Tuesday, May 20, 2008

The Pain Play

(long, rambling, unedited post warning)

I'm trying this new system out, as you know. And I have to say that it has exposed a little something about myself that I'm only now realizing.

I get bored easily when trading.

Like, back in the day, I had loads of positions all the time and it was more about money management than about entries and exits. And there was a lot of exhilaration in that, and when I made money, it was fun, and I felt like I was playing a game.

Currently, trading feels like more work and waiting and it's not very much fun. I'm not stopping with this method just yet. I mean, my real office, filled mostly with guys who trade like "crack-addicts" isn't doing that great either... most are doing better than I am, but not with results that tell me I'm on the wrong path.

Right now, what I'm worried about is that I'm not going to have a $28,000 day anytime soon... last year, I pulled that one out of my pocket and it saved my year. I'm currently up about what I was this time last year, but I don't foresee another July and August of 2007 happening. So I'm worried.

And yeah, the vibe on the blog has been thick... a little heavy. But you know, I'm a real guy, going through this very real shit everyday, and I don't sugarcoat here. I have gains and losses and that's part of this job. This year I've had too many losses. And let me tell you, small gains aren't even fun. So it's been a grind. A fucking grind. And it's depressing and not much fun. Even my normally dark sense of humor is failing me. I even let Jake Gint get to me last night with his idiotic comments.

But I'm stressed out, for real. And so that's part of this blog too... it has to be, because it's all very real.

I could report my good trades everyday without any other color on my life, or my bad trades, but I don't think that would get me anywhere. What's this blog about? And who is it for? Ultimately, the answer to both of those questions is the same. It's for me.

If you read it daily and you enjoy it, that makes me very happy. But at the end of the day, this blog is a release for a stressed-out trader who has been struggling with this job, alone, for the first time in his 9-year career, since January of 2007.

I just wanted to get that out. I know the tone here has been despondent, depressing, and sometimes angry but that's the fucking point. That's what this is right now. It's a period, it's a phase, and hopefully, I get to the other side.

Because really, while some of you may trade because you like stocks, or research, or for whatever reason you trade, the only reason I trade is so that I can be free. I don't have career ambitions. I never have. I can't compromise myself working for someone else, taking orders, writing memos, whatever. I've tried it and I can't. Does that make me a dick?

Well, if you worked with me you might think so... I'm just not the cubicle type.

What's the point? I don't know. I guess what I'm saying is that for now, you'll have to bear with a slightly depressive DT. I've felt pressure the last couple of days to come up with some funny shit regarding the slowly disintegrating VO, but I've been unable to muster the interest.

Perhaps that's because since I've had access to the numbers of the other traders in my real office (the RO?), I'm no longer in need of comparisons from other stock bloggers to figure out if I'm trading relatively well or not. Also, right now, it's very obvious where I'm at... I suck. So I don't need to necessarily have that reinforced by watching myself make $300 one day while losing $250 the next, or vice versa.

I'm a chart with no pattern, a stock absent of volume and trend.

But I feel the need for a story to move us forward here... but the story here is my trading. So we'll just have to get through this together. It's quiet... it's a little dull. Something could be growing under the soil or the bulb could be shot. Time will tell.

Okay... enough of that... Now, lately I haven't been paying attention to my office mates. I haven't been joining in on the chats, I haven't been listening in on the call, I've just gone solo, me and the graphs, following only the HCPG newsletter and their style of trading (or approximating their style the best I can. I want to note that my failings here shouldn't reflect on their system. Just check out Wall Street Warrior to see how well the trades can work.) But as I said, I've been getting bored. And since I haven't been trading their system perfectly, I haven't had much success. And so I'm bored and frustrated... so today I turned on the office chat.

A friend of mine was getting blown out of PDO. It was around 10:15 and he just ate a five grand loss on a short trade in the stock. PDO and MXC are both currently beyond parabolic. They've had volume, wide spreads and insane volatility. Being in my bubble, I didn't even know they existed until 10:15 today. And all I can say is that instinct took over.

In the office, you'll hear someone say, "I'm taking pain on this GOOG. I'm 3 points out of the money and can't fucking take it!" and like vultures, other traders swoop down and start buying "on the pain." I don't know what it is... if it's out of respect for the pained trader as in, "he thought it was a buy 3 points ago, so it's that much cheaper now" or if it's out of competition, as in, "well, he's getting smoked... if i buy here, no matter what happens, I'll be less smoked than he is... and if it works out, I'll make more since I have a far better entry." I'm just guessing the psychology behind the "pain play." All I know is that today, when that very good trader announced that he was taking the big loss on PDO, I just felt the end of the move must be nigh.

So I located some shares and sold it. 300 at $22.50 and $22.61. About 10 minutes later I covered 200 for a small gain and then got stopped out of the last 100 over $23. But I kept watching... A couple minutes later, MXC took a ridiculous tumble.



I called out, "shorting PDO on MXC" and short 400 shares at $22.69.



It worked out and I have to say, I almost felt a little guilty about it... like, because I cheated myself and the new system. I wasn't "pure" to my current methodology. But fuck that... it felt real... visceral... like I was in the stock. A part of the trade, some electronic crowd, messages, bytes, communicating to bring the price in line, create order.

Now, I didn't have a great plan or anything... I threw a stop for 200 shares up at the high of the day, which would have meant a large loss, and I was going to cover the other 200 at market, based on how the stock acted. Had this trade not worked out, I might very well be feeling like this guy. I made $372 in the fucker and it saved my day.

I'm not going back to trading purely like a "crack addict." That's not the point of this post. However, I think that my current discipline, informed this "degenerate OTB guy" trade. I felt like I was in control, my emotions were in check, I was prepared to take the loss should it get there... I dunno. There's a place for these trades in my book, is all. I just need to keep working on getting back there.

Meanwhile, just to put the PDO trade in perspective, check out it's daily... below the PDO is MXC.





Here's the stats:
P&L, $218
Best, PDO, $372
Worst, GG, -$149

8600 shares traded.
8 stocks traded, 3 positive, 5 negative.

8 comments:

bocagirl said...

Great post DT. Seems like the purely instinctual trade you did today might help you break through the logjam of trading pain you're in. Deep frustration always feels worse to the person going through it, than to the person reading, but I sympathize having been there in the pit of frustration many times.

Personally I think a lot of what you're feeling is due to the way the market is right now. You'll be ok IMHO.

wincity said...

Pyramid Oil Co, HA!

The oil scam might be nearing an end. I remember last year at the market top, Chinese garbage stocks were running wild just like this pyramid stock.

You really got guts to short them. MXC only has half a million share float and PDO just a million and a half.

I've never heard of them until I read your post. My software filters out low volume stocks.

Dinosaur Trader said...

Thanks, Boca.

"Logjam" is a great way to describe the state of affairs here... I'm looking forward to the flood that washes the river clean again, you know?

-DT

Dinosaur Trader said...

Win,

That's hilarious... I didn't even get the comedy of their name until you pointed it out...

-DT

Bluedog said...

DT,
It's just like a bad surf session. Stormy, messy, sometimes scary, sometimes you get a good line. But in the end staying out there will make you a better surfer. And as a surfer you know the waves will come. It's just a matter of time.

BD

mOOm said...

This shows the benefit of diversification across trading styles. I've had a tough time trying to day trqde futures and blown up the profits I made last year. But my longer term trades and investments and some shorter term stock trades have worked out pretty well in the last few months. This has given me time to try to get my act together on the shortest term trading. So maybe you need to follow "the system" and do some "degenerate trades" too. At times one will work and at times the other.

Tyro said...

DT,

I get bored easily when trading.

That's good to know about yourself. Do you think that only following the HCPG newsletter will be a good match for you? I thought that they were relatively inactive during the day so following them to a 'T' may just make your boredom worse.


I hope you end up finding a system that meshes with your personality, or as Dr Steenbarger calls it, "finding your niche". Without that, all your concerns about money management, discipline, stock selection, everything becomes irrelevant as you will either hate trading or you'll subvert the system.

Thanks for sharing your path with us. It's a damn hard job, and harder still to be at the bottom after spending so long on top. Good luck, man.

downtowntrader said...

Great Post DT. I don't normally post comments, and to be honest, I don't think I can tell you anything you don't know at this point. Any trader who's been at this long enough goes through stretches like this, and it's frustrating as hell. You wonder if you were just lucky for so long, and then you start trying to reinvent yourself. The biggest thing, and I'm sure you know this, is to slowly build your confidence by taking some winners. I agree with Tyro, following the HCPG dudes strictly probably won't work for you. Maybe the trick for you will be to take some "crack" trades, but instead of doing them like a degenerate gambler, hammer out a system around how you take those trades and where you take the profits. That way it's not all discretionary. Sometimes, just having systematic exits is enough to release some stress and pressure on you about your trading, and slowly but surely, your confidence will come back.
Good Luck,


Joey