Thursday, July 22, 2010

Art Of Trading Member Asks Me A Good Question

I have been working on trading the crude oil futures and have been doing okay.
I trade one or two contracts. Today I saw I pattern I got very excited about so I thought I would do 4 contracts (about 10,000 shares of USO).
The trade fired off and I had an $800 stop. It moved about 12 cents in my favorite so I thought to bring my stop to close to break even.
I still do not know how I did it in Trade Station but the stop became like a sell limit instead and I got sold with a $80 gain.
By the time I tried to get back in, crude was running really fast.
You can see crude moved close to 2 more dollars two. One trade and I could have made my quarter in two hours
I got to be more calm when I trade.
I feel like a tight end in football (real football not the crap you get excited about) that dropped a game winning touchdown pass.
I do not know if you have had this happened but with me the less I have to lose the easier it is to take on risk.
When I was newly divorced, I had to use my credit cards to make ends meet. I knew of a good company that just went public that was very under valued.
I had about $2000 in cash. I borrowed $2500 off my credit cards and took a $2500 loan out against my car.
I put it in a margin account and bought 2000 shares of a $7 dollar stock. Totally insane.
I sold the stock 4 months later at $12 and paid everything off. The stock later went to $30 about 18 months later.
That 18 years ago. 5 years ago I could day trade an account of 25k where many times I would buy 50-75k worth of stock making or losing 1,000 a day - no big deal.
Now I finally have an large account to trade with 150k. No debt other than a small mortgage. My only kid is out of school. I have a decent retire nest egg. But now I find myself out being able to stomach a $200 loss. 10 years ago I had many losses of 2 or 3k and it was no big deal. I also had wins that size too.
I have seem to lost my balls in my older age. I wonder if it has to do anything with my Blood Pressure meds of the last 5 years.
I do know if has to do with the fact that most of my trades are done in minutes or hours instead of days or weeks or months.
Any thoughts? It is driving me crazy that I went from being way too aggressive to not being able to handle the pressures of normal risk.


Here's my response:

Hi jeff.
Your story is awesome and i will tell you one thing: i can relate and i know EXACTLY why!! A few years ago, i used to swing hard for the fences with 5 figure swings in my PnLs almost daily. It's simple:: you are getting older! LOL. As traders when we are young we are fast, furious, aggressive, cocky and well......'DUMB'!! Also, in your younger years to take those kinds of risks shows that you had a 'nothing to lose' attitude!! Now, you have a nice nest egg and a sweet size of a trading account, no debt, YOU HAVE A LOT to lose!! You instinctively want to keep what you worked so hard to build!! I think what you could do is pull out about 20K from your 150K account and use that 20K as your aggressive portfolio. That will help your "gambler's high" going! But as always as i preach here daily: Whether you TRADE conservatively or trade aggressively just MAKE SURE TO TRADE WITH DISCIPLINE!! Know your risks, know your setups, know your stop losses and always factor in worst case scenarios.

hope this help jeff!

p.s. I love Jeff but i think he is a little misguided about soccer: It is the number one sport on planet earth!! ;-)

As always guys, i am here to help in any way i can! I will always give my truest honest answers for better or for worst.

Happy trading!!


David D said...

Just a suggestion, clean up the spelling and grammar of your posts, even when they come from outside sources. Newspapers do this all the time with letters to the editor so there is no reason why you should post such poorly written content. Otherwise I enjoy your trading commentary.

Rick said...

Stew's right. I would also add that with more trading experience comes more losses. The losses tend to accumulate in your mind and weigh you down.

Stewie said...

Hi David, my problem is i rarely proof read my posts!! LOL. I am hoping that people get the general message and not judge me based on my grammar(which i know is not up to par)!

p.s. i did not proof read this comment either. LOL.

much love.

Hite said...

wow, david d! perfecting blog grammar is for people w/ too much time on their hands. Stewie is busy searching for sweet stock plays. Also, soccer is the real football. you barely even kick the ball in american football. cheers stew thax for all the advice and picks!

Denarii said...

I wrote Stewie a quick note and question. I did not think he would publish it. I would have hit the spell if I thought he would.

But I think you guys can understand the thought and question.

I would be interested in others ideas on this.

MC said...

This is the natural progression for traders. As you build your account, you are also going to carry the burden of trying not to give it back. Diversify (not in trading only) to have uncorrelated positions. For example, leave 1/3 of your networth in an intra-day trading account, 1/3 in position/mid to long term account were you employ trend following methods and 1/3 in a safer accounts like money market, CD, etc.

I have a method of taking money out of my gains that I have used when I started and still using today. For my gain, I move 30% to tax account (never to be touched again until April when I have to file taxes), 15% for spending account, 25% stays in my trading account, 25% goes to savings account.

You have to be in a position where you can tell yourself that if I blew out my trading account, I'm still going to be alright. Because trading is a business of taking calculated RISK and the only guarantee that you can give your self is to make sure that you can comeback again even if your trading account blew out.


Stewie said...

this is excellent advice pinoy! thanks for posting.

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