Table of Contents
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Trade Planning Before the Emotions Kick In
Each week, I review my trades and notes and answer three questions:
What went well?
What were the errors?
What is the one thing I need to focus on, adjust, or optimize going into the next week to improve profitability (or progress)?
This week, I started with the assessment that I was still pretty jumpy and making emotional trading decisions. And while that wasn’t wrong, it wasn’t the whole truth.
As I continued digging through my trades, I realized that I was leaving more decisions open than I thought. I had a plan. I knew my levels and targets, and where the trade would be invalidated. But at some of those levels, my plan was essentially, “I’ll assess it when I get there.” 😂
I had planned where the next decision would happen, but I had not planned the decision itself or the contingencies around it.
Now, assessing on the fly does work well sometimes. When I’m calm or even slightly heightened, I am still capable of looking at a chart and making an objective decision in real time. But when I’m highly activated, things are different. Maybe I’m using a larger position size, sitting on a profit I really don’t want to lose, or a position is pulling back and the option is pricing against me with a vengeance. Maybe several trades have already gone south, or I’m feeling FOMO. The reason itself doesn’t matter; the fact that I’m not cool, calm, and regulated does.
So then there I am as my most activated self, trying to make the most consequential decisions. And that’s when “I’ll assess it when I get there” becomes: TAKE PROFITS BEFORE SOMETHING HAPPENS TO IT! 🤪
In the range-bound market, my plan was simple: buy near the bottom of the range and sell 100% near the top. I had an exact target, and there was very little left to decide while I was in the trade.
But as we potentially move into a rising market, there are more decisions to make once a trade is working. My exits are still target-based, but if I take 50% off at the first target and hold the rest for the second target, what happens if the first target works but the second one doesn’t?
What if my target is hit and price immediately reverses sharply?
Do I wait for the invalidation I planned for the remainder?
Do I take more off?
Do I sell all of it?
How far can the remaining position pull back?
What would tell me that the second target is no longer likely?
These are the moments when I can freeze. The trade is moving quickly, my unrealized P&L is changing, and I’m trying to decide in real time whether I’m watching normal price action or whether I need to act.
I’m typically a “feel the fear and do it anyway” kind of person, except in trading, where I can become a “feel the fear and abort the trade/plan” kind of person. 😅
Now, I’m working on planning my response at each level, not just identifying the level itself. This does not mean I can’t continue assessing the trade as it develops. I’m not trying to remove discretion from my trading. I’m trying to contain it inside decisions I make before I take a trade.
So much of what I was doing worked well enough to get me where I am today, but now I need just a little more precision. I need the regulated me to leave the activated me a few instructions:
If X happens, do this.
If Y happens, do that.
And if nothing has happened to invalidate the trade, sit the fck down. Everything’s going to be alright. 😂
Base Breakout & Retest Strategy Workshop
On Thursday, August 20, from 7:00 to 8:00 p.m. ET, I’m hosting a free workshop where I’ll review my Base Breakout and Retest strategy setups through chart examples. This is the strategy I’m using in the U.S. Investing Championship, where I’m currently in fourth place.
You can find this event, along with others like my Morning Market Review, inside The Trader Reset Community. If you’re not ready to join the community but would still like to attend the workshop, just hit reply and I’ll send you the direct link.
SPX Review and Outlook
After SPX reclaimed the moving averages, price continued to push higher through Wednesday morning. We then saw a shallow retest around 7,700, and so far, buyers have continued to hold that area.
SPX Daily Chart
Here are this week’s potential scenarios:
Continue Building Above 7,700
price holds above the 7,700 area and continues pressing higher
this would keep buyers in control, for now
Digest Sideways Above the Prior Range
price holds above the prior range, but spends more time digesting sideways
an example of sideways digestion in an uptrend: Friday, April 17th to Wednesday, April 29th where SPX moved sideways for several days after the breakout before continuing higher
if we are starting another move up, sideways digestion above the prior range is still normal price action
Retest 7,600 / 7,555
price pulls back toward the prior breakout area
7,600 was the prior all-time high area, and 7,555 was the upper part of the recent range
if buyers step in around that area, this could still be a normal retest after the breakout
if price falls back into that range and cannot reclaim it, that would give me pause about upside continuing from here
For now, SPX is holding above the prior range. The shallow retest around 7,700 may have been enough, but if price needs more time, sideways digestion above the prior range would still make sense. What I would not want to see is price fall back into the recent range and struggle to pop back out.
Before you go, how are you? What are you working through in your trading right now? I’d love to hear from you! Feel free to hit reply. I read and respond to every email.
Resources and how to work with me:
