An NYSE Scalper's Tale - A Trader's Diary

Thursday, October 05, 2006

Why I'm NOT A Good Trader

Gross: +$682.00
Net: +$565.64
Loss From Top: $67.26
Trades: 80
Shares Traded: 113200

Stocks Traded Today (net profit/loss):
Motorola (MOT): +$633.85
Corning (GLW): +$199.04
Walmart (WMT): +$85.99
Home Depot (HD): +$8.88
Exxon Mobil (XOM): -$33.47
AT&T (T): -$90.64
Pfizer (PFE): -$97.69
Advanced Micro Devices (AMD): -$140.30

There are lots of resources out there that tell you what a good trader should and should not do as well as lots of info about how a good trader should and should not think.

I would say that most dedicated traders know what they should and should not do/think, but yet why is it still so hard?

Well, I was thinking about my trading problems late last night and I thought to myself that instead of focusing on what I should or should not do/think, why don't I focus on the trader that I am and work on the weaknesses that are part of me.

I vaguely know what my weaknesses are (they're all in the back of my mind somewhere) and I have a vague idea of what I should do about them (like devising a trading plan that works with your weaknesses).

But I have never really physically put them down on paper (or electronic form), and I thought it would be a great exercise for myself so that it all becomes much more concrete and hopefully it really forces me to actually think about them.

I believe if that I acknowledge these problems, only then can I begin working on correcting them. It's very similar to an alcoholic - they first have to admit they have a problem before they can begin working on it (otherwise they are in denial).

And so, without further ado, why I'm NOT a good trader and what I'm doing about it:

1) I don't have patience. I don't have patience when it comes to riding winners and I don't have patience to wait for good setups.

What I'm Doing About It
  • I must follow my trading rules - these dictate when I should get into a position and when I should get out
  • If I'm in a position, take a deep breath and slow down - it seems like everytime I'm in a position, time seems to be stuck in fast-forward - just slow down and keep assessing and analyzing the position
  • Patience is a virtue and can be difficult to come by; by far this one is one of the more difficult things for me to obtain, but I will work hard at achieving this

2) I don't like taking risks. Often times I don't act on my gut feelings and as a result, I miss great opportunities. I also don't put on position sizes big enough.

What I'm Doing About It
  • I just have to realize the difference between taking a risk blindly and taking a calculated risk
  • I should know by now what kind of trades have higher probability of working out and thus I should adjust my share size accordingly
  • I must also acknowledge that trading will involve losers and the sooner I accept that fact, the sooner I can accept risk
3) I don't like change. I don't do enough to change the way I trade for the better and often times I just do what's comfortable. Doing what's comfortable leads to unimpressive results and won't lead me to my goals

What I'm Doing About It
  • From here on in, I must make a conscious effort to change or even try new things and strategies
  • I must also take a more active part in education and learning new ways to do things

4) I worry about what others think of me. I worry about what my family, my friends, even co-workers think, especially since I've been at this for more than a year and a half; I think they all expect much more of me

What I'm Doing About It
  • I will leave all worries at the door and focus completely on trading during the trading day - results will come if I just focus
  • I should think of the entrance to the office building as a barrier - once I enter through it, I become Trader JC, when I exit through it, I become regular JC. All worries and problems will stay on their respective sides of this barrier
  • One of the reasons I started this blog was to have everything out there for everyone to see - I had hopes that by doing this, I would become numb to what others think (i.e. I was hoping that eventually I didn't care what others think)
5) I get bored easily. I tend to trade when the markets are flat which leads to losses and overtrading.

What I'm Doing About It
  • I'm starting to bring more things into work - MP3 player, books, newspaper
  • When the weather is nice, go outside to do something
  • I've taken Richard's example (from Move The Markets) and I'm learning a new language during quiet periods of the trading day

6) I worry or think too much about my trading problems. I'm sometime overly critical especially when I have a bad day. All the worries add more stress to the trading day.

What I'm Doing About It
  • A reader left a comment mentioning having balance in your life - which I believe is essential
  • I'm doing more to get my mind off things when the markets close - I need to do these things to release stress
  • These things include: exercise, learning Mandarin by watching movies, TV show and by listening and learning lyrics to music, and watching sports
  • I should start looking for other hobbies

7) My mood is too coffee dependent. If I haven't had my morning coffee, I'm moody and irritable when I'm trading and if I don't have coffee during the day, I get sleepy, have trouble concentrating or I get headaches. This ultimately affects the way I trade.

What I'm Doing About It
  • One thing I've done is I'm exercising again - I feel as though I have more energy and my mood is lifted and I do not feel as tired without my morning coffee as before
  • Have all my coffees without sugar (I think I was taking in too much of it) and use small cups at home and use the small styrofoam cups (instead of the big cups in the office)
  • Reduce your intake gradually - currently I'm down to three cups a daily (from 6 cups daily)

8) I trust the Level II too much which causes me to exit early. The setups, the charts, the Futures - everything could be going my way, but I get spooked and exit out of a great position because I saw something on the Level II

What I'm Doing About It
  • I am currently working on relying more on charts and what the Futures do instead of what I see on the Level II
  • I should make more of an effort to know exactly where I want to get out and stick to your trailing stop loss - don't jump out of your entire position just because big size suddenly appears

9) I hate losers too much - perhaps a little too much. I estimate that about 70% of my 1-cent and 2-cent losers eventually go in the direction I originally had intended. I'm jumping ship too early without giving the position time to work itself out.

What I'm Doing About It
  • I've really become more patient with my positions and really do give it more time to work out
  • One thing I should do is really stick to my intial stop loss. I always have one in mind when I enter a position, but for some reason I keep jumping out of my positions once they've become a 1 or 2-cent loser

10) I get too emotionally involved. I take offence personally when I take a string of losers and I tend to spiral out of control.

What I'm Doing About It
  • After every single trade, just forget it ever happened
  • Hide your P/L so you don't really know what kind of damage a loser had on your profits
  • If you feel like you are getting frustrated, take a break
  • Do not reverse your positions because you are angry - if you find yourself doing so, stop and think back to all those really bad days and all the profits you lost and remember how you felt at the end of that day - you never want to feel that way again
Wow! This took me a long time to write and once I started I kept thinking of more! Obviously this isn't an exhaustive list, but at least it's a start. I hope with time I can eliminate some of these items and I should review this every once in a while.

Now that this list is in front of me, I feel much more comfortable and I now have a clearer idea of what needs to be done. I shall start working on all of these things tomorrow. What better place to put these things in than in my diary!

Anyways, this post has become huge and I've had to reduce the font size.

Quick recap for today: I found it quite choppy today, but I managed to catch a good trade on Motorola. One good trade and one bad trade. I really focused on taking more risks by increasing my share size on my positions today.

And of course any comments are welcome!

Good Trades
1:00PM - Motorola (MOT) had a strong uptrend going while the Futures were flat. MOT reached resistance at $25.50 and since MOT was uptrending strongly, I went long 10,000 shares. I got out as follows: 5-cent winner (7700 shares), 6-cent winner (2300 shares) ($523 profit before fees ; In: 1:00:09PM ; Long 10,000 shares @ $25.50 ; Out: 1:02:25PM)

Bad Trades
12:52PM - Advanced Micro Devices (AMD) was downtrending while the Futures were flat. AMD reached some support at $24.90 and when it looked like it was going to break, I went short 3000 shares. I probably held this position for a little too long and I was forced out. I got out as follows: 5-cent loser (1000 shares), 6-cent loser (1100 shares), 7-cent loser (900 shares) ($179 loser before fees ; In: 12:52:36PM ; Short 3000 shares @ $24.90 ; Out: 12:55:12PM)
  • AMD was giving me troubles all day long and everytime I got in it always seemed to chop me out - I should have stayed away from AMD for the rest of the day
  • I shouldn't have gone in with soo many shares - it was AMD (thin, choppy stock) and it was the tail end of lunch
  • The Futures weren't confirming the move either

16 Comments:

  • Wow, what a list, I am exhausted just reading it.

    I did not get any patience until after I was 30 years old, and still do not have enough. But I became aware of it. This one is a tough-y.

    Rather than a long to-do list, I try this viewpoint:

    "If you want to know everything about the markets, go to the beach. Push and pull your hands with the waves. Some are bigger waves, some are smaller. But if you try to push the wave out when it's coming in, it'll never happen. The market is always right." - Market Wizard Ed Seykota

    That is what I try to think about, just watch the waves, act on what I see. This will create patience and harmony with what you are doing. Sounds kind of hippie, but try it.

    You are doing very well, read your feedback, we are all engaged in your success. Try to enjoy it a little, just a little.

    Good luck.

    By Anonymous Anonymous, at October 05, 2006 8:35 PM  

  • Anon@8:35PM,

    Thanks for your comments.

    Patience is definitely hard to come by. I think you're right - I've been fighting with the markets too much lately and not going with the flow. Hopefully by going with the flow, patience will present itself.

    I really appreciate all the encouraging comments - especially when things weren't going so well for me. I've been viewing everything I do from a negative perspective; on bad days I rip myself apart, on good days, I rip myself up for not making more. I think I should acknowledge when I've done something good more often in my posts.

    Anyways, good luck to you and I'm hoping patience can be found soon!
    JC

    By Blogger J.C., at October 05, 2006 10:01 PM  

  • JC, wow, i can tell just by that list that you are dedicated and willing to do whatever it takes you become successful. Good luck JC, im sure you will achieve your goal.

    Lately 'ive also been having trouble following my own rules.. reading your post made me make my own list.. thanks

    JP

    By Anonymous jp, at October 05, 2006 11:28 PM  

  • Thanks for your insight and educating us with real time examples of your daily trades. You do mention the number of shares traded per day (in the 130k range), but can you please elaborate what kind of $ amount you are using for these trades every day?

    By Anonymous Anonymous, at October 06, 2006 1:12 AM  

  • JP and Anon@1:12AM,

    Thanks for your comments.

    JP,
    Thanks. Yea - the last little while has provided very little opporunities and as a result, I end up breaking my rules too. I very glad you were able to get something out of that post. Good luck to you and your trading!

    Anon@1:12AM,
    I'm currently working with a buying power of $900,000 and stays at $900,000 regardless how much I lose/gain. I hope that the trades I highlight help you in some way. I think in the near future I should include charts to my posts. We'll see. In the meantime, the best of luck to you!

    By Blogger J.C., at October 06, 2006 7:26 AM  

  • JC,

    Great list! I share many of them in my trading, especially 1), 3) and 4). I will print out your list and keep alert.

    ZBS

    By Anonymous ZBS, at October 06, 2006 9:33 AM  

  • ZBS,

    Thanks for your comments. It seemed like the more I thought about it, the more weaknesses I found. Many of them were kind of hard to admit, but now it's out there and now I can focus on correcting them.

    Good luck to you and I hope we can all overcome our weaknesses!

    By Blogger J.C., at October 06, 2006 5:43 PM  

  • J.C. that's great. I'm in the process of noting my bad habits and what I can do about them. I'll take your example and make one on my page!

    With your dedication and passion I don't see how you won't be as successful as you want to be.

    Thanks again for the inspiration!

    By Blogger dan, at October 06, 2006 7:10 PM  

  • Thanks J.C. for sharing your list. At least I don't feel alone, I have the same problems and I'm working to correct it. I eliminate the level II, because my style don't need it. I pass more time with friends and it really helps to clear my mind. And the viewpoint of Ed Seykota is great! Patience is the hardest point to correct for me.
    I hope you will achieve your goals.

    Good luck

    By Anonymous Jose, at October 06, 2006 8:11 PM  

  • Dan,
    Thanks for your comments. I think by noting why you aren't achieving greatness is a first step in achieving it. I look forward to your post! When I put up posts like these, what I'm really trying to do is inspire myself, but you don't know how happy I am when I hear of others being inspired as well! The best of luck to you and your trading next week!


    Jose,
    Yes - my Level II problem still haunts me. I think it's because I use the Level II to help define my entry in a position and as a result, I feel as though I should use it in my exit. I too really like that quote from Ed Seykota - it really puts things in perspective. Thanks for your encouraging comments and happy trading to you!

    By Blogger J.C., at October 07, 2006 10:06 AM  

  • J.C.
    I was using level II when I first started out, but realised its not very useful in determining entry & exit. Price, volume and support & resistance (using moving averages or fibonacci)are good for entry & exit.

    All the best!

    By Blogger Simply Options Trader, at October 08, 2006 9:51 AM  

  • Simply Options Trader,

    Thanks for your comments. Sorry for responding to your comment soo late - I just realized that your comment was here. I think later on in the Future when I hold positions longer I'll try to use some more technical indicators for me to pick a good entry/exit. I guess I should start playing around with a few now so that when it comes time to use them, I have a better idea of what will work for me.

    Best of luck to you!

    By Blogger J.C., at October 11, 2006 8:36 PM  

  • I just came across this insightful post in my wanderings and I can't believe how strongly it to relates to my own journey. I have had similar problems with coffee, beating myself up, not having patience etc, and am seeking similar answers (exercise, getting out etc).

    It's good to see you have a plan to fix your faults, and I hope it is working out. Keep up the good work buddy, and all the best on the journey.

    By Anonymous Caravaggio, at November 30, 2006 9:22 AM  

  • Caravaggio,
    Thanks for your comment and thanks for visiting!

    I'm glad you were able to cone away with something from the post and I hope we all can eventually get to where we want to be.

    I want to wish you the best of luck and happy trading!

    By Blogger J.C., at November 30, 2006 5:24 PM  

  • My trading is exactly what you said it was. Every day the market teaches me something new. I thought I was the only one having trading problems. But thanks to you, I have better perspective.

    Hope you make more money.

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