A few days ago, I had my Traders University second one to one mentoring session. Just like the first one (see previous post) this session was excellent and allowed me to move further on in my understanding of spread betting and trading in general.

We discussed a couple of the trades I had already placed and some were good. However, I still had not followed all of the rules of the trading system perfectly. I had done some research previously (also detailed in a previous post) where I had been running the strategy over a stocks as if I had been placing them for 2 years.

I had noticed that not all trades were placed on the next day of the strategy as defined in the rules. The rules dictate you should cancel the order if it has not been placed on the next day. I extended their rules from the first day to place the trade if you wait for up to seven days instead. This entered significantly more trades and made more money.

I have therefore being using this extended strategy in my own trading.

My mentor pointed this diversion out and I explained my reasoning. However, he informed me that after day one it became a completely different strategy and should be treated in a different way. You didn’t need to miss out on the trade, but approach it in a new way. He gave me a better strategy and I have applied this to many more trades this week.

This should reduce the risk in future and make more money per trade.

Also, in my own research I found my trades were being placed before my support line had been broken. I.e. they were being placed before the breakout had occurred. This was resulting in some of the trades not breaking out, entering me in the trade and then bouncing back up and stopping me out with a loss. In most cases (66%) this is because I have been calculating the actual underlying market price PLUS the dealer spread and using this as the entry and stop points.

If I ignore the dealer spread when placing an order or stop, the trades work as planned. This was also pointed out in my first one to one session, but I chose to ignore it at my own peril! I think I just needed it proving.

The key to this is keeping records, reviewing and refining as you go.

I now have some more homework and that is to apply various breakout patterns to stocks over the last two years and to make sure I learn how these work.

Since my first one to one session, I have turned my trading from losing money to gaining money. If you don’t count the mistakes I have now rectified, I would be making around 1-2% per day of my initial capital. I am slowly getting back the loses I made initially. When I get back to my initial £2K I think a celebration is called for!