Golly gee has my perspective on all this changed rapidly in the past week.
It feels like I have poured high octane gasoline into the learning process.
It's almost unbelievable how powerful a catalyst this journaling has turned
out to be.
One thing that has changed is that I have suddenly self-identified as a trader.
I'm a trader now, and I am working on becoming profitable. It could take years
to do it. It's going to take 1000's of hours and a lot of hard work. I'll do it.
There I've said it.
As a consequence of this new perspective, I am now starting to look at the
markets with the eyes of a trader, not those of a retail investor. For instance,
I now realize that I need to go back to watching CNBC -- not to get ideas,
but to see what the retail investors are being programmed and conditioned
to think. To see which way the herd is going to run.
Anyway, so back to GERN. I set my stop according to rules, it stopped out, therefore
it was a "good loss." Simple as that. Let it go and move on.
If I were back in my retail mindset, I would have immediately wanted to jump back in on
GERN on this last breakout, "to recoup my earlier loss." I would have probably bought
GERN precisely at the peak, then got scared and bailed as it dropped, and lost even
more money than I did in the last go-round.
So, now I understand my own thinking pattern better, and knowing that, I am
becoming able to cut through it. I also know that there are a lot of retail investors
out there indulging in that same dysfunctional thinking pattern. I am going to learn to
take their trades. Come to papa!
I had to suck in my breath when I opened my brokerage statement last night. My USLV
underwater position is still sitting there like a dead tree visible in the clear water after the
dam was filled. And all my other positions are stopped out. Just cash and one dead tree.
From my new "enlightened" perspective on risk management, I see that USLV is now
the vast majority of my trading capital. On the other hand, I could also look at it as a very
large hedge against a very bad market event. So, I need to stop framing it as a bad short term
trade and re-frame it as a longer time position trade. Because things are going to get ugly in
the markets again, and when they do I am going to be glad I have this huge PM position.
OTOH I've decided to take about 80% of my total capital and go ahead and position trade it
in a mechanical rotation style from among a handful of ETFs. The strategy involves several
global index, bond and volatility ETFs, which get rotated on a monthly basis with no stops.
The trade for November is EPP, which is Asia ex Japan. Portfolio is 100% concentrated in one ETF for the month, and may last for from one month to a year or longer. Backtested results for
this strategy over the past decade are really good, and with my time horizon of 15 to 20 years,
this strategy should satisfy my craving for alpha and liberate me mentally from the psychological
pressure I have been feeling to make something happen in the markets. I will be able to relax
and stop worrying that I am missing out.
Newbie trader, sheesh. The only thing I am missing out on is blowing up my account.
Just having my investment capital out of my trading account should relieve some pressure.
From this point forward, once I get back to trading real money in my trading account, I need
to concentrate on taking only the high probability A+ trades with good risk management.
In the meantime, I need to get my mental game in shape, because this is clearly
all about the mental game.
So, dear readers, I regret that you all will have to suffer through a lot more of my touchy feely
psychological posting, rather than fast paced exciting tales of my market victories and subsequent
fevered shopping trips to the Takashimaya Department Store at Nagoya Station to purchase bling bling.
Last edited by suko; November 11th, 2013 at 08:39 PM.
This great pair of charts, JDSU in 2000 vs DDD in 2013, takes me down memory lane to when I blew up my first trading
account. There I admitted it! I frigging blew it up.
I took $30 K in wedding gifts that my diligent and hardworking in-laws saved up over many
years and turned it into $3K in very short order. The most spectacular loss in the whole
thing was JDSU, which I bought at the peak and rode all the way down to about a buck
fitty. A reverse 100 bagger.
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).
Why did I buy the JDSU? Did I even look at the chart? Nope. I bought the narrative --
"optical!!!" And I desperately didn't want to be left out of the action. When I bought it
I figured there must be a bigger fool than me, and all I wanted was "just a little taste."
So, I got my little taste, and here I am, 14 years later, still married, and still wanting
"just a little taste."
Now, as for the JDSU of 2013, DDD, stay tuned for the next post.
Last edited by suko; November 11th, 2013 at 10:55 PM.
Trading psychology: I am gripped by the fear of that I am going to miss the boat.
Every time I look at the Bitcoin chart, for instance, I feel a wave of almost illness.
It's almost a physical reaction. This feverish reaction makes me want to throw the
rules out the window and rush "all in" to chase the momentum.
But instead I am learning to sit on my hands, to calm down and tell myself that the
only boat I am going to miss here is more likely a CIA rendition ship.
Better metaphor is surfers and waves. Mike McMahon talks about how surfing is basically
guys sitting on their boards and yakking, looking over their shoulders at the oncoming
waves, and occasionally taking a good one that comes.
Always more waves coming, there is nothing to miss.