The Discipline NOT to Trade Low Quality Setups

• Market Recap

  • S&P 500 highly volatile
  • 20% market drop, then 46% rally off lows
  • Oil prices on the rise
  • Extreme market swings make full investment challenging

• Trading Environment

  • Lacks parabolic momentum and big dollar-per-share moves
  • Seeing only 50-75 cent moves per share
  • Low relative volume on potential setups
  • Cheaper stocks too risky for large positions (slippage, difficult exits)
  • Skepticism about reported low floats due to high volume
  • Chinese stocks without news deemed untrustworthy
  • General absence of high-quality trading setups
  • Quiet end to the trading week expected

• Lessons Learned

  • Recent significant losses led to "trader rehab"
  • Implemented strict "guard rails": 10k max shares, $6k max loss
  • Focus on slow, steady "base hits" for recovery
  • Avoid continued drawdowns and consecutive red days
  • Discipline is paramount; no trade day is a valid strategy
  • Requires 95% conviction for any trade post-losses
  • Prioritize quality setups over activity: "trade the best, leave the rest"
  • Refuse to lower quality standards to force a trade
  • Patience is key for recovery: "slow and steady is the way"
  • Aim for "one and done" – one good trade, then exit