End of the Year Review

gmanGilbert Mendez's (Gman's) Blogs2 Comments

I know I’ve been slacking a bit with my blog schedule. Let’s just say that I am more of a social butterfly, this writing thing is not my favorite :). But as a New Year resolution I have it to be a lot more active with my writing. Yay!!

I have received a few emails from fellow traders and mentees asking about how I review my year and what kind of goals to set for the upcoming year. I have been off the desk for the last week or so and that’s given me enough time to look over my stocks, stats, daily/weekly/monthly performance. I want to share with you today my way of reviewing the year. It is by no means the WAY of reviewing your performance. If you think I missed anything or something seems redundant please let me know. I always welcome comments and suggestions on how to improve my game.

I break my review into three categories: Hard Stats, Psychology, Idea Generation and Execution Skills.

Hard Stats
I have been a huge believer in hard stats. It is very easy to get carried away with looking at too many variations of the stats. Too below are the most important questions to ask when I review my numbers:

1. what is my win rate on the ideas generated?
2. What is my win rate overall? This number varies because it is the case that I may make money in a stock I had the wrong idea because of managing risk/trading around it
3. How are the results from overnight risk? What is my average reward per 10k/50k/100k of overnights?
4. How many is too many positions? When do you start to get sloppy?
5. Is the performance affected by the type of day (trend, range, inside)?
6. Hedging for pikers? The results are clear. Spys/eminis not the way to hedge. The protection added does not provide better results
7. What is my overall risk:reward on ideas and scalp plays? Do you need to increase risk on those?
8. Avg amount of BP used intraday? what are the spikes like? is my performance overall good relative to average BP used?
9. What is my avg holding time for trades off the different time frames? needs improvement?
10. What is my return relative to how big I get on a position? When tier 3-4 do I make the equivalent in reward?
11. How many times did I close at or above 80% of my daily stop loss?
12. How many times did I get close to 80% of my stop loss and finished up positive? negative? this will help in dealing with psychology and picking a correct stop loss
13. What are my net positive days compared to my net negative days? What is that ratio? does that go in hand with my daily stop loss and bank? Need to increase daily risk?
14. How am I managing risk on the overall portfolio of monkey positions? What is the avg draw down intraday on ideas I am sitting on? Can I increase those positions overall without affecting the rest of my trading?
15. How much pnl am I giving up reacting to price action/algos? fresh news stuff?
16. How often do I hit out of a position to buy it right back as a response to algos touching prices?

1. Increase the number of big idea positions to 4-5 intraday
2. Increase the amount of risk per idea on Tier 1 and at Tier 4 level
3. Increase my daily stop loss and develop a plan to increase BP gradually.
4. Increase the overnight risk gradually on positions that I think are fully developed. Take the full tier 3-4. Do not take the risk if the idea is still developing
5. Think and experiment with ways to hedge some of the extra exposure. Maybe keep weakest stocks short? hedge with the corresponding ETF? Just give up with the dope SPYs/@ES
6. Continue to journal about the possible algos. There’s a major advantage recognizing them and being aggressive when the time is right.

Everyone knows I talk mad smack on my call. I am an emotional monkey. I know it. While It doesn’t affect my trading OFTEN, I know that it gets me in trouble at times. As part of my yearly review I want to find out
1. How much $$ damage does trading pissed off made to my daily pnl? Add that monthly and yearly. Proud of yourself clown?
2. How many days did I trade my PnL and not the market when I was up/down big/evenish?
3. How many days was I tired on the open from being a single retarded monkey in the city the night before?
4. How does the trading environment (quiet, moving, ranging, etc) affect my trading? Do I settle on my PnL or do I continue to find opportunity?
5. How did the breathing exercises help in the am? The results are clear. Must add to the daily routine
6. How did trading FX and futures overnight affect my trading coming into the US session? What happens when I had a good/bad day there? Can I be objective about my trading for equities?

1. Continue to improve with the emotional aspect of my trading. If pissed off, WALK the F away.
2. Stop the mid week shenanigans at all possible.
3. Must stop letting my FX and futures trading overnight affect my performance on the US open.

Idea Generation and Execution Skills
If you sit on my desk or listen to my call you will always hear me say that you HAVE to trade with an idea in mind. Not just bang keys for the heck of it. The big money comes from sitting on a position while it develops and while it starts working. To review this category I am interested in:

1. What time frame generates most of my ideas?
2. Am I being patient enough while these ideas develop? On average If not do I need to trade off the immediately lower time frame?
3. How long is it taking for these ideas to develop? When I am wrong how quickly does the market tell me so?
4. Am I managing my risk well while these ideas develop?
5. How often did I get to be at tier 3-4+ when I felt the play was ready?
6. How often did I feel the play was ready but I did not execute on adding size? How can I improve this?
7. How many ideas am I adding to the portfolio a day? How many of them work out on a daily basis?
8. How are my results on overnights from these ideas once they are developing?
9. How are my results on overnights from these ideas once I think I have them?

Goals: 1. Add 1-2 more ideas a day. This will provide greater cash flow if my win rate stays the same.
2. Make an effort to get to tier 3-4 more consistently when I feel I have the play
3. Hold at least tier 2 overnight and for the duration of the play
4. Slowly add money at risk per idea. Get this to be twice what it is by end of 2011.

There you have it. A somewhat detail way of looking at my numbers and journal entries. For newer traders you may want to consider working on some basic essential skills: managing a position, adding/taking away, when to size up, trading into a position, idea generation system, etc.

Also would like to take this opportunity to wish everyone a healthy, happy and prosperous new year. 2011 will be the year of the big chop. I can feel it. That volatility wants to get back into town. Love it. Live it. Crush it!

2 Comments on “End of the Year Review”

  1. Great post Gman, many great thoughts for biz of trading in 2011. One idea I’d like to put out is a goal to increase the percent of shares I trade using liquidity providing vs. taking from 35% to over 50%. Since working hard on tape reading, I’ve gone from 10% to 35%. Nice increase in profits due to lower fees. Getting over 50% would indicate great entries without less paying up, reducing risk.

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