Trading Journal, November

S

STOCKKBROKER

I had a rough week . I lost the first 3 days of the week, down $850 by the middle of the week! My worst start of the week in a month. I had to stop myself and took Thursday off (Which incidentally turned out to be one of the best days of the week). I took some time to clear my head, and came back on Friday. The day started off the same, I lost in ALL of the 7 stocks I traded, my stomach started churning and I started to lose my confidence, but fortunately, my biggest loser was only $70. I waited and waited and my chances finally came at around 3 p.m when a few good opportunities came and I took full advantage of it.
I made over $300 in one stock and I had a few small winners of $80, $90, $100. I ended up the day up over $200. It wasn't a great day, but I'll take it after what happened earlier in the week. The thing is, I was really down on myself after the first 3 days, I thought to myself, there are still guys who are making money around me and why is it that I don't seem to get it? I feel like a total failure and my confidence was shaken, but luckily the love of the game gave me a strong motivation to continue and I can't tell you how elated I was after I had a positive P&L on Friday. All of a sudden, you look at things in a different light and you feel so much better about yourself.
There are several guys in my firm that are quitting this week. It is hard to say good-bye to your buddies in war, and the realization that they have given up after a long battle with themselves and the market is really sobering. I had to remind myself not to be another number, another casualty in this wall of Wall Street and to learn from their mistake and VOW not to repeat them. In a way this industry is a revolving door, for every one who quits, there are 10 who are willing to give it a SHOT. it is up to all of us to make sure that we STAY inside, while we learn to jump over the first few hurdles, because the reward is unbelievable to those few, those elite few who have the discipline, the right attitude and strong motivation to succeed in this business.
For those guys who are just starting out just like me or having a tough time trading, keep your head high and believe in yourself, and know that you have what it takes, be patient, be discipline and next week will be a great week

FOR THE LOVE OF THE GAME!
STOCKKBROKER :D
 
what a good post STOCKKBROKER!

i voted for "they don't have the right skills." my reasoning is because those other choices ARE not the right skills!
 
What caused the guys who quit to do so? I'm assuming they all lost a lot of money, but why? My guess is they either put too much money on their trades or they couldn't accept the losses that were happening and watched them get bigger. What kind of backgrounds did these guys have?

I'm going to start trading full time soon and while I have confidence in myself, I know that deep inside me lurks a little evil monster that wants me to fail. Like a flaw in the system that you know is there, but as long as you beat it down everytime it tries to surface, you'll be alright. I've identified my weaknesses and am honest about them, which is why I think I'll make it. But I think there's important lessons that can be learned from people who do fail, so I hope you'll share some insight
 
I think that is a very good question that desreve a honest answer.

I think the main reason they " fail " is because they failed to win the battle with themselves. I think to succeed at trading or anything else for that matter, you have to really WANT IT.
Deep down you have to know who you are, and what you love doing and if trading is enjoyable to you.

For some of them, the motivation is to make a lot of money in a very short period of time. They come in and have unreasonable expectations of what trading really is. Don't get me wrong, money IS the bottom line, but trading is so much more. You can learn a lot about yourself. Who you are, what you good at, what you are not good at, how well you work under stress, how well you perform under pressure, can you remain calm and collected when a position is going agaisnt you, can you do THE RIGHT thing regardless of what your P&L says?

I mean trading could be a whole journey with the final destination being the 1 million dollar pay off. If you ask all the great traders out there, they will tell you that they LOVE to trade. Love to figure out the game, love the dynamic of the game. It's like Michael Jordan's love for basketball. He would still play today, if he get paid a minimal salary. Why? Because he just love the ompetition, love the game for what it is, and not for the money that he can potetially make from basketball.

Another reason might be that they failed to control the their emotions of FEAR and GREED. They go for the home runs one too many times and when they hit one they get irrationally excited and when they lose, they become unconsolably depressed.
It is times like these that killed them. The more depressed they get, the worse they trade, the worse they trade the more losers they get. Losers beget losers, pretty soon, they can't understand why they are in a losing streak. They lose confidence, lose perspective, go for more home runs, and like a vicious circle, repeat itself over and over again and before you know it they HAVE HAD it. They decided they can't trade at this firm, they go somewhere else, try to start fresh and the same thing happens again.

So I mean, trading is very tough itself and if you don't have your head straight or a good support system of friends and collegues, it is almost impossible. But on the flip side, it can be a very rewarding and fulfilling career for those who have gone through all these tests and challenges and survived. I guess the one thing that I learned from them is that you have to be a good student of the game. Be very flexible in your attitude and approach and you better be a GREAT student of yourself. Identify your strength and weakness and constanly improve upon them.

Love the game and never give up and the reward will come.
 
I voted for "They don't keep their emotions in check". Since I work alone "they" means "me", so I can't speak about others. I trade certain indicators, but my emotions get in the way sometimes. I was in a trade Tuesday that was going against me at the time. Another one came up but I didn't take it because I figured "I'm in deep enough already". Wouldn't you know it, the trade I didn't take would have made me $400. If The trade I was in had been going my way I have no doubt that I would have taken the other trade. The market, the indicators, and my trading methodology don't care about how I am currently feeling. Emotions don't have any place in trading. This is an ages old battle, to do what you know is right, not what you feel like doing. We all fall short of the mark sometimes. New traders more often than experienced ones I think. If a trader is experienced it means that they have survived, and to survive a trader needs to learn to hit the mark more often.
 
THE LOSER'S SPIRAL - THE DARK SIDE OF TRADING

All of us, as trader's normally sense that trading can become "dangerous", if you let it get out of control when it's not going well. It can indeed be a rather dangerous (risky) endeavor, financially speaking. A friend of mine, after trading marginally successfully for a few months, said to me "man, I sense this is really dangerous - I could get into a lot of trouble here". He was right. There is one basic process that destroys almost everyone that "blows out" of trading; I call it "the loser's spiral". I know all about it, as I went through it myself several times, in the process of really learning how to trade more consistently. Only extreme interest in trading, and perseverance through travails got me through this one! I've never met a good trader who hasn't been through grappling with this, either. As they say, "you must learn how to lose, before you can win". It is "the filter", which keeps most away from full-time, long-term trading success.

It goes something like this (simplified, for brevity). Trader makes a little bit of money. Skills develop. Trader makes a lot of money. Takes bigger risks. Things going well. Then...Wham! Big loss. Wham! Bigger loss. Trader tries to "make back" loss by taking bigger risks... and so on. The spiral is self-perpetuating.

Think that won't happen to you? Well, it happens to 80%+ of beginning traders within six to nine months (mileage varies, depending upon prevailing market conditions). It happens to a lot of intermediate traders, and experienced traders. It happens to world-class traders who run huge hedge funds, and it happens to people that have written scholarly books (Victor N.) and who are geniuses. So don't think it can't happen to you - it will, unless you study the mathematics of money management, and carefully calculate how much you can risk, versus your total tradeable capital. The statistics are overwhelmingly against you, if you violate the cardinal rules (generally, if you are risking more than 1-5% per trade, depending upon your trading style). For those with higher net worth, more tolerance for risk, or a longer time frame, (usually a combination of these factors) the parameters are different. But the basic idea is, if you are trading too "large" (of risk on each trade), sooner or later it will destroy you and blow you out of the game - probably, sooner rather than later.

Picture the trading process as a vortex that you are swimming in. If you trade properly and exercise good money management, you can create enough centrifical momentum to avoid the inevitable "flush down the drain". After a while, it will become a habit, and you will be able to routinely stay out of trouble (see my post on Equity Curve - an "early warning system"). But the forces of the vortex are always there, ready and lurking. This is truly the dark side of trading, which is always there. If you let your greed get the better of you, it will take over. And for any trader who has experienced the "high" of a big trade, the lure is always there to pull you away from your discipline.

What causes a trader to enter into "the loser's spiral"? For most, it can be identified as simply to trading too big relative to their account size, trading without stops, and/or riding positions down. Losses overwhelm gains, then the trader tries to trade his way out, quickly, often while not taking the true market environment into account before taking positions. Good traders are out of the market more than they are in, and they trade selectively.

Only the minority know how to avoid this vortex, in my experience. Think about it, before you commit to a trading (vs. investing) style... investors are less susceptible to this ever-lurking, rarely-discussed problem, which is the biggest potential pitfall traders must face, IMO. The shorter the time frame of your trading, the more difficult the trading process becomes. The rate of return also becomes higher; however the risks become higher as well. So daytraders are particularly susceptible.
 
I completely agree with the comments on trading too big. I am now trading 1/20 - 1/40 the size per position I was originally trading. Its unbelievable how it changes the psychology. My volatility is much less and I am making much more money.

Example: our system had us net short Wednesday. Going into Thursday we were down for the week and we were net short several positions (although we had a few longs on as well). The market was rocking up. Thursday morning our system had us put about 5 more short positions on. It was painful (at noon every one of our short positions was going against us) and in the past (trading much bigger size) I definitely would've freaked out or not done it (or done fewer positions but at the bigger size, which is much riskier). Instead we put the positions on, took a walk, ate a nice lunch (Chinatown!), and came back to find the market had tanked. Turns out we had a much better day then when we were playing 10 times the size (in position size and overall allocation). The 100% reason is not our system (because we wouldn't've had the discipline to follow it if we were playing bigger) but position size. Also, if we had lost that day we would've been largely ok again because of our position size and the fact that our longs held up and continued to rock. Previously, I would not have played long and short at the same time no matter what the system said. Now, no problem. All psychology.
 
Accident?

As of 12.45 pm, no confirmations.

Traded horribly today. DYN gapped up, and kept going up, tried to short (s-$40.65, covered @$41 on a gap up, tried again @.90, covered again @$41.), lost $150. Some positive comments from the chairman regarding the buying of ENE.

ABC- stock got killed a couple of days ago, stock rallied from low of $54.50 to $56.75, starting to come in and I shorted @ 55.41, covered at $55.60, shorted again at $55.90 and covered at $56.10. The stock broke 2 price levels at 50c and 00. Should have gone long. The stock went on to new highs.

MIL- put in a bad stop. Stock opened at $55.50, shorted at $55.25, it went down to a low of $54.80, put in my stop at $55.00,, got printed at $55.05. I should have left my stop at $55.25. The low on the stock was $53.65!!

TSG - put in the wrong order to sell instead of buy after the stock! Had to cover 30c higher. stock opened at $28.25 and went as high as $29.10.

It was a little chaotic at the open today. Made some really bad decisions, luckily I am still up $70.
 
A FEW OF MY OWN RULES
analyze the mkt environment you are in and have different strategies for different environments.
make a list of conditions that exist when you usually lose and what conditions cause you to break your rules and post them on your monitor.I call these conditions evils and have them listed as : being tired
overtrading
wanting to get money back from mkt
financial pressure to make money in mkt
one of the most important traits I have noticed great traders have is if the ideal entry point passes dont be afraid to miss "the move" if you did not get in.This requires the ultimate level of discipline especially if the move continues.But more often than not this will avoid disasters.
Just my opinion
 
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