An example of a failed setup

I recently posted a potential long setup which appeared on the Dow (see here for more). With last week's price action, this setup has now been invalidated.

As we can see, price has started moving in the opposite direction to that I was looking to trade, coupled with a sharp jump in the 2ATR volatility measurement.

This type of setup failure has also occurred on a large number of long setups on individual stocks. While the setups originally identified may appeal and meet all my criteria, a lot of them never trigger an entry.

Recently I have further developed my scans to look for the setups I am looking to trade. This has involved codifying more of 'visual characteristics' that I look for in a setup.

This has further leveraged my time in that I now have fewer charts to go through before I decide which stocks make it onto my watchlists.

One thing I have identified in the review of my trading activity for 2015 is that I have failed to trade too many setups that have met my criteria. If anything, my trading activity has been far too light - this is borne out when looking at number of trades I have taken here.

This tweaking of my scans should mean that fewer stocks make it onto my watchlist, with the express intention of ensuring that, should a stock trigger an entry, I won't miss taking the trade.

One aspect of what I call 'the magic formula' of trading is that of trading opportunity. Almost certainly, I have been guilty of trading too conservatively in recent times, and haven't taken trades that I should have done. Therefore, the trading opportunity part of that equation has dipped.

I am hopeful that this change will help me correct that issue in 2016.