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

Thursday, January 11, 2007

The Cowardly Lion

Gross: +$644.00
Net: +$536.24
Loss From Top: 0
Trades: 80
Shares Traded: 89800

Stocks Traded Today (net profit/loss):
AMR Corporation (AMR): +$344.69
Alcan Inc. (AL): +$120.46
Amdocs Limited (DOX): +$89.65
ConocoPhillips (COP): +$67.05
Genentech Inc. (DNA): +$56.59
EMC Corp (EMC): +$30.90
Schlumberger Limited (SLB): -$2.21
William-Sonoma Inc. (WSM): -$2.53
Hornbeck Offshore Services Inc. (HOS): -$51.41
Equity Office Properties Trust (EOP): -$117.47

My trading today reminded me of the Cowardly Lion from the Wizard of Oz.

The Cowardly Lion looked like a lion, sounded like a lion, and walked like a lion, BUT didn't ACT like a lion because he was cowardly.

OK - so what does this have to do with my trading?

I seem to be a trading, it sounds like I'm trading, and I go through the motions of trading, BUT I don't ACT like a trader. Just like the Cowardly Lion, I seem to be lacking courage.....courage to hold on to my positions.

All this time I kept telling myself that I have to have patience when it came to holding winners. BUT, I think I may have been confusing a lack of patience with FEAR....fear that my position could reverse or that I'd lose the profits that are currently staring me in the face.

So what kept happening today?

I'd get into a position and it would go my way. But then prices seem to stall or a certain amount of time passes and I feel a great need to get out of my position because I fear I'll lose the profits I could take now.

Shortly after I'm out, prices continue to move....but without me on board.

In my mind, I kept using the excuse "Well, I could book profits now and if prices continue moving, I can always get back in!"

But ultimately what ends up happening?

I get out, and when prices continue moving, I don't get back in because I'm too fearful that prices could reverse at any time (again, fear working against me!) and I end up waiting for the next level break on the stock.

Midway through the day I tried to get over my fear by exiting about half or two-thirds of my position whenever I felt uncomfortable and holding the rest until the charts say it's time to get out or my mental trailing stop is hit.

BUT wouldn't you know it, I always seemed to be exiting that remaining half or third of my position for a loss. Either things reversed (and the charts told me to get out) or prices would blow past my mental trailing stop and I would find myself chasing prices to exit my position.

Sheesh! I got caught a couple of times like that....definitely not a good exercise in trying to overcome that fear of loss (in the back of my mind I kept saying "See? Told you so! You should have exited everything when you had the chance!").

This was more true on some of those thinner stocks...one second you're up 25-cents on a trade and in the blink of an eye you're down 10-cents.

But all in all, I'd say it was a good learning day in that I drew a defining line between patience and fear. All this time I've been saying I need patience, but what I needed was to visit the Wizard of Oz so that he could give me the courage to hold onto my positions. This, above all else, is probably the reason why I'm not as successful as I want to be.

The one aspect of courage that did improve today was the bigger share sizes on some of the thinner stocks. I'll continue to work on that front as well.

Boy did I miss a lot of good moves on AMR Corp (AMR) and Alcan Inc (AL). Both of these stocks were really strong today, but I was constantly jumping in and out (just like a Cowardly Lion).

No good trade and no bad trades.

Lemme see if I can step it up a little bit in the next little while....

Good Trades
None.

Bad Trades
None.

Labels:

7 Comments:

  • I could have written your column verbatim. How I hate "fear" screwing up your trading. Sometimes I think I should look into automated trading like at Trade Station...but where would the fun be?

    My problem is that if I start the day with two losing trades, it colors the rest of my day. I either trade scared or not at all. Never a good situation.

    Then I'll decide to papertrade for a couple of days to get my confidence back up and, of course, the "money" just flows in. When I jump back into the real deal, somehow and someway and regardless of my share size, the "fear" factor will sooner or later knock me down again.

    Any suggestions?

    Thanks

    By Anonymous Rudedog, at January 11, 2007 10:13 PM  

  • RudeDog,
    Thanks for your comments. For me, I feel as though fear surrounds me from every corner. Even on the very first trade of the day, fear creeps in. If it goes my way, I fear losing the profits I see. If it goes against me, I'm like you...I trade the rest of the day in fear. Even if the day has been profitable, I fear losing what I've made, which ultimately affects the way I trade.

    I guess the one way to eliminate it is by trading with strict rules and all we have to do is follow them (of course, this is always easier said than done!). This is something I have to work on too.

    Instead of watching my position penny by penny, I should instead watch the charts and let the charts determine where I should get out. But it seems soo hard watching a 25-cent winner turn into only a 5-cent winner when I'm watching only the charts. Again, it's always easier said than done.

    Unfortunately I have yet to rid myself of fear in my trading, so I don't really have any good suggestions...perhaps we can both work on this and share our findings!

    Here's to some good trading and hopefully we find a way to slay that beast we call fear!

    By Blogger J.C., at January 11, 2007 10:48 PM  

  • Hi JC, to overcome fear, you can't eliminate it, but you displace it, you need to follow your trade plan. Have a plan for the trade and stick to it. That means having exit targets, one stop and one exit To help the fear of seeing profits evaporate, scale out half when in good profit and put your stop in at breakeven. Avoid scaling out the second half if it comes against you, as it most likely reverse and continue in the direction you intended. Having your stop at breakeven means you can't lose. With the half still on, you can use a trailing stop.

    Follow this everyday and you will be catching the big moves.

    All the best JC

    By Anonymous Anonymous, at January 12, 2007 3:38 AM  

  • try XTO if you have fear syndrom. jump to the board and close your eyes.

    By Anonymous Anonymous, at January 12, 2007 8:01 AM  

  • I have a suggestion, as I have been exactly where you are at. Fear comes from anticipating a loss. When you focus on the specific trade, with a random outcome, fear is inevitable, even when you are trying to focus on following the rules. Trading is not "made" to anticipate profits on specific trades, because any one trade's outcome is random. It's made to anticipate profits on the series of trades. So, if you trust your system, focus on the series of trades, and its profitability, and faith replaces fear. It is impossible to trade without fear if you focus on the one trade, because the outcome is unknowable. To trade without fear, you MUST think of a profitable outcome that you can have confidence in, and that is ONLY in the series of trades.

    By Anonymous Anonymous, at January 12, 2007 8:54 AM  

  • i think the time you trade the stocks of thinner isn't long.so you feel so fear,if you continue to trade this sort stocks.you will not fear that!

    By Anonymous wj, at January 12, 2007 2:29 PM  

  • Anon@3:34AM,
    Thanks for your comments and thanks for the advice! I'll continue to work on this and I'll probably just have to get used to holding onto positions a little longer. We'll see where I go from here.

    Anon@8:01AM,
    Thanks for your comments. :) I've thought about that...someone also suggested putting on a position and leaving the desk! :)

    Anon@8:54AM,
    Thanks for your comments and some great advice. Nicely put when you said "faith replaces fear". I have a feeling that I perhaps need to work a little more on my exit strategy...I've got all kinds of rules in place about entries and about losing trades, but my trading plan always seems kind of fuzzy around the edges when it comes to exiting winners. Perhaps this is something I need to review this weekend!

    WJ,
    Thanks for your comments. Yes, I think you're right about the thinner stocks...I can potentially take more profits if I can hold onto thinner stocks longer. Hopefully I can get over my fear soon!

    Thanks all and have a great weekend!

    By Blogger J.C., at January 12, 2007 8:03 PM  

Post a Comment

<< Home