I should note that tomorrow marks exactly one year since I quit my job and started trading full-time, and so I've been doing a lot of reflecting.
When I started trading full-time, I made up mind to get in the game. Don't keep money sitting on the sidelines. Push myself. Don't keep money in the holding account because its safe, employ it! Make mistakes, lose money, win money, but be sure to learn and grow from each and every experience. Like the old adage, "A ship in a harbor is safe... but that's not what ships are made for, and eventually its bottom will rot out."
With this attitude, I have made a TON of mistakes. Some that are weighing a little more heavily right now are
1a. Crossing orders. I crossed orders THREE TIMES today. On one occasion, I was watching the market like a hawk, waiting for the perfect time to cover a short. Finally, after hours of staring at my screen, the price spiked to where I wanted to cover! I moved fast--too fast--and sold instead of bought! I ended up stuck with double the position that I wanted to dump! AARG! In the moment it took me to realize what I'd done, the price had bounced up again.
1b. Hoping. Later that day, I crossed buy and sell again, and picked up an extra 400 shares of something instead of reversing a position. I decided, "Maybe it's for the best. Keep it in." Nothing doing: it moved against me.
Another time, I entered a limit order instead of a market order, and lost the price that I wanted. I really need to be more careful. I find the order entry on my terminal to be clumsy; maybe I can switch it somehow.
2. Gap Spike Strategy. I noticed a pattern in some equities: in the morning, they would upspike/downspike at the opening bell, and within 10 minutes, swing back to the previous close. I decided that, right at the bell, I would scan for equities that made a big move in a direction, and bet the opposite way. Quick, easy money, right? Well, it worked a few times... but then I tried it with Nasdaq:JNPR on 22 Sep 2016, and shorted at $22.70. It just kept going up and up and up!!! I'm still holding some as a deep float.
3. Reversing too soon. I like to work groups of equities within the sectors, get to know how those specific stocks move, and swing trade. I strive to stay long when the price is going up, and when I think that its going to swing the other way, reverse to a short. The hard part, of course, is hitting the turn at the right time. Sometimes I find myself reversing my position, but the price just keeps on going, and I lose my profits almost immediately. This is to be expected with this strat, but it still hurts to lose. My goal is 60/40: Win 3 out of 5 bets. If I can get that good, I get $1 every 5 trades. I really shouldn't be beating myself up over this one, but I am; hence this post in the Psych forum.
4. Gambling. This mistake was a while back, when I was still learning just how dramatic the effects of earning announcements can be. I decided to bet long on Nasdaq:SWIR earnings. The next morning, I watched it drop off a cliff, and my account value drop almost 2%. I really had no business keeping those shares through earnings. I didn't really do any research on the company, other than glancing at their Web site and thinking, "The Internet of Things. That sounds sexy! I'm in." It was nothing more than a roll of the dice.
5. Winning by luck. Oddly, the thing now irritating me most is that my biggest win was by pure, unadulterated luck. It was 18 Aug 2016. I was long on Nasdaq:BRCD, and it was the day of their earnings announcement. After the experience of #4 above, I made sure to do my research this time! After several hours of careful study, I determined to exit the position, and not reverse. I breathed a sign of relief as I listened to the call, and watched it spike down. "Good work," I said to myself, "you did your homework, and got out at the right time." I kicked myself slightly for not having the balls to go short, but I was happy that my research and analysis was correct.
So what? You might be wondering. Well, I then glanced at my screen, and saw that my account had soared up almost 3%!!! "WTF?" I thought, "What happened?" As it turns out, I was long on Nasdaq:NTAP, which also had earnings on that day, and exceeded expectations with great forward guidance. The price soared up almost $5 per share! I was on the right side of it, but it was total luck. I was so busy researching Nasdaq:BRCD, that I completely missed the fact that NTAP was also announcing that day.
That, my friends, is the story of my biggest win ever.
I think you show you've got many things going for you - integrity and honesty being one of the most important aspects, not just to others, but most crucially to yourself.
Regarding your points, sharing them with others might help you who knows:
- Have you thought about semi-automating this stuff? Trading is actually pretty boring, the GUIs are often expensive and error-prone as well. Starting some automation should improve execution and may help you focus more on the business side. What you want is stress-free and perfect execution (Operations) within reasonable market conditions, so you want to be fully prepared prior the every entry and exit.
1b. You want to minimize losses due to mistakes, because the correct action after a mistake is always to take the guaranteed loss/profit as soon as possible and cool down, if possible. Any deviation from your trading rules leads to breaking your rules, which shouldn't be within your trading plan, and thus need to be mitigated. - It's about probabilities, not patterns repeating 100%. Look at any busy chart at any timeframe. Are any patterns repeating 100%? Usually, no. Gaps can mean many different things within a larger context and are not that different from long candles.
- Does your backtesting tell you reversing is profitable versus not reversing? You should be wary about what risks and costs you commit to.
- If earnings can do so much damage, aren't you over-leveraged? Black swans happen very rarely, but they will decimate you if not properly covered or diversified, and impossible to predict (by definition). The problem is one lacks such experiences, but doesn't mean one is impervious to such events. You might believe that reversing your position could even make such events profitable, but that too needs to be confirmed if really so.
- Winning by luck is actually a good sign. I've had those too, and it means you're allowing some winners at least. They should pay for your risks and costs. However, what you mean is that you broke your rules and "won", and it's good that you want to improve on that. It means you can put more efforts into improving your trading plan / rules, knowing that "winning by mistake" is not good enough for you.
