Thursday, March 25, 2010

This month has been a yoyo on my account

This month has been very volatile in terms of my account value. I have been moving between 15,600 and 16,700 all month. I am currently at about 16,000 net liquidation value. I have been stopped out of about 50% of the positions that I have put on this month. The biggest urge that I am fighting right now is wanting to close out positions that are working. I think that many times we are all guilty of trying to wash away losses with what little gains we may have in positions that may have just started working. I know I am guilty of this on many occasions. I really think this is the reason I leave a lot of money on the table because the last loss I made is always in front of me. Which if you think about it is completely ass backwards. You need to be able to put your losses behind you and be forward looking. I mean learn from those losses but you really need trade amnesia when looking at current positions.

Another thing that I found myself doing this month is going long when stocks had already had a big move and really looked extended on the charts. Driven by fear of missing the next move. I did not realize it at first, but as I got stopped out of my positions I started looking back at the charts and realized I did not have the best entries. It was this realization that made it apparent to me that I would be better off analyzing potential trade ideas outside of market hours. As you mentioned it is much too easy to act on impulse during the market hours. I know there may be some opportunities missed but I am okay with that.

I know I have been talking a lot about what I have been doing wrong and not much about what I am doing right. I do think it is just as important to spend time focusing on what you are doing well vs wrong. To be honest I think that the first and foremost thing that I am doing well that I have sucked at and failed to do in the past is analyze my trades and define my methodology to the market. Coming up with a theme towards my approach to the market. Drawing conclusions based of analysis of trading results. Also acknowledging and identifying my mental state when putting on trades. My risk management has come a long way as well. I guess you can sum it all up by saying that I have become more process driven rather than results driven. I think that if you focus on the process the results will come.

I continue to learn more about the markets and myself everyday.


  1. When you said that looking back at the charts you didn't get good entries. How did you feel at the time of entry? What did your pre-trade analysis show? Were you ignoring what you already knew to be true and putting the trade on anyway? Or are you looking for reasons afterward to help explain why you were stopped out? The reason I ask is that your pre-trade analysis seems to always be in depth. Another question to ask yourself is, had these trades worked, would you still feel that your entry points were bad or are they only bad because they didn't work? Because I think you would agree that just because we might be profitable on a trade does not mean it was a good trade or that our thesis was even correct. We can get lucky just as often as we're unlucky.

    I've currently only got three recent positions and I see that IWO just advised to close one of them out. I am shocked at the rally and feel no need to chase it. I'm comfortable waiting until I have a better feel for what to do.

  2. Another thing on my mental list to get to when I have the time is to make a list of things I do better now, or things I've made progress on, etc. Because like you I tend to just focus on the losses and don't give myself a parade for the wins because isn't winning expected of us?

    So here is a short list of things I know I'm doing better or at least my trading is better off for it. I now set stop losses and have a defined entry and exit point. Even though sometimes my exit strategy might be that there isn't one, that I'm willing to let those go to zero. I'm not keeping a trade journal for each trade entered so I can look back and have a historical document as to what I was thinking. This is opposed to my past where other than trades I did extremely good or bad at, I had no idea what some of those trades were. I would get my 1099's and ask myself what ticker symbol that is. At least now I can reference what I've done.

    I think setting a monthly target and overall strategy is hugely beneficial than just completely flying by the seat of my pants and having no basis for a trade entry other than I wanted to gamble. I really feel as if I've entered the second phase of my trading life and the first phase was just one long training experience. I look back at my past and think of what an idiot I was. It's kind of like that old adage of "the more you learn, the more you realize you didn't know anything before." I keep feeling that way the more I learn. I get embarrassed at things I've done in the past before I knew any better.

    So my point was that I wanted to create a master list and and then update it as needed to remind myself of the progress I've made. Although the ultimate goal is to remain profitable financially, we have to keep in mind that progress isn't measured by monetary means alone. Perhaps keeping a list such as this will help me during the inevitable times of self-doubt when things aren't going our way.

    The most important things to me are having fun and feeling like I am moving forward and getting better. During the short-term, some profitable trades trump all that and its all I care about. but longer-term, if I wasn't learning and having fun then I wouldn't still be here.