This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Begin Depressive Rant

I’m referring to you, Mr. “You Suck and I Hope You Fail”. Your analysis was correct, and you got your wish. I’ve thrown away all of my prop trading gains and I’m down a bit besides. I am a terrible trader, and I’ve failed. I’m out of control, and I keep throwing money away with bad trades, time after time. I lost all 6% from last month and then a bit more over the last two days, and I’m now underwater. I can’t make money trading, but I sure can lose money. I’m just not cut out for this, apparently. I love it and want to succeed more than anything, but I have to face it–I’m just no good. I’ve been trying for two years now and if I don’t have it by now I’m not going to get it. I’m going to quit before I blow up my account. I’ve “kept swinging” all the way down from my 30% return peak, which was obviously a fluke. “Fooled by Randomness”, eat your heart out.

I’m discouraged beyond belief. I hate my job, and was really hoping to do well with the Prop trading so I could put more capital to use and go full time, but that dream’s gone. I admire all the profitable, disciplined traders out there that have tried to teach me over the years, and I’m sorry I’ve wasted your time with my questions. I wish everybody luck and success in their trading.

End Depressive Rant

So I’ve vented and chilled, and I don’t want to give up, but what I’m doing isn’t working. I’m not trading until I work something out, but I’ll be back. Thanks for the comments.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I took 9 trades today, all losers–9 in a row, all between -1.3R and -0.3R. All of these losers were within my 1% of equity risk parameters, but I took an -8% drawdown from these trades. Now my Prop results stand at +17.3% overall, +26R. My PnL chart is now not as impressive next to Trader Mike’s. At least I didn’t do what I did last Friday, by trading out of control. I took setups that looked reasonable as I saw them, but they turned out to be wrong is all. I did have one that went in my favor on CAL, but I left the computer and it retraced and stopped me out, filled above breakeven (hence the -0.3R loss). It’s pretty discouraging, but I tell myself that this kind of thing will happen from time to time. Today I’m not so upset about the 9 losses in a row as I am the -8% drawdown. It’s a big number! At least I didn’t blow myself up by trading bigger and bigger trying to make it all back. This choppy, listless market environment is really wreaking havoc on my style. I need a rule to keep me from overtrading on days where it’s not working out, but I don’t know what a good rule would be, as you never know when the market will change and things will pick up. The next big winner could be right around the corner, or another 9 losers–it’s hard for me to tell. Any thoughts on that would be hot most kindly appreciated :p

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

So I did a really boneheaded thing today. After trading without any luck this morning, and losing -2.6R over 5 trades in CFC, I was mad. I was mad that I had smacked CFC around yesterday and it was “beating” me today, and I felt like I could scalp the money back. This was after 3:00 pm already, on an OPEX Friday. I traded, lost a lot and gained a little, and then doubled my size, and lost more. During all of this, I kept very tight stops, but when I came to my senses I had traded 8 more times and lost another -3.4R, making today’s loss -6R overall. Based on the $ sizing, today I gave back -6.5% on my equity because I chose not to leave it alone and stop trading. I am responsible for these trading results. Boneheaded choice, no? At least I still ended the week up 4.3%.

This wasn’t a “Keep Swinging” problem, because you don’t size bigger when you’re down. That’s backwards. So I’m going to learn from this lesson so that my tuition money isn’t wasted. I will not open positions after 3:00 ET, only manage open ones. I will also only “Keep Swinging” if I see a defined setup. I will not increase my size when I’m down. I will not scalp blindly, but only in combination with a good setup and tape reading. I knew the action was aimless and random, and I had no business gambling to make my money back.

My biggest problem is that I hate to lose, period. I’ve made peace with the fact that every trade can’t be a winner, even though it took me a while. Now I’m battling with myself that every day can’t be a winner! I need to accept that I will have some losing days–I can’t be green every day! My goal should be to end every week in the green; I believe that is achievable. There’s nothing wrong with losing, just losing big. There’s nothing wrong with being wrong, just being wrong big! I should have walked away, and next time I will. I can’t imagine how much harder this must be for someone who trades for a living and has pressure to take money out of the market to pay the bills. There is no urgency in my trading, other than the urgency of wanting to get enough capital to trade full time.

I share all of this for juxtaposition next to my results from yesterday. It shows how much I’m still a novice trader, and that my personal discipline and psychology need work, even if some of my techniques are starting to improve. See what I mean when I say that ol’ Jesse Livermore and I have something in common? With me, you’ll get the good and the bad–it’s “reality internet”. I’m really mad at myself, but that won’t do any good, so I’ll refocus my anger into discipline, and come back ready to look for quality setups on Monday.

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I took 10 trades today in my first full day prop trading. Some were well thought out and some were not. I ended up finishing the day -2.5R down, so after yesterday’s gain my overall PnL is now at -0.5R. My win rate is only 30%. Lots of room for improvement. Today was a wild market day, though I made plenty of mistakes and took some unjustified risks on mediocre setups. I traded a lot off of the 1 minute chart, since I could. When I was down, I wanted to make it back. Just a quick scalp. I better watch that! If I wasn’t keeping my position size so small, I could have lost a bunch today.

One downside of graduating from 1 trade per day to 10 is that I can’t go over all of the trades in detail as I did before. Well, maybe that’s an upside for some of you out there. :/ Most of my trades were too tight for the volatility today. I shorted BIDU, got stopped out at a retrace to breakeven, and then it ran to about 3R later in the day. I also entered GRMN on a flag on the 5 minute, before the consolidation broke, and got nailed for -1R as it broke the wrong way. Lots of ~-0.8R losers, and only a couple of winners.

My best trade today was in Continental Airlines (NYSE: CAL), and it was also one of the only trades I took from the 15 minute timeframe (which should teach me a lesson). I entered at the orange line, stops managed by the red lines, and I took a partial at the 119% fib (blue line 1) as price stalled. The final cover came at the 138% fib (blue line 2), which was also just about the low of the day:

Thank you Trader-X for that one. Too bad I missed the entry earlier in the day.

I’ll try to be more selective in my setups from now on, even with my newfound freedom from pattern daytrader rules.

Stocks Mentioned In This Article
Stock	Links
CAL	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Here’s my trade from today in Continental Airlines, Inc. (NYSE: CAL) that was the final straw in my daytrading struggle:

The One I Missed

I was watching this setup, and then missed the entry due to a distraction. It would have been a great trade:

I was watching for a breakout of the base at $39.40. It went on to hit the pivot point resistance from a prior day, which was my target.

The One I Took

After missing the last one, I saw another base set up:

I picked a higher interday pivot for the target, and was watching the prior high just above $40 for potential resistance. At 39.90, price dropped on volume, but the bid/ask spread widened, so I took it as a cleanup of panic sellers. Price then retraced to my entry point and went on to hit my stop.

Mistakes: I keep messing up my entry, stop and targets. I pick a target that is too far compared to my timeframe and entry setup. I pick a stop that is also too far relative to my timeframe and entry setup. On short timeframe trades (1 min) I have taken, I watch price go up in my favor and then slide right back again for a breakeven or a loss. I don’t have a feel for when price is retracing or when it is reversing, so I either get spooked out, and the trade goes on for a win, or I hang on to avoid a whipsaw and price really reverses.

So there you have it. My last daytrade until I can get in a better situation through capitalization and skill. Thanks for reading, and thanks to all the truly great daytraders that have helped me. I hope to join you someday.

Stocks Mentioned In This Article
Stock	Links
CAL	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

After another string of 1R losses, the most recent today in Continental Airlines, Inc. (NYSE: CAL), I’m finally giving up on daytrading. Even though daytrading fits my personality and my desired risk management style, it doesn’t fit my capitalization level or my current skillset. True, with Zecco I have no commissions, but with less than $25K I have the patter daytrader rules to deal with, which limit me to 3 daytrades every 5 days. This does not allow expectancy or a high Risk:Reward style to play out, and my profitability is completely a function of my win/loss rate, which is about 30/70 over the last few months. With the PDT restrictions, I’m not really daytrading anyway, since I can’t take a lot of positions (a lot to me being maybe 3-4 per day). If my trading skills were exceptional, I could trade consistently enough to pull this off under these limitations, but they’re not and I can’t.

When I started trading, commissions killed my expectancy, which was about -0.5R per trade. After the advent of Zecco, I thought I’d be able to overcome the commission drag I had from my old broker, and I did. But my situation hasn’t changed, as the PDT get in the way. Now I’m either at zero expectancy or slightly negative depending on how “lucky” I get with my 3 trades per week. Babak’s international option would help with the PDT rules, but then I’d have very large commission drag for my small account size. Even if I could get the commissions lowered, or trade higher priced stocks with a per-share structure, I still don’t have the time to watch all day, which is another of my problems.

My pipedream was to double my tiny account over some period of a year or three, to prove to myself that I can trade profitably. Then I would put more money on the line and go from there, possibly even full-time. I haven’t achieved anywhere near those results, and I’m net down since I started two years ago. So a combination of undercapitalization and lack of skill are forcing me to accept reality: I can’t daytrade anymore. Without better skills, getting more money won’t solve my problems. I’ll just lose it 1R at a time instead of 1r at a time like I do today. Seriously, I must just suck at the markets. I always hear people say that “it’s easy to make money paper trading, then you trade for real and lose money”, but I even lose money paper trading!

So what now? I have to move up to the daily timeframe and set my stops and risk level such that getting stopped out in the same day is highly unlikely. My daytrades will then become a safety net rather than my intended trade vehicle. Ideally, I shouldn’t ever have to use the daytrades anymore. If I can get swing trading skills such that I can grow my account, I can then consider rounding up more capital to risk. My NR7 scan results have been disappointing, so I think I’ll head in a different direction, but I’m not sure where.

I hope to return to daytrading someday, but for now I sadly bid it farewell.

Stocks Mentioned In This Article
Stock	Links
CAL	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Today my Zecco account balances were all screwed up. It showed I have a -$1000 market value, but I’m not holding any positions. I think they will get this sorted out, but it really makes me mad. I guess I can’t complain, because you get what you pay for.

Anyway, since Zecco was out for me, I decided to trade my TD Ameritrade account today to try to gain back my earlier loss. So far, so good. I was looking for base-and-break, OR breakout type setups. Read the rest of this entry »

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I traded D.R. Horton, Inc. (NYSE: DHI) as an OR breakout short. I saw all of the homebuilders getting whacked after news of Lennar’s 73% profit decline. I used my trade box limits as I discussed yesterday. This one set up early, so I only had a bit over an hour for the trade to move. I didn’t have to wait that long, though: Read the rest of this entry »

Stocks Mentioned In This Article
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DHI	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I took a trade in Palm, Inc. (NASDAQ: PALM) today. It was a gap up this morning, and I liked the action in the first four bars: Lots of white space, the second bar was a doji, followed by two green bars. It reminded me of the setup in my TTWO trade. I took an entry above the high of bar 4, knowing that it was a higher risk trade since it was below the OR high. I was ready to get out if it didn’t work. Or was I?

Background:

I traded through my TD Ameritrade account this time, which has a good deal of long-term investment money (about 10X my Zecco account; my Zecco money will soon be joining it). Because of that, I’ve taken the dollar amounts away from my results, since the newbie small-dollar trader journey is not really what I’m trying to portray anymore. Instead of trading a very tiny account that is 100% risk capital, I’m going to trade a much larger account that is about 15% risk capital. I see this as my next step in trading.

For example: Say I have $1000 to burn, and $10,000 that I “need” eventually. Instead of trading only the burn money, and grinding away a tiny bit at a time, I would trade the combined balance, but impose a drawdown limit on the account–absolute rock bottom would be if the $1000 goes away. Now a 1% of equity risk would be $100 per trade, instead of $10 as before. This would mean that 10 immediate losses in a row would hit my drawdown limit. A problem–now I have commissions, and if my trade risk size were only $100 then the commissions would be 20% of that. Yikes!

Analysis:

I entered as stated above. As I’ve been re-reading Phantom of the Pits, I read some things last night that I should have obeyed today (paraphrased below):

Don’t wait for your stop to prove the trade wrong! Assume it’s wrong until proven otherwise. Trading is a losing game, and if your position is not proven correct, then reduce or remove it! Don’t let the market tell you that you were wrong. It’s your job to know when you are wrong. You have to learn to be wrong, fast!

I kept watching PALM go sideways, waiting for the breakout above $19.00 that never came. I had opportunities to get out at -0.4R, but stayed with it. In retrospect, it was not proven correct within 3-4 bars, and I should have bailed on it instead of stay with it, especially since it was in the red rather than the other way around. I didn’t want to take the $50 loss, so I stayed with it until the stop was hit for the full 1R loss. Not good. I should have been wrong, fast! That’s the only way to survive in trading.

Takeaway:

Listen to the Phantom! Get out if your wrong trade (that’s all of them) is not proven correct (within 2-3 candles)!

Trade Summary:

PALM Long
Entry: $19.03, Stop: $18.86, Target: $19.63
R: $0.17/share, Exit: $18.86
P/L: -1.00R

Stocks Mentioned In This Article
Stock	Links
PALM	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

Here’s something you will probably not see very often (with a few notable exceptions from the blogosphere)–A public admission of a humiliatingly bad trade. This morning, I traded Fremont General Corporation (NYSE: FMT). It was up strong in pre-market, and they had positive news of new credit being extended to them. I had no setup, I just wanted to buy the open and ride it up. I entered as FMT broke the pre-market high:

I sold by reflex based on it looking like it would go on to hit the pre-market low. I realized by then that I had made a mistake, but I wasn’t going to wait around, hoping for the loss to turn around. Ironically, that would have been the thing to do in this case :(

I made so many mistakes it’s almost laughable. Here they are, in no particular order:

1. I’ve been sick all week and not sleeping well—not a good time to be making decisions.
2. I ignored my 2% risk rule, and just put my whole buying power down for my position size—over 10x my normal R size!!
3. I didn’t have a clear stop point other than the pre-market low—I just bailed when it plunged down.
4. I wanted to hit a “home run” and get a good 10% on the one trade—I wanted something for nothing!
5. I wanted to trade today. I went looking for something to trade, rather than waiting for a setup to appear.
6. Zecco recently instituted a $2000 minimum rule for margin accounts. They hadn’t had any problem with a small balance before, but now they lock up my buying power every day, and I have to ask them to manually release it. Don’t ever trade with some kind of restriction in place like that! It locks down your options and messes with your mental state.
7. I told myself that I wouldn’t trade while I get a swing-trading system going, but I broke that promise and traded anyway.
8. I traded on options exp. Friday, breaking another of my rules.

So what now? I need to regroup. I’m taking the cash out of my Zecco account. I’m not exactly sure of where to go from here, but one thing’s for sure: I’m really disgusted at myself for doing this. At least it’s a big loss out of a small account, rather than a proportional chunk out of a more substantial account. I didn’t blow out my account, but a loss this large (about -15%) is completely unacceptable and entirely avoidable. It’s not so much the dollars involved as it is the percentages. I trade a small account on purpose, until I can be consistently profitable and weed out mistakes like this one.

I hope that by posting this trade, it reinforces to me not to do this again!, and that it can serve as a warning to others. Like Phantom of the Pits says, the most important part of trading is behavior modification–without that, you will lose, just like I did today.

Trade Summary:

FMT Long 280 Shares
Entry: $9.35, Stop: $8.37, Target: $12.00
R: $274.40, Exit: $8.64
P/L: -0.72R, or ($198.80)

Stocks Mentioned In This Article
Stock	Links
FMT	| |

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I got tagged as a pattern day trader by Zecco yesterday. I thought that MLK Jr.’s birthday would count for the 5 day rolling window, but apparently not. I’m trying to work it out with them, as I didn’t intend to violate the PDT rule, but in the interim I’ve got a $24,000 margin call. Until it gets resolved, I’m afraid to trade at all lest I get some kind of penalty. Undercapitalization strikes again. This infuriates me–the SEC’s pattern daytrader rules are a joke. It’s supposed to protect small investors, but all it does is limit my risk control ability. They’d hate for me to control my risk intraday when markets are liquid, but they’d like me to hold overnight when anything can happen.

I really REALLY need to develop a inter-day trading system, something like buy the close, or something else. Anybody got $24k I can borrow ;) or trading system ideas covering two+ days? What would Trader-X do if he held overnight? (I think just asking that question makes little kittens burst into flames, somewhere.)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com