Making Discretionary Trading More Consistent
By Dave Mabe
As I was thinking about the next post in the series on how discretionary traders can move toward automation, I received this from a list member, Jack F. (used with permission, lightly edited for clarity):
Jack F:
My main focus right now is Day 2 trading, particularly Day 2 Continuation. I find Day 2 setups easier for me to work with, and I look for Rubber Band, Fashionably Late, Opening Range Break, or Big Dog setups before taking a trade. I'd like to learn other strategies, but for now I want to focus on becoming more consistent.
When I say execution, I mean a few things: selecting the right stocks, holding trades long enough, and recognizing a setup's quality in real time so I can size and manage it appropriately. I want to get better at distinguishing an A+ setup that deserves more time from a B trade where I'm just looking to capture a quick momentum move.
I'm also reviewing successful Day 2 trades to understand which catalysts tend to produce stronger follow-through. So I have a clearer focus now, but I'm still refining both my trade selection and execution, rather than claiming the strategy is fully proven.
Dave:
At first glance, you might think Jack's approach leaves no room for automation.
He uses discretion to decide almost everything about what he trades.
Here is where I would focus to streamline his manual trading:
"selecting the right stocks" - probably the biggest opportunity
"holding trades long enough" - how do you know how long is "enough"?
"recognizing a setup's quality" - what are the rules for this?
The very first thing I would do: define and analyze the exact process for selecting the right stocks.
What decisions are you making there?
How much effort is required?
Can you tighten the filters to weed out symbols you know you don't want to trade?
Removing outliers in this phase can be easier than evaluating setup quality.
And tightening up your selection/scanning process will alleviate mental energy required for the real money-making part of the process: making the trades.
What part of Jack's process would you focus on to make it more systematic?
Hit reply and let me know.
-Dave
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