Trauma

Having given back all gains from the beginning of the year then taking losses, I feel like I am stuck.  The emotional toll of being a value trader -- and then deciding to cash out to protect losses (and thereby selling near the bottom) has hurt my confidence.

I am quite sure I have solidified my trading strategy as a swing trader, using charts to denote times to enter or exit the market.

I did not use clearly defined risk management skills.  I remained far too complacent as the signs stacked up for a correction.

I need to let the past go and not fear missing out on a new rally or remaining in cash until signs show I should reenter.  I need to be willing to put cash to work as the signs emerge that the markets can push forward.

 This is  a long race.  The main thing is to learn from each new mistake and rise anew.

It's time to focus on the next step now.

don't give up:

I went back to ERY and bought again...

 Made 8x my first loss with a bigger position.  Right idea, bad timing the first time.

 Now ERY is once again dropping fast.  Definitely played it much better the second time.

 I see confusion today so hard to pick a side.

fighting daily

I tried to short the counter rally and got stopped out --  market up 154 points here...

 Too early to attempt to catch the roll over... got squeezed out for -$200.

 This was not a good trade because I was fighting an incredibly oversold market with all sectors green.  I was going counter-trend which rarely works.  Especially with no 3 bump pattern to show the bulls are tired.

 Chances are this short will work later in the day.  Maybe I will watch for that.

 Pro traders went long today on strong names and won.

taking it slow:

Well, there was a small bounce in HAO but I'm not taking any chances.


I attempted two daytrades and pocketed a grand total of $58.91 -- about the usual take.

 The market is mixed so it's not like there's any strong trend.

 Both trades were buys on strength (news related), both China names I follow (CTFO, HOGS).  The HOGS would have been good but I bought very little and sold it too soon. It moved about .50 from my initial entry which is excellent.

 I did earn over $500 on HOGS in a managed account.  With the market in a downtrend, I feel good being mostly cash now.

 Not having any stop losses in place on the correction was simply... well, that's a mistake I will never repeat again.  All stocks are deadly in a weak market.  And now the weakness is starting to strengthen as the day goes on.

Hope is for the Unprepared

Sometimes you hope the markets will go up or a stock will do this or that.


Hope is for the unprepared.

If you're trading for a living, you can only control your own actions.  So if a stock moves down, where do you plan to limit losses?  What signals will indicate the environment has shifted?

When will you switch from offense to defense?

A trader must always be prepared to go over the scenarios and diligently watch for the signs of shift in investor confidence.  A trader must always have an actionable game plan that covers every scenario.

If not, the trader will inevitably start hoping -- a sure sign that one's strategy is closer to failure than realized.

Cashed Out:

Starting over... again.


Working on developing a system to get me out of weakening markets and completely out of corrections.  But went to cash (90%) to preserve capital in this new treacherous environment.

Rule #1 is don't lose money.

Once you start losing big hunks of money... there's not much else to say.

So the first rule of the new trading I will implement is starting with the question:  How much are you willing to lose on this position?

Once you can define your risk, you can start to trade.  If I don't know how much I'm willing to lose, it will always be much more than I think.

So this will involve proper position size and identifying a support level that must hold.

And secondarily, it involves identifying a benign vs. hostile market.

Relief Rally: New Beginning

My portfolio is back to break even after being up 12% -- then losing it all and more in 8 days of huge losses.

So a fresh beginning.  That's okay.  Especially if I've learned from my mistakes.

Taking profits is part of the game.  Sure, the stocks I own should be much much higher, but the market cycles and will regularly selloff after extended runs... consolidate, run some more.  Not taking profits when they come fast and furious is foolish.  Making money is easy... keeping profits is not.

I will be much more observant of charts going forward... using them to make occasional sells when they get extended.  What works with value stocks is simple:  sell when they are the must-own exciting names... buy them when they are being tossed in the garbage heap.

To succeed, it is critical to do the very opposite of normal human behavior.   Good times should bring on fear and concern of loss.  Huge drops should be welcomed and embraced.  And always keep proper position size and cash balance to take advantage.

You can make money in the larger swings... but you must have the patience to hold, the ability to let go too early, and not fear the panic lows that bring the most opportunity.