Eight Months of Trading - Reflecting

May 2nd, 2018 | 7 minute read (Repost from We The Market)

This blog was started to write my story, a story of a new day trader. The successes and failures that I share I hope that others can learn from. No two people are alike or even their trading behavior. Possibly after reading my experience you will have nothing in common. Of course, I find many of my mistakes are common among new traders.

The last eight months have been a great experience but also a very painful one. My cash account has been drained to an uncomfortable level. How do I rate with my research of other traders? I have no hard statistical facts to share but only from what I have read that many people will lose everything. Yet, some stars out there will lose nothing and or even take off from day one. I’m guessing I landed in the middle. I am still in the game but very cautious at this point because of losing a good deal of money. Live to play another day was a quote I heard one time. I am limping along at this point.

Did I hear you say simulator? I will fully admit I did not stay in the simulator. Obviously. Why you ask? Every time I did great in the simulator I would step into the real world and BOMB! Am I the only one? NO! Again from my studies and also talking to Zack in tech support at Interactive Brokers, many people do the same thing. In my case I believe the stress and pressure are gone in a simulator. Another error on my part was not acting like the money in the simulator is the same as real. I would play with 2000 shares as opposed to 500 in real life. Currently, I am back in the simulator doing my best to make it real in my head. My suggestion is to do the same. If you must use real money then only buy a small amount of shares until you have proven to be consistent for two months.

I have read or heard over and over that the losses are tremendous compared to the gains and also rules around stop loss are violated. I am so guilty of this. “HOPE” has destroyed my account. While “Hope” is great for the Star Wars Rebellion and religious realms, it has no place in the stock market. I would blow past my designated stop and mentally think “I hope this turns around”. STOP for the love of God, stop out. Think of it another way, if your hope is so strong that it will bend the price back to where you want it, then stop out at break even and when the price does come back around enter with a new position. You will make so much money if you obey this rule. Just Stop. We are in and out of stocks for a short period. Don’t turn into a swing trader unless you become one after investing in the education.

You just read about stops but have you fully grasped that there are profit stops? I can’t tell you how many times I was profitable only to end negative on my position. When you step back and think about it you would ask yourself who in their right mind would let a positive position go negative? How does this happen? A person might be thinking this is a slight dip and it will continue on in an ABCD pattern. Eventually, you drop below your entry and now you have switched to "I HOPE" it will return to my break even spot. Look at your support and resistance lines. Obey them. Take Profits by scaling out of the trade. If the stock price action is ABCD pattern then look to add again at the next opportunity.

More on stops. At this juncture my entry is now my stop loss point. I have not read this anywhere but until I consistently make profits I will exit if the price begins to drop below my entry. This now makes my game interesting. I have to enter in a dip or pop. That is even more hard. Also, I will be paying more in commissions. All I can say is the last 8 months I have been losing and I have to make changes. Maybe the next update will be different in three months.

Excitement still kicks my ass. Excitement kills my patience. I either hear, read in chat or see on the scanner, a stock is taking off and I jump in without waiting for the pullback. We talk about Set Ups and that is exactly what it is. A set up is where we are aligning our plan with the price action. Example: VWAP entry is a set up. Excitement about a stock price shooting up to VWAP and you enter before the price crosses the VWAP is NOT a set up. Many times the price would have a resistance at VWAP and then reverse, bye bye money.

I now have an extreme interest in the following rules. 1. Follow your strategy. Enter on your “Set Up”. Example: that may be enter dips and pops by waiting for the consolidation / retracement. 2. Scale in to test your assumption. Scale out by taking profits often. 3. My stop loss is my entry. By that time I will have already taken profits. This also means I have to enter the stock precisely. 4. If in the simulator, make it real in your mind. 5. End by 11:00 am EST.

The next report from me better be positive. Day trading is the single toughest thing I have ever done. Imagine excelling at everything you have ever done and then you start trading only to lose your money and find out your ideas are for the birds. I get knocked down but I keep getting up and pushing forward.

Stay positive and stay green.