the-daily-trading-coach-101-lessons-for-becoming-your-own-trading-psychologist-brett-steenbarger-_2009_-a23

242 THE DAILY TRADING COACHfor example, consists of three kinds of trades: intraday trades with plannedholding times of less than an hour; intraday swing trades with planned holdingtimes of greater than an hour; and overnight trades. The short intradaytrades are based on short-term patterns of price, volume, and sentiment.The swing trades are trend following and are based on historical researchthat gauges the odds of taking out price levels derived from the prior day’spivot points. The overnight trades are also trend following and are based onlonger-term historical research that shows a directional edge to markets.These trades comprise different kinds of trades, because they are based ondifferent rationales and involve different positioning in the markets. Forinstance, I can take a short-term intraday trade to the long side, but shortthe market for an overnight trade that same day.You can identify the inventory of your trading business by segregatingtrades based on what you’re trading and how you’retrading it.For other traders, the division of the trading business will be by assetclass (rates trading versus currency trades versus equity trades) or by tradingstrategy/setup (trades based on news items; trades based on openinggaps; trades based on relative sector strength). Relatively early in my tradingcareer, I broke my trades down by time of day and found very differentmetrics associated with morning, midday, and afternoon trades. That findingwas instrumental in focusing my trading on the morning hours. In otherwords, the divisions of your trades should reflect anticipated differencesin your income streams. If the returns from the trading strategies or approachesare likely to be independent of one another, they will deservetheir own bin for analysis by metrics.One of the breakdowns I’ve found most helpful in my trading is basedon tagging the market conditions at the time of entry. To accomplish this,you would tag each trade based on whether it was placed in an upwardtrending market, a downward trending market, or a nontrending market.You will want to be consistent in how you identify market conditions; myown breakdowns (because I trade short-term) were simply based on howthe current market session was trading relative to the previous one. It iscommon that traders will perform better in some market environmentsthan others. For instance, based on a different breakdown, I learned thatI was most profitable in moderate volatility markets, as tagged by the VIXindex at the time of entry. When markets were relatively nonvolatile orhighly volatile, my returns were significantly reduced. This was useful tome in knowing when and where to take risk.