It's official
I am the world's worst stock trader. Down another 1% on a good day for the market. I spent most of the morning dumping the stocks that I bought on emotion and jerry-rigged technical analysis. I held on to AZZ and a couple of dumb options that wouldn't sell. I feel like I'm having some sort of nervous stock breakdown.
I have NEVER felt this incapable with my trading. Thanks to all of you who have encouraged me to take a step back and re-focus. I think that is some great advice. I think I've muddied the waters with too many ideas and too much information. I leave for a family vacation on Thursday and I hope to regroup.
Here's the thing though. I tried my first day-trade today and stopped out in about 3 minutes. Of course I got all worked up and quit. I decided to spend the rest of the day virtual trading. I know virtual trading isn't the same as the real thing, but I managed to somehow (virtually) make 47 times my risk. That's more than my YEARLY goal! How is it that I can do so well in my virtual account?
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3 comments:
First, is your virtual trading realistic with respect to volume and bid/offer? That is where most virtual trading fails the smell test. If it is, then perhaps it is the emotional attachment to loss of real money vs play money. Second, how hard are you watching the virtual compared to the money trading you are doing? I don't watch paper trading with the same intensity I noticed. If it is with the same intensity then you have something to really think about and could adapt to the same style.
I hear you about hitting rough patches. I just went through one with a trade I did in size and had a 4 figure loss morph to a 6 figure loss. You can't imagine the doubt in myself that created. I was paralyzed. This was a fundamentals-driven trade that hit negative sentiment and got crushed fast. The trade has come back by more than half and is now headed in the right direction and I will exit soon even at a loss. I did everything wrong in this trade and have noted my faults. First, I traded price action in the premarket when I don't have access to the same info that pros have. Second, I didn't heed price action and increased my position at a lower price. Third, I didn't think through my risk strategy and when it went lower, I froze. I hope others learn from this.
None of my mechanical systems has hurt me as I set stops at 2*ATR. I am more committed to screening methodologies than ever.
This article from stockcharts.com I found today would have prevented such a mistake: http://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:richard_rhodes_tradi
Hang in there, your honesty has inspired many of us and profitable trading is always possible. Have a great vacation. The market will be here when you get back.
Scott,
Go back to whatever screen you have most confidence in and trade it small. Day trading now would be like a cigarette smoker switching to crack to kick his bad habit.
I've really enjoyed reading your blog for the last year. I've noticed you and I have a lot in common with respect to investing/trading education. I also followed the AAII screens, and was glad to see you could make some real money using them. I was going down the AAII screening path, but for some reason stuck with my own trading method which was adapted from IBD. I've questioned my method when I would lose money, and swore by it when I made money. But after a couple of correction cycles, I've come to discover the most important item is to determine the trend of the overall market, and trade in its direction. I've learned you can make a lot of money very quickly when the market moves up. I'll bet you've also had the same experience, since you most concentrate on stocks with high Relative Strength.
Don't give up on what you know works, but remember your method (mechanical screening), was executing well in a Bull Market. I'm confident it will work well in the next Bull Market. Try to learn from this experience and don't fight the trend.
As for day trading, I'm sure some folks make a lot of money, but you had better be very very good with execution, consistency and controlling trading costs. Oh yeah, you better be prepared to watch the markets every second of the day, which really isn't that exciting.
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