After reading Attitude Trader’s recent posts, I realized that tracking my paper profits was not providing me the most important information I need to improve my trading performance. Reflecting on my non successful trades over the last couple months, I came up with three main themes in my failures:

1) Exiting trades way too soon, not letting winners run.

2) Not entering trades, despite obvious indicators, in stocks that made big moves after I passed on them.

3) Forcing trades with marginal set ups often because I felt I missed out on earlier plays.

So instead of asking, “Did I make paper money today?” – the real questions for me are: did I stay in my trades until I got exit confirmation, did I enter every single good setup I saw, and did I avoid entering marginal trades? If I do that, the money will follow.

It’s like training for a foot race. You don’t focus on being fast and winning, rather you pinpoint key skill areas to work on, try to perfect your form and strengthen yourself physically and mentally.

To track my compliance following my rules, I’m going to use the “Don’t Break the Chain” behavioral modification concept attributed to Jerry Seinfeld. Once you start a continuous chain following the habit, the more ingrained it becomes.

So the next question then – what are my rules? I made the following checklist in Word that I am going to fill out with every potential set-up and trade during the day. These rules will likely change over time, but the goal right now is to follow them each and every time!

Overall Market

__ Wait until 9:45am to enter positions

__ Green market – trade long
Red market – trade short
Channeling market – long on bottom / short on top of range

__ Trade with stock’s sector direction

Entry Signals

__ Solid tall candle under or above 10 SMA on 5-minute chart

__ Alternative setup: Long – steep “drop & bounce” or short – “rocket spikes” charts for reversal scalps

Rule-Out Confirmations

__ Do not enter long near resistance unless breakout above
Do not enter short new support unless breakout under

__ Do not enter if ADR price swing expended unless breakout past R/S

Entry Confirmations (at least three to make trade)

__ Former Runner

__ Pre-market Mover

__ High of Day / Low of Day

__ Green to Red / Green to Red

__ 10/60 SMA Cross on 5-minute chart

__ Cross of $1 or .50 price threshold

__ Long tested support / short tested resistance

__ Significant change in volume

__ Higher, highs / lower, lows on shorter time-frame

__ News fueled momentum

__ Sector / peer stocks running

Exit Criteria

__ Full bar outside of 10 SMA on five minute chart confirmed by 10/60 SMA cross on one
minute chart except on alternative set-up scalps OR by end of day unless overnight short