. Messy with GDX but I had my levels to chase. Traded cleanly in all my spots but was guilty of taking too many off too soon. Was relatively patient but still would have added alpha by doing absolutely nothing until 10.30am. My only real mistake was not adjusting fully real time to the unfolding price action. Clear see it moment was 4m block at 3.35 at 10:05am. This is someone wanting out and early. When it held below here, had to go for it into 330 bid. The risk/reward has changed and I have identifued a truly great spot intraday to put it on vs my pre-open planning. Further block lower of 5m at 3.225 at 10:12am same trade. Easily 100k through all here vs my 50k cores

-Better:

“if you are gonna sit sized in a sideways pivot you should be adding the break as the probability of success just shifted towards you, so increase the bet on the break, not decrease it…..you wanna pay yourself when it works”

Charts:

Idealised: