Monday, February 9, 2009

Brief Thoughts On A Bad Week (or two)

So each Monday I post and explain a good trade from the previous week.  Unfortunately, after de-balling myself last week, I find I don't have much to work with.

Instead, I will say the following.  I had a real war going on with myself, trying to decide whether I was pushing myself out of some "comfort zone" as far as my position sizing or if I was really fucking myself up, psychologically. Ultimately, I believe I will look back on the last two weeks as a positive.  It is always good to push yourself in this occupation and I learned a few things about myself regarding discipline and focus.  Namely, discipline isn't my strong suit and it's better for me not to "focus lightly" when trading.

While having somewhat precise rules is comforting to a certain extent and makes the job less stressful on many levels, I found that they stripped me somewhat of my instinct.  Instead of getting out of winning positions, or at least "lightening" them, I found myself holding for larger rules, as long as I wasn't getting stopped out per my rules.

In short, I had a hard time balancing my rules versus my instinct.

However, and this is really what caused my massive losses, when positions went against me, I often didn't exit fast enough, because I began believing in my positions too much.  So I was using the rules to keep me in positions, but not using them properly to exit positions... a rather deadly combination...

I will leave you with two final thoughts that I heard last week.

First, from my father, who knows that when I start thinking about money, I cripple my ability to trade.  He said, "If you are thinking about the money, then you are not focusing on the right thing which is the trade.  Instead, you are trying to make back the money you lost and this is irrelevant to the trades you are making today."  I thought this was pretty insightful from a man who has never read a book on trading and who still doesn't truly understand what I do each day.

Second, "Trader P" related a thought from the Charles Longstreet book (which, incidentally, will be the third book in the Dinosaur Trader book club).  Longstreet said he'd rather be right 60% of the time and execute his plan 90% of the time, than be right 90% of the time and execute properly 60% of the time.

We'll see how this week goes.  I'm going to work hard on keeping a positive mindset and starting each day with a blank slate.

I sometimes think of myself in graphical form.  If I looked at myself on a 10 year chart, this would be a minor pullback.  Last week I made a huge red candle with a tiny wick off the bottom.  This week let's hope for a big green one closing at the highs.

(Tomorrow I will have a post on "Market Wizard," Richard Dennis.  He also offers a few insights on trading slumps.)


OONR7 said...

that Longstreet quote is BAM... right on. I was actually thinking about that last week. I'd rather stick to a plan and deal with the losers than not know exactly how I got into winning trades.

Anonymous said...

You could always post a trade that you did poorly on and explain what went wrong.

It might be painful but I'd enjoy reading about it (obviously for its educational value and not for some perverse pleasure)

Goodluck this week

Dinosaur Trader said...

Ha, this is true.

I guess, despite the advice from Richard Dennis, who I'll be reporting on tomorrow, that I didn't want to think much about last week after it ended.


Anonymous said...

Your dad is right; at least for me. Whenever I focus on the money I get screwed, especially if I focus on the money I could make from a trade. I'll focus on that point and hope and mentally urge the stock towards it. But it rarely gets there.

When I think in terms of what could be lost, I do better. If I focus on minimizing my losses and riding good setups, the winnings come.

I think there was something about that in your first DT book club book. It's one of those weird psychological things that make behavioral finance such a profitable and counter-intuitive area of study.

- CP (stupid blogger isn't letting me log in)