Funny you mention that. Prior to this job I spent years in a line of work where I dealt with lots of hand holding and serving the needs of others. One of those jobs was with a bank in the lending division, which is what initially spurred my love for studying the markets. At any rate, I got so burned out that moving into trading became the most obvious thing to do for me. I just got so tired of peoples' self-entitlements.
I will say though that I have started to miss the interactions. I wish I worked with other traders, that might solve some of that.
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I understand, each trade is the equivalent of a car or a down payment on a house. It's large enough to weigh on your thoughts because of what it can physically represent in the real world. Are you working with other people's capital and expectations for a returned cut or are you solely using your own money?
See you just described some of the mental aspect of dealing with sizable money. It's something I didn't grow up with and as I came into more trading capital thinking it was going to solve the situation, what has happened is it's become more imposing because of my fixation on the money factor.
The capital comes from an uncle. Now I know someone might cringe at the idea of it being "a family member", but this is a man extremely blessed in life. His core belief is that if you stop filling other peoples' cups, yours will stop being filled too. This is also the same guy who when I first started this endeavor told me that I he would've given me 30k to go waste at a strip club instead of for trading. When I got the new capital he said it's mine to lose, but I certainly have never once considered approaching it like that.
Weighing on my thoughts is the correct way to coin this whole thing. I think I'm just arriving more and more at the idea that I'm not yet situated enough in my finances to trade the way I'd like to have an opportunity to. Each trade ends up meaning too much, it gets outside of the act of identifying a target and a stop and being willing to let either play out.
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The less stress about paying people back the better and if you're uncle doesn't require it then that's great. There's nothing wrong with trading other people's money if you've proven yourself consistent and have full confidence in your system as well as sound risk management practices. Anything else, as you know, is certain to cause trouble.
@Rock Sexton, I think you've got it going on. At first I wondered if your problem might have to do with thinking in terms of probabilities but it seems like you have a handle on that. Speaking from my own experience, could the problem be execution related? You mentioned, a couple of times, that the fluctuating p&l impacts you psychologically. So I'm assuming that for each position you have a large stop. Maybe your stop is just a little bit bigger than your comfort level? When I suffered from this I found that the solution wasn't to move the stop, because the trade needs the room it needs to play out, but it was to try to achieve better execution. So instead of putting on the position 10 ticks from the inside market maybe you need to try to get 20 or 30 ticks worth of edge? The further away from the inside market that you can put on your position the better off the position is. Try to get a handle on how much drawdown you take on a position before it moves in your favour, get an average, and try to work that into your execution. It could be as simple as that. Of course I am speaking from my own experience but I find that if my execution is good then the whole trade management process is a lot less stressful and a lot more enjoyable.
I hope that helps.
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Objectively I think your recent trading issues might have something to do with position sizing. A good analogy that comes to mind is lifting @ the gym. If you have 25 lb dumbbells at home that you are used to lifting, you are going to see consistent results in your muscles. However, if you go to the gym and decide to use 60 lb dumbbells simply because it is available, your form is going to suffer, you are gonna be more prone to injury, your other muscles will overcompensate, etc.
Just because you have a lot more money doesn't mean that you should be trading larger. Like going to the gym, you have to work your way up from a $400 stop to a $4,000 stop. Psychologically, it is daunting also to log in every day and see a large # on your account value. It makes the small wins (which is what built your initial trading account) seem a lot less relevant and like you are spinning your wheels. I think a simple tactic that might also work is (if you have not done so already) to breakdown your 'main' account into sizes that you are used to trading. For example, if you usually have a $15,000 account, then break down your +$45K account to put things back into the proper perspective that got you to where you are today. I did this after my HNZ trade and it allowed me to work on a lot of trading issues I had instead of reveling in having more money at my disposal.
In your 2013 journal review, you admitted to being overpositioned in: INFI ADTN WLT & BCRM. So I really think position sizing is an issue.
Also though, I've watched your journal for over a year now, so I do have a more subjective suggestions as well....
Be aware of negative thinking/talking: The tone that you talk to yourself after a stop/out loss sometimes makes me cringe. If you are self-coaching yourself, you are basically a father, and the son he gives advice to at the same time. The tone you take towards yourself reinforces the outcomes and beliefs that you have.
Ignore 'non-chart related' information: You stalk trades for weeks/months looking for a good setup like most swing traders. As someone who has transitioned from trading a few times a week to trading a few times a month, I think that the time you used to invest watching 30 stocks in a month, you now spending watching 6-7 stocks, which leads to over-analyzing your positions. If you plan on holding for a few weeks, then it doesn't really matter if the HOD was faded unless it was on extreme volume. As a divergence/reversion trader, you are entering stocks when they are most volatile and sentiment is mixed, so there is going to be lots of temporary pullbacks as the sellers turn into buyers. I think you should work on reframing the situation and view pullbacks as "a chance for more people to turn bullish and to confirm that the sentiment is shifting if/when the dip gets bought"
Accept the idea of being wrong You are one of the most popular traders on HSM and so I can imagine that a lot of your successes (and temporary shortcomings) are viewed in the public eye. This is a gift (because it makes you accountable) and a curse (because it would make any sane person want to be right in their prediction) Imho, wanting to be right might sometimes persuade you to take a small victory on a stock that is making you anxious instead of risking a pullback and potential stop out. Based on the trades I've seen, when you are positioned correctly (and are using the proper size) your stops aren't being touched.
One final suggestion that I have is to sit down and verbalize the reasons WHY you would exit a trade. It really helped me determine when I was panicking because I had a winner vs when it was rightfully time to jump ship. As a swing trader, your reasoning for entering should be very selective because you are passing up on many trades a day just waiting for the perfect set up that happens 5-7 times a month. With that said, your reasoning for exiting a trade needs to be even more selective. As a swing trader, the only reason to exit a position is when the theory/trend has been invalidated.
Entry criteria = the perfect storm has happened
Exit criteria = the perfect storm has completely died and is no longer valid at all.
A retest of a support level after a rally is not a reason to exit. It is a chance for the market to confirm that buyers have gained control as the stock makes a higher low. Reframe reframe reframe.
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When you mentioned "psychologically daunting" that's exactly what it is. I didn't properly build my way up into being able to mentally handle it. Within the past couple of months I tried to "force" myself to get used to the idea of bumping up my typical 3,000-5,000 shares sizes to 7,000-10,000 shares.
Why did I do that? Well I know you're familiar with my plight and the 20 trading days a month I have to make what I need to make. I know that the variable of "time" is the only thing I can't control, but I do know that trying to fit my swing trades into the framework of 20 days is not always realistic as the month progresses, so my hopes were that I'd cash in on the first part of the expected move. All that has happened is in many cases the position will be working itself out and I'm completely nerve wracked because of my expectation of immediacy based on my situation and and how much risk I have on. This has led to more shakeouts than I care to mention.
Ironically enough I had 7 positions in December, shook out of 6 .... all went on to hit defined targets within a matter of a week or two, none hit their stops .... I was pressing and exited for losses after no more than 48 hours in them. It just blows my mind how my analysis gets over-ridden like that. Especially knowing how often the targets plays out. You're familiar with it.
Really can't argue with this list. The negative self-speak is a manifestation of my inability to conduct my system the way it's supposed to be. I'm very hard on myself about it because all the potential is there and it gets squandered because of mental noise.
You touched up on the time opportunity costs that I've talked about.
Ultimately man, I'm getting closer and closer to the realization that to get over this hump I'm going to first need to dial down the worry I have about reserves. Do what I have to do to supplement myself to try and eliminate as much mental noise about that as possible. The second is (again) the fact that I still need to work my way up slowly in terms of position sizes. Just not ready to handle those reigns until I've actually started executing my system the way it's supposed to be. I've been putting the carriage before the horse.
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