Inspiration For Stock Traders

True, I Lost 5 Grand Yesterday

But things could be worse...

A Beautiful Morning

I woke up this morning to go surfing. The conditions were perfect for me and my longboard. A nice, clean and glassy, 4 foot swell. Really mellow. Although the water temperature is now sub 40 degrees, it didn't feel cold at all because there was absolutely no wind and the air temperature was pleasant. 

It felt like spring.

The coolest thing was when a harbor seal poked his head up out of the water about 20 feet from where I was sitting on my board.

So a couple of times after I caught rides I had to paddle all the way back out from the inside. It was somewhat challenging, because I'm still not in great shape. My lungs are still feeling the effects of a month-long bout of bronchitis. When I was in that position, I thought of a quote I read when I was browsing around late Friday night.

"Fall seven times. Stand up eight."

-Japanese proverb

Its worth in terms of getting through trading and trading slumps, is obvious.

Ending The Month In Style

If you've been reading along, then you know that there was a long dry spell that I endured prior to this recent flush of success. In fact, the start of this blog (in March) coincided directly with my first ever negative month of trading. So if you've been here since the beginning, you haven't known me to be successful yet.

Let me tell you, it hasn't been easy.

At the end of May, I wrote a depressing post about working in a gray cubicle again...

At the end of June, I was more or less at the end of my rope and I declared July to be a pivotal month. For the record, I still like the word "Philosophistal."

As of last Monday, I was still down a few thousand dollars for the month. Never would I have guessed that the market was about to freak out and that I would finally get my shit together all at the same time. As it stands, I ended up pulling over $20,000 net out of the market in the last week. That's double what I had made for the first 6 months of the entire year.

I think that the number one thing that helped me get my game back on track (besides the market freaking out) was talking with my risk manager. Setting a tight loss-limit on my account each day freed me up from worrying about losing money and made me focus more on making money.

But there have been many other things as well that I've come across in these last 6 months which have helped me get my trading back on track. Perhaps I'll have time to reflect upon and write about them when I take off the last couple weeks of August. For one, I have benefited greatly from the traders who read and comment on this site. Were it not for me stumbling across Ray's blog in February I may have never found the Scalper's blog, and I may have never started this blog. And this blog has been a great tool of professional reflection for me.

Also it goes without saying that any trader in a slump needs strong support from his or her family. My family has been great.

Anyway, so July was in fact a pivotal month and for now, I can stop working on my resume and focus on hitting the market again. Like I said last week, I'm not declaring victory over "the slump" just yet. I'm sure I'll have bad days again. However, after getting through these last months I realize that what Bob Dylan said is true, "they say the darkest hour is right before the dawn."

Thanks for reading.

-DT

The Importance Of A Floor To Stand On

I was going to name this post something like, "RIP 'Slump' March 2007-July 2007" but I decided against that.

I think that instead I'm going to treat "the slump" kind of like we treat the "War on Terror" here in the U.S. It's going to be a never-ending battle that requires vigilance and constant changing of tactics.

That said, I won a pretty significant battle today, no doubt.

My "best" trade of the day also happened to be downright lucky. It was a short in TBSI.



I was turned onto this stock over the last week by the guys in Wallstreak. It's a shipping company and therefore, it often trades along with the price of crude and with oil stocks in general.

It was relatively strong going into the Oil Inventory data that was released at 10:30 and so maybe I shouldn't have been shorting it at all. However, with the weakness in every other shipping stock, including the other recent leader DRYS, I took a shot.

Here are my trades in the stock:

10:14:13 Short 300 @ 38.85 (-300)
10:14:27 Buy 300 @ 39.04 (flat)
10:23:15 Short 200 @ 38.65 (-200)
10:30:36 Buy 100 @ 37.70 (-100)
10:31:39 Short 300 @ 38.09 (-400)
10:38:05 Buy 100 @ 37.65 (-300)
10:44:04 Short 200 @ 37.78 (-500)
10:50:09 Buy 300 @ 34 (-200)
10:50:49 Buy 100 @ 34.18 (-100)
10:50:54 Buy 100 @ 34.20 (flat)

Never in my dreams was I expecting the stock to drop to $34. I was thinking it could go to "unched" on the day, but I didn't see that drop coming. In fact, the low of the day was $33, so I left a point of profits on the table. No complaints, I made over $2000 in the trade.

Anyway, at around the same time that TBSI was falling off a cliff I made another good trade. This time in a recent favorite of mine, MOS.



Again, I found this trade by watching all of the fertilizer stocks decline. They were all weak, though again, I had no idea that they were all about to fall off the face of the market.

I initially short MOS up around $38.80 because it was struggling to regain it's highs from the early morning and the rest of the fertilizers, most notably MON, were coming off. Again, I was hoping the stock would get to it's 50-day moving average line and then stabilize, setting up an opportunity to buy.

It shot straight through the MA. In fact, I covered way too early and then got long. I took a loss in that initial long but kept watching the stock. I bought back a little later and rode it up for a nice retracement. I made a little over $1500 in these trades.

I also had two other fertilizer stocks that I traded for over $1000 in gains each, CF and TRA. Both were short trades made at the same time I was shorting MOS. So, the charts speak for themselves.





On the other side of the ledger, I made bad trades in ARD and BTJ today. I bought ARD during it's slide lower in the morning and then missed the bounce. BTJ, I bought once and lost a straight point on. Sometimes that happens in BTJ, he's a lunatic. The good news was that I didn't get stubborn and try to fight the stock or make a revenge trade. I took my loss in BTJ and walked away. -$392 on 400 shares traded.

So back to the post title. Surely the market has been better for trading these last few days and that has something to do with my recent success. However, I also think that calling my risk manager and placing a very tight loss limit on myself has done wonders for easing some of my mental strain. It was kind of like admitting that I had a problem and that I needed some help in getting my discipline back.

Simply put, I no longer feel like I'm trading without a net.

During my big years, I was in an office. I can be a "competitive shit" and I wanted to beat the other traders because frankly, I thought most of them were meatheads. I never had big losses. I knew they were the hallmark of a bad trader. I just focused on making good trades, taking long lunches and letting the boys with the big egos scream red-faced at their 12 monitors and talk about their fancy cars and their country clubs.

Wanting to beat those idiots made me a better trader. And for the years I traded in the city, I beat most of them day in and day out. Back then, my competitiveness provided me with a "net".

Since I've begun trading from home, I've had a hard time channeling my competitive spirit back into the market. Despite the fact that I'm a trader and I like to trade well, I've never been a materialistic guy. Making money for the sake of making money has never interested me.

So then I became a father and the entire focus of my world turns towards my daughter. Making money then became more about "security"... having enough for her college, having enough for (if you can believe it) her nursery school! This led to a classic mindfuck. Every time I lost money it became anxiety. Every new loss turned into "how can I afford to send her to school?" etc. This is a very poor mindset to trade with because it killed my ability to want to take on any risk... I became afraid to lose money and ironically, this led to me losing money over and over again.

Over the past few months, even before I contacted my risk manager, I started working on taking my foot off the pedal. I took up surfing again. I started walking away from my computer in the middle of the day... I began to trade less and I began to search for perspective again. These efforts, combined with the "net" from the risk managers have given me a floor to stand on again.

Hopefully, the trend has finally changed here.

Here's the stats:

P&L, $6817
Best, TBSI, $2078
Worst, BTJ, -$392

shares traded, 63,200
22, 14 winners, 8 losers
total trades, 300

Fugazi, "Waiting Room"

The famous call to end apathy (too bad the country isn't listening). Anyway, I post this video as an inspiration to myself. One of my favorite bands of all time.

Although, I do understand the irony of posting a Fugazi video on a stock blog...

Time for me to wake up a little. I had some good days and then went back into a mental slumber.

Strict Buy and Sell Rules Today

After yesterday's debacle, it is time to stop the bleeding. I began this blog after I got smoked badly twice in early March and spent the rest of that month having to make money back. I can't let that happen this month.

So today, I am starting all positions with 200 shares only. If I am in the money in a trade I will allow myself to buy 100 more shares. That's it. I'm starting over, if you will. Trading light... float like a butterfly, sting like a bee.

I was working on my next "history" post last night. I'm at a point in the history where I'm studying for the Series 7 and papertrading once a week or so at the office. Everything then was so wide-open with possibility, there was so much potential. Anyway, just thinking back on it gave me a sense of hope.

Sometimes I feel like I've already written the end of my stock trading story. Based on my performance since December that the ending goes something like, "And then the hybrid market came, he couldn't adapt, and blew up." But I can actively work to change that ending. It doesn't have to be the meteor that mades this Dinosaur go extinct.