Rookie Trader Journal - Advice Welcome

Well, today definitely went better, and was less stressful then yesterday. As many can attest, live trading is very different from paper trading. In order to futher your education, you just need to take the leap some time, you’ll never be completely ready. Even though I’m obviously inexperienced, I’m not going to throw in the towel anytime soon, I would rather lose some money and learn then sit on the sidelines.

I kept my contracts to a maximum of two until the very end of the day when I needed one last push and decided it would be worth it to take it up to 4 for a few minutes. Taking it up to 4 worked, but it was more luck than skill.

I went down $120 early on some poor decisions with stops as I am still trying to decide what works for me. I was satisfied to have limited my losses to $120 with the stops. For the rest of the day I rode the wave up, I watched the up trend and just stayed with it, averaging down periodically. At the end of the day I thought I’d be clever and short the profit taking that I was sure was going to happen but it didn’t and I lost some of my winnings for the day.

I am still having a very hard time accepting losses, this is probably common with newbies. I find myself sometimes adjusting my stops once I get close to them. I’ve got to work on this.

Day 4 Results:

Date: 4/16/08
# of Trades: 37
Contracts Bought: 78
Contracts Bought Range: 1-4
Highest down: ($120.00)
Highest up: $518.00
Net Profit/Loss: $354.20
 
Krolik,

In the first place congratulations for your early successes. I'm a newbie as well and started trading the day before you (first week great, second week crap). I'm with IB and Ninja as well.

I'm definitely not in a position to give you any advice, but I'd like to share, from newbie to newbie, a couple of things with you:

As you, I have 50,000 for trading (well, actually it's 50,000 euros, but you get the idea). However, I only wired 10,000 to my IB account. You show wisdom in saying that if you lose the money you will consider that your tuition, show some prudence as well and make sure you can eventually pay for your sophomore and junior year. Pivotas has given you the very best advice, do yourself a favor and heed it.

Regarding "averaging down" that works "great" and many times it will prevent you from having a losing day. However, all it takes is ONE BAD DAY (please forgive me the uppercase) to send you packing, if you don't believe me, ask Victor Niederhoffer. Check again the picture that Bison posted.

Also as you, I am struggling with my stop-losses, in the sense that if I keep them tight, they get triggered and the tick after the market reverses, etc. Finding the right stops will come - I guess - with more experience and time. In the meantime and until I find the mega-super-sweet-stops for my trades I am more concerned with my daily loss limits, i.e. the point at which I stop trading (for me 2% of 10,000 eur, 200 eur), and the weekly and monthly limits (500 eur and 1000 eur). When after some study and consideration I set these limits I thought: "hell, 200 euros to me is nothing, I can be ok losing more"... and that is precisely the point, that you stop BEFORE it means something. As an example: I can have one or two drinks, no problem, but if I get the third one, I'm in trouble, not because I cannot handle three drinks, but because once I had the third, I will be dizzy enough not to mind having a fourth and a fifth... You might be ok with taking a 2,000 dollar loss on any given day, but then, the day you give that loss a bit more room (say, that 3,150 stop of yours), you might well hit that point when you think, "hell, what the f@#~, at this point it doesn't matter anymore...". The market will sometimes inflict pain on you and you will certainly have to pay your tuition, just make sure you don't inflict pain on yourself and that you don't drop out because you run out of tuition money (errr, sorry for the grave-sounding point, just thinking aloud I guess). If you haven't watched it yet, look for the "The stock market ruined my life" video. Sobering.

Finally, something I read in the elite forums and that I keep in front of me as I trade: Profits come from luck, small losses come from skill.

Best of trading to you, thank you for sharing the journal.

Jorge

[On a technical note: in case you use the T&S, you might want to consider adding a third party quote feed, since IB aggregates the trades and you will not get the right feel from its data]
 
Quote from Sarvise:

...As you, I have 50,000 for trading (well, actually it's 50,000 euros, but you get the idea). However, I only wired 10,000 to my IB account. You show wisdom in saying that if you lose the money you will consider that your tuition, show some prudence as well and make sure you can eventually pay for your sophomore and junior year. Pivotas has given you the very best advice, do yourself a favor and heed it.

Regarding "averaging down" that works "great" and many times it will prevent you from having a losing day. However, all it takes is ONE BAD DAY (please forgive me the uppercase) to send you packing, if you don't believe me, ask Victor Niederhoffer. Check again the picture that Bison posted.

Also as you, I am struggling with my stop-losses, in the sense that if I keep them tight, they get triggered and the tick after the market reverses, etc. Finding the right stops will come - I guess - with more experience and time. In the meantime and until I find the mega-super-sweet-stops for my trades I am more concerned with my daily loss limits, i.e. the point at which I stop trading (for me 2% of 10,000 eur, 200 eur), and the weekly and monthly limits (500 eur and 1000 eur). When after some study and consideration I set these limits I thought: "hell, 200 euros to me is nothing, I can be ok losing more"... and that is precisely the point, that you stop BEFORE it means something. As an example: I can have one or two drinks, no problem, but if I get the third one, I'm in trouble, not because I cannot handle three drinks, but because once I had the third, I will be dizzy enough not to mind having a fourth and a fifth... You might be ok with taking a 2,000 dollar loss on any given day, but then, the day you give that loss a bit more room (say, that 3,150 stop of yours), you might well hit that point when you think, "hell, what the f@#~, at this point it doesn't matter anymore...". The market will sometimes inflict pain on you and you will certainly have to pay your tuition, just make sure you don't inflict pain on yourself and that you don't drop out because you run out of tuition money (errr, sorry for the grave-sounding point, just thinking aloud I guess). If you haven't watched it yet, look for the "The stock market ruined my life" video. Sobering.

Finally, something I read in the elite forums and that I keep in front of me as I trade: Profits come from luck, small losses come from skill.

Best of trading to you, thank you for sharing the journal.

Jorge
More...


fantastic post, jorge.


krolyk, a lot of people have given great advice. your enthusiasm is great, but i urge you to take a step back and analyze what has been written to you. other than that all i feel compelled to advise is that you cut your trading volume and number of contracts on at one time.

i'm new at this as well and started my own journal a couple weeks ago. i took a break from trading for the last few weeks because after six months of getting lucky while trading without a plan, overtrading, and trading lot sizes beyond my level of experience i took a drawdown that wiped out six months of progress and put me right back at square one. if you get a chance check it out because i've been given some great advice as well. http://www.elitetrader.com/vb/showthread.php?s=&threadid=123984

ted
 
Thank you very much, excellent comments. I plan on keeping my exposure lower going forward, I had a couple days that got away from me. Hopefully I will be able to recognize when it's happening next time and take appropriate action.
 
What happens when you average down.

From Wikipedia:

"The beginning of the end occurred on January 16, 1995, when Leeson placed a short straddle in the Stock Exchange of Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight. However, the Kobe earthquake hit early in the morning on January 17, sending Asian markets, and Leeson's investments, into a tailspin. Leeson attempted to recoup his losses by making a series of increasingly risky new investments, this time betting that the Nikkei Stock Average would make a rapid recovery. But the recovery failed to materialize, and he succeeded only in digging a deeper hole."

What happen when you work without a net.

From Wikipedia:

"The Flying Wallendas is the name of a famous group of circus act and daredevil stunts performers, most known for performing death-defying stunts without a safety net. They were first known as The Great Wallendas, but the current name was coined by the press in the 40s and has stayed since. The name in their native German, "Die fliegenden Wallenda", is an obvious rhyme on the title of the Wagner opera, "Der fliegende Holländer" ("The Flying Dutchman")............

The act toured Europe for several years, performing some amazing stunts. When John Ringling saw them perform in Cuba, he quickly hired them to perform at the Ringling Brothers and Barnum and Bailey Circus. In 1928, they debuted at the Madison Square Garden. The act performed without a net (it had been lost in transit) and the crowd gave them a standing ovation......

It was at a performance in Akron, Ohio that the group all fell in the wire, but were unhurt. The next day, a reporter who witnessed the accident stated in the newspaper, "The Wallendas fell so gracefully that it seemed as if they were flying", coining the name of The Flying Wallendas......

In the following years, Karl developed some of the most amazing acts like the seven-person chair pyramid. They continued performing those acts until 1962. That year, while performing at Detroit, Michigan, the front man on the wire faltered and the pyramid collapsed. Three men fell to the ground, killing two of them (Richard Faughnan, Wallenda's son-in-law, and nephew Dieter Schepp). Karl injured his pelvis, and his adopted son, Mario, was paralyzed from the waist down.

Other tragedies include when Wallenda's sister-in-law, Rietta, fell to her death in 1963, and his son-in-law Richard ("Chico") Guzman was killed in 1972 after touching a live wire in the rigging. Nonetheless, Karl decided to go on. He repeated the pyramid act in 1963 and 1977. Karl continued performing with a smaller group, and doing solo acts.

On March 22, 1978, during a promotional walk in San Juan, Puerto Rico, Karl Wallenda fell from the wire and died. He was 73 at the time."

What reducing your account size will do for you.

From the American Heritage Dictionary:

Circuit Breaker

A switch that automatically interrupts the flow of electric current if the current exceeds a preset limit, measured in amperes. Circuit breakers are used most often as a safety precaution where excessive current through a circuit could be hazardous. Unlike fuses, they can usually be reset and reused.

My friend... a drunk driver will drive his car on the wrong side of the road risking killing himself and others because he is too drunk to know he is too drunk to drive.

When your emotions grab you by the throat as you average down and see potential loss increase, you will not have the cool, calm and objective presence of mind that you are counting on to avoid disaster. It will already be too late.

As the saying goes: An ounce of prevention is worth a pound of cure.
 
Thanks for another insightful comment Pivotas, I can tell you did some research on that one, you'll get through to me sooner or later.
 
Today was my worst yet, I did something really stupid, I’m almost too embarrassed to post it. But I hope I have shown by now that I am pretty good about not sugarcoating anything, I really am treating this as more of an open journal and I try to admit my weaknesses and the stupid rookie stuff I do. So this morning I signed up for a trial account on an unnamed chat room and started listening to the calls they were making. I wasn’t really planning on trading them, I was just hoping to get assistance gauging the direction of the market. But when they made a call, I then wanted to trade them. And I was an idiot because my charts weren’t indicating to me that it was time to buy or sell, but since I thought that whoever these guys were probably were more experienced and would know better than me I followed them. Well about 3 trades later I was suddenly down -$1300.

It was very frustrating. Then in my frustration I did some more rookie things and got myself in deeper. I spent the entire day down, if I would have closed out at the worst possible point in the day I would have been down -$2900. I increased my contracts as the closing bell came nearer and luckily caught the end of day selloff and ended up at -$600.

I then decided to try some afterhours trading. I have done this before on paper and have done ok with it. The afterhours trading went very well, and I was able to recover my $600 and end the day in the green. In fact, the afterhours trading was much more pleasant, since I could easily identify the resistance points and it slowly moved back and forth between them. Maybe I need to start trading some slower moving indexes.

Another educational experience, I have been glued to the screens for about 11 hours today, I am very exhausted. I figure if nothing else good comes out of this thread at least I will provide some entertainment value for all the pro’s on here as they watch my dwindle away my investment. Please feel free to tell me how much of an idiot newbie I am.


Day 5 Results:

Date: 4/17/08
# of Trades: 59
Contracts Bought: 274
Contracts Bought Range: 1-16
Highest down: ($2900.00)
Highest up: $110.00
Net Profit/Loss: $24.6
 
Quote from krolyk55:

Day 5 Results:

Date: 4/17/08
# of Trades: 59
Contracts Bought: 274
Contracts Bought Range: 1-16
Highest down: ($2900.00)
Highest up: $110.00
Net Profit/Loss: $24.6
More...
Nobody's laughing, we've all been through it.

You survivied to fight another day ... there's a big lesson in that one.
 
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