Category Archives: Foundational Guides

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Retrospective Process

Posted on by Conor Browne

Weekly Retrospective:

Review Journal Entries:

  • Assess market conditions
  • Evaluate trade execution
  • Assess mental state during each trade
  • Evaluate the overall management of these factors

Identify Trends and Patterns:

  • Evaluate areas of strength
  • Identify areas for improvement

Develop action plans:

  • Focus on specific, measurable and actionable steps
  • Address areas for improvement

Reflect on the Process:

  • Consider lessons learned
  • Acknowledge steps taken to improve
  • Identify steps still needed to reach the desired performance level

 

Monthly Retrospective:

Review Monthly Journal Entries:

  • Assess market conditions
  • Evaluate trade execution
  • Assessment state during each trade
  • Evaluate the overall management of these factors

Identify Trends and Patterns Over the Month:

  • Evaluate areas of strength
  • Identify areas for improvement

Develop Action Plans:

  • Focus on specific, measurable and actionable steps
  • Address areas for improvement

Reflect on the Process:

  • Consider lessons learned
  • Acknowledge steps taken to improve
  • Identify steps still needed to reach the desired performance level
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Make Journaling a Habit

Posted on by Conor Browne

Building the Habit: A Step-by-Step Guide to Master Trading Journaling and Continuous Improvement

To transform the daunting task of creating a habit into an approachable, step-by-step process, we’ll borrow from the wisdom of behavior science. We’ll apply the four laws of behavior change, as outlined by James Clear in his book, “Atomic Habits,” to mastering trading journaling and continuous improvement.

Step 1: Make it Obvious (Cue)

The first step to habit formation is to make the cue obvious. In this case, the cue is finishing a trade.

Action: Dedicate a specific, clutter-free space for your trading journal. This could be a physical notebook or a digital platform. Have it open on your desk or screen whenever you’re trading. Seeing the journal will remind you to log your trades immediately after they’re done.

Step 2: Make it Attractive (Craving)

The next step is to make the habit attractive. To do this, we’ll use a technique called ‘temptation bundling,’ where you link the habit you need to do with one you want to do.

Action: Pair journaling with an activity you enjoy. For example, treat yourself to your favorite beverage while journaling, or listen to a favorite piece of music. This simple reward system makes the process of journaling more appealing.

Step 3: Make it Easy (Response)

Make the habit so easy you can’t say no. The trick is to start small and gradually build up.

Action: Initially, don’t worry about detailed journal entries. Start with logging just three key details – the trade, the outcome, and one sentence on why you made the trade. Once you’re comfortable with this, slowly expand your entries to include emotions, reasoning, and lessons learned.

Step 4: Make it Satisfying (Reward)

The final step is to make the habit satisfying. We’re more likely to repeat a behavior when the experience is positive.

Action: Dedicate time each week to review your journal and reflect on your progress. Seeing your improvement in black and white is a powerful motivator.

Embrace Continuous Improvement

Now that the journaling habit is established let’s focus on the continuous improvement process:

  1. Weekly Reviews: Schedule a fixed time every week to review your journal. Look for patterns, common mistakes, or successful strategies. Use your findings to tweak your trading plan.
  2. Set Monthly Goals: Set small, achievable goals for each month based on your weekly reviews. This could be reducing a particular mistake or implementing a new strategy.
  3. Monthly Reflection: Review your progress towards your goals at the end of each month. Celebrate your wins, learn fromyour failures, and adjust your goals for the next month.

Remember, the goal isn’t overnight transformation but consistent, incremental improvement. Over time, these small steps will compound into significant growth in your trading career.

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Create a Journal & Playbook

Posted on by Conor Browne

I’m sure you’ve heard me say, that if you want to become a consistently profitable, professional trader, you must keep a journal. Well, I’m going to make it easy for you by telling you exactly what should be in your journal and how you should use it every day, and evaluate it every week.

What your journal should contain…

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What your journal might look like…

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Process for keeping this journal:

  1. Set aside time: Set aside a specific time each day, such as the end of the trading day, to update your journal.
  2. Review your trades: Review your trades for the day and fill out the template with the relevant information.
  3. Reflect on your performance: Reflect on your performance and take note of any patterns or trends that emerge.
  4. Make adjustments: Based on your progress and what you’ve learned, make adjustments to your trading process and plan accordingly.
  5. Review regularly: Review your journal regularly, such as once a week, to reflect on your progress and make any necessary adjustments.

Remember that journaling is a powerful tool for self-reflection and learning; keeping the journal requires you to be consistent and honest with yourself. It’s also critical to go over your journal on a regular basis and make any necessary changes to your plan as you go.

Process for your daily trading…

  1. Monitor market conditions: Keep an eye on the market conditions just before and after the market opens, such as the market’s direction, volatility, and any news or events that may impact the market.
  2. Identify the entry point: Identify the point at which you will enter the trade. This should be based on your trading plan and take into account the market conditions and your risk management strategy.
  3. Place the order: Once you’ve identified the entry point, place the order for the SPX OTM Butterfly. Try to get as close to a 1 to 9 risk to reward as you can. Easy way is to make the debit 1/10 the price of the spread.
  4. Manage the trade: Manage the trade in three separate periods, morning from 9:30 to 12 PM, then early afternoon from 12 noon to 2:30 pm, and then late afternoon from 2:30 pm to 4 pm, which is the close of the market. Follow your plan for exiting the trade based on the market conditions structure and your profit management strategy.
  5. Evaluate the trade: Once the trade is closed, evaluate the trade based on your plan and the market conditions. Reflect on what you did well and what you can improve for the next trade. Enter these thoughts in your journal.

Process for evaluating your trades at the end of the week:

  1. Review your trades: Review all the trades you took during the week using the trade log and journal you’ve been keeping. Pay attention to the trade type, entry, exit, result, market conditions, entry quality, mental state, and any other data points you’ve been tracking.
  2. Accumulate trade log statistics: Create a summary of the statistics for your trades, such as the total number of trades, the total profit or loss, the win-loss ratio, and the average profit or loss per trade.
  3. Reflect on your performance: Reflect on your performance for the week, and take note of any patterns or trends that emerge. Consider factors such as market conditions, entry quality, and mental state and how they may have impacted your performance.
  4. Assemble best examples: Identify the best examples of trades from the week, those that performed well and followed your plan and those that didn’t.
  5. Create a template (Your Playbook): Create a template for the best examples of trades that includes the trade type, entry, exit, result, market conditions, entry quality, and mental state, as well as any other relevant information.
  6. Organize the Playbook: Organize the playbook by the grades given to each trade from the journal. For example, you can create a section for “A” grade trades, a section for “B” grade trades, and an area for “C” grade trades. This will allow you to quickly reference the best examples of trades and see how they performed about the grades given in the journal.
  7. Update the Playbook: Make sure to update the playbook with new examples of trades at the end of each week. This will allow you to build a library of the best trades over time and to refer back to them as you continue to improve your trading process and performance.
  8. Reflect on the Playbook: Reflect on the Playbook and analyze its trades to understand what made them successful and how you can replicate them in the future.
  9. Incorporate the lessons: Incorporate the lessons learned from the best trades into your trading process and plan to improve your performance in the future.

It’s important to review your trades regularly and to be consistent in your efforts to evaluate your performance and improve your trading process. A well-organized playbook can help you to reference the best examples of trades quickly and to learn from your past performance.

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Why Every Trader Needs a Journal

Posted on by Conor Browne

The Virtue of Vigilance: Why Discretionary Traders Must Prioritize Record Keeping

For anyone venturing into the world of trading, the allure often lies in the excitement of the markets, the prospect of lucrative returns, and the strategy and skill it takes to succeed. Yet, while these are integral facets of trading, there’s an unsung hero in the tale of successful trading: meticulous record-keeping. This article aims to spotlight the immense value that diligent record keeping brings, especially for discretionary traders.

  1. The Clear Mirror to Trading Performance

    Think of record keeping as a clear mirror that reflects your trading strategy’s blemishes and beauty spots. While live updates and account balances give you a sense of how you’re doing, they can’t comprehensively understand your performance. Only a well-maintained trading journal can offer that in-depth insight.

  2. The Basis for Continuous Improvement

    A trading journal isn’t just a record; it’s an essential tool for improvement. You create a robust data set by capturing the details of each trade — the strategy employed, the market conditions, the outcome, and even your emotional state. This data becomes the foundation for assessing what’s working, what’s not, and where adjustments might be needed.

  3. Quickly Spotting Patterns

    Discretionary trading, by its very nature, relies heavily on personal judgment. But how do you determine if your judgments consistently lead to gains or losses? By maintaining diligent records, both advantageous and detrimental, patterns in trading behavior become apparent. Recognizing these patterns early can be the difference between a minor setback and a significant downturn in profitability.

  4. Emotional Checkpoint

    Trading is not just a financial endeavor; it’s an emotional one. By keeping records of trades and personal reflections and emotions tied to each decision, traders can gain insights into how emotions impact their trading. Over time, this self-awareness can lead to better emotional regulation and more rational trading decisions.

  5. A Safety Net Against Overconfidence

    Success breeds confidence, which is generally beneficial. However, unchecked confidence in trading can border on recklessness. Regularly reviewing trading records ensures that a trader remains grounded, basing their confidence on tangible past performance and not mere gut feel.

  6. Legal and Tax Implications

    Beyond strategy and performance analysis, diligent record keeping is also crucial for tax purposes. With clear records, traders can ensure they comply with all necessary regulations and readily provide documentation if required.

  7. A Beacon for Future Strategy

    Your past trades, captured diligently in your records, provide insights into how different strategies fare in various market conditions. Your trading journal can guide you as the market landscape changes, illuminating which strategies best suit the prevailing conditions.

In Conclusion

Discretionary trading thrives on intuition, experience, and judgment. However, traders need to complement their skills with diligent record-keeping to achieve and maintain peak performance. The adage “you can’t improve what you don’t measure” holds profoundly true in trading. By dedicating time to record, analyze, and reflect on each trade, discretionary traders can always move forward, learn from the past, and optimize for a prosperous future.

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0-DTE Fundamentals Guide

Posted on by Conor Browne

0-DTE Fundamentals

The fundamentals of the 0-DTE (Zero Days to Expiration) trading strategy are built around capturing the rapid decay of options premiums on the day of expiration through asymmetric risk-to-reward setups.

Here’s a breakdown of the core elements:

Asymmetric Risk-to-Reward:

  • The foundation of the 0-DTE strategy is to place trades with extreme asymmetric risk-to-reward ratios. The most common approach is using Out-of-the-Money (OTM) butterfly spreads. These are constructed to limit potential losses while maximizing potential rewards. The debit is kept low, usually under 10% of the width of the butterfly.

Trend Following:

  • Trades are aligned with the current market trend to increase the likelihood of capturing larger moves in the direction of that trend. Market direction is typically determined using moving averages and other technical indicators.

Options Premium Collection:

  • The strategy focuses on the rapid decay of options premiums on the expiration day (0-DTE). This decay provides an opportunity to collect options premiums efficiently, especially in highly asymmetric setups.

Agile Continuous Improvement Process:

  • There is a strong emphasis on regularly reviewing and adjustingstrategies based on performance data. This agile approach allows forcontinuous refinement and adaptation, crucial for maintaining atrading edge in ever-changing market conditions.

Market Structure Analysis:

  • Volume Profile analysis is utilized to understand the market structure and anticipate potential price behaviors. Key elements include identifying High Volume Nodes (HVNs) and Low Volume Nodes (LVNs) to mark areas of potential support and resistance, which are crucial decision points.

Profit and Risk Management Framework:

  • The strategy focuses on monitoring the highest profit achieved and making dynamic “hold or fold” decisions throughout the trading day. As the end of the trading day nears, gamma risk increases, requiring a tighter risk management approach. Scenarios are built for favorable and unfavorable price movements, allowing premeditated decisionmaking.

Strategy Variations:

The 0-DTE strategy is not limited to a single approach; it includes several variations to adapt to different market conditions:

  • OTM Butterfly: A basic long butterfly in the direction of the trend.
  • Batman Strategy: This strategy consists of two long OTM positions, effectively creating a “winged” set up to capitalize on large moves in either direction.
  • Time Warp Strategy: Involves placing both a put fly below the market and a call fly above when trends are unclear or extreme/low volatility is expected. This trade can go out to 1, 2, or 3 days to expiration to capture overnight moves.

Volatility Regime Consideration:

The strategy dynamically adjusts trade types and widths based on the current VIX level. For example:

  • Low VIX (<17): More 1, 2, and 3-DTE trades.
  • Moderate VIX (20-23): Mix of 0, 1, and 2-DTE trades.
  • High VIX (25+): Primarily 0-DTE trades.

Mental Toughness and Discipline:

  • A key component of success with the 0-DTE strategy is the mental aspect. Traders are encouraged to develop mental toughness and discipline, as no strategy or edge can be effectively executed without it. This includes sticking to the plan, executing under pressure, and continuously learning from mistakes.

Incorporation of Eastern Philosophies:

  • The strategy’s philosophy also incorporates Zen principles such as impermanence and the balance of yin and yang (soft skills like strategy and analysis vs. hard skills like mental toughness and discipline). This holistic approach helps traders maintain a balanced and focused mindset, which is crucial for navigating the uncertainties of trading.

These fundamentals combine to create a robust, adaptable trading strategy designed to thrive in various market environments while maintaining a strong focus on risk management and continuous improvement.