Friday, March 9, 2007

Why trade?

This past week was very hard for me. I was wrong consistently. Worse yet, I recognized that I was wrong but continued to "fight the market" nonetheless. This compounded the pain of being wrong and turned it into something far worse; stupidity.

At times like these, sometimes it helps to be reflective. To ask questions. One question that has come up over and over for me recently is, why trade? Why put myself through this? It's been months since I've made real money. I'm stressed out and I'm dying the death of a thousand small cuts. Not to mention the two very large cuts that I suffered this past week...

Well, to answer that, I need to delve a little into my past. I have to remember the beginning of trading. What was life like before I began to trade?

I remember all too clearly my ex-bosses fat knuckles laying on her desk before me. She had asked me to write a memo, a menial little task. I wrote the memo and a half hour later there I was sitting across from her staring at those fat, pasty white knuckles as she ripped my little memo to shreds.

I remember getting paid $26,000 a year in my next job and having to fight (unsuccessfully) for a $500 a year raise that was promised to me. And I still remember the phone call I received from a friend of mine who had recently started trading when he told me that he had just nailed down $75,000 in one month. That's when I quit that job and decided that I would learn how to trade.

Now, just as a reference point, it is not easy to make that much money in one month... or at least, it was never easy for me. I've traded now for 8 years and have probably made upwards of $75k in a month 5 times. And I haven't made that much in a month since early 2001...

The early days, those days where I was learning were great. I was told to "paper trade" and to watch the market. I was told that it would probably take 6 months to really learn the sectors and the stocks and that I should just focus on learning and not worry too much about the money. There were hundreds of different traders in the office, but it was easy to discern a few main "types of traders". Think high school where you had the jocks, the nerds, etc. With traders, there were the retracers, the trend traders, the news guys, the freaking psychopaths... I learned quickly that I hated to lose and that I was very conservative with my trading style.

I'll write more tomorrow. This could go on for a very long time and it's late. I really need to read a bit.

4:13pm EST

Weekly stats:

Monday: $756.36

Best stock: HRT $800
Worst stock: BLK -$672
26 stocks traded: 16 positive, 10 negative

Tuesday: -4031.05

Best stock: AB $820
Worst stock: SPY -$1750
23 stocks traded: 7 positive, 16 negative

Wednesday: -4081.79

Best stock: HRT $659
Worst stock: POT -$1533
19 stocks traded: 6 positive, 13 negative

Thursday: -0.078
Best stock: CFC $148
Worst stock: SPY -$156
7 stocks traded: 3 positive, 4 negative

Friday: $79
Best stock: TNH $395
Worst stock: SPY -$252
13 stocks traded: 5 positive, 8 negative

Total P&L for the week: -$7277.55

Perhaps my worst week ever as a trader. Lowlights included being reigned in by the Risk Managers at my company and nearly losing all of my capital.

In short, seemed like a great time to start this blog. I already learned something just by looking at these stats. I should not fight the market. I was trading the SPY all week and losing because I was bearish and the market was rallying. It doesn't matter if those rallies were coming on no volume they were rallies nonetheless and I shouldn't have been shorting them.

I plan on doing some reading this weekend to get my head straight. When I've slumped in the past it has helped me to read books on trading. I'll report any special wisdom to the blog this weekend.

3:22pm EST


At 2:30 I was pretty short and had run my profits for the day up over $600... I was slow to cover however and now most of my profits have been squeezed away. I am now up only $125 on the day and I'm still net short as the market looks to be strengthening.

At least I'm still green...

1:42pm EST

Another day where the market is starting to weaken as we head towards the close.

One little piece of advice for anyone currently in a trading slump. Cut your size drastically. I'm taking about the initial size that you start positions with. And then, trade EVERY idea that you have. And, as always, cut your losses quickly.

If you stand and watch the market for too long you may never get your mojo back. That's not to say that a day off here and there isn't a good idea. It's just that when you take days off, take them OFF. Leave your desk, go take some deep breaths. Listen to the birds sing.

12:45pm EST

Sleepy day. Volume has been steadily dropping all week long. If today continues as it's going, it will be the lowest volume day of the week. Another low volume rally...

I'm still a little amazed this market is going up. I was really thrown a loop after the drop last week and then all the low-volume rallies this week. It's hard to trade effectively when you keep expecting the bottom to drop out.

My best trade so far today was getting short 400 TNH at around 53.85, 20 cents from the high. I screwed up on the covers though... I bought 100 back at 53.74, 52.65, 52.41 and 52.38. The stock is currently trading at around 51.15. Still, I net $424 on the trade. Since my worst loser on the day is -$169 (an overnight SPY short) I'm positive on the day. Sprinkle in a few other small losers and another minor winner and I'm up a whopping $185.

I just received a call from the home office. I don't have enough equity to carry overnights anymore. They are breathing down my neck. Cue the Wilco song "Company in My Back".

This is the first time in my trading career where I've even been on the radar of the Risk Management guys and I'm not happy about it. Need to regain my confidence and trade through this.

Testing... testing...

Well, here goes.