In my 30 years of trading, the only thing that has ever given me a proper trade is trading around price and the VWAP.
Predictions on what the market will actually do are complete nonsense. And acting on these predictions can get you in hot water.
Take yesterday for example.
I was having a good day using the VWAP indicator to give me some decent plays, and was up $250 on the day.
But in the back of my brain, I had a suspicion that the markets would sell off.
In the image below, you can see the moment that I was shorting the markets, thinking that my hunch was legitimate that I had it all figured out…
Minutes after this moment, the markets rallied back up, and my short position got stopped out for a loss.
I was up $250 on the day, and then I immediately lost $125 of that.
I halved my profits because I thought I knew better than the markets.
Going into yesterday, I was way too bearish and let my bearish outlook decide my fate.
I was sitting there and my brain was prepared for the markets to go back down.
It didn’t happen.
The silver lining to the end of the day is that I still was up.
I didn’t try and save my loss by trading more. I have a personal rule that I will trade until I lose. And then once I get my first loser, I’m done.
Other people have a three in a row rule where if they do three trades in a row as a loss, they’re done for the day.
Trading is a huge psychological struggle. And if you aren’t in the right mindset, then you’re going to blow up your account.
Trade around what works.
And what’s worked for me over the past 30 years is trading around the VWAP.
November 11 2022