So I haven't blogged in forever. Originally I quit because I was told not to write anymore about my financial opinions. This was because it could have been construed as an advertisement (I was registered with a broker-dealer and had some clients even though poker was my main business). However, as of the beginning of 2012 I no longer am with them.
With online poker still difficult due to the UIGEA and our wonderful justice department, and my lack of desire to play live poker in the St. Louis area or travel the circuit, I have begun trading stocks fairly actively (hoping to make a living out of it). With this in mind, I plan on using this blog as a way to describe what is going on with my trading - both emotionally and in practice.
I have been "officially" trading since mid June or so. My results have been horrible to say the least. I figured this had a good chance of happening based on various bloggers/books I have read, but it doesn't make it any easier on my mind. The learning curve is pretty steep, and even though I have invested successfully for years, trading is a whole new ballgame. I came in with what I perceived to be a good system. However, I quickly began overtrading both in volume and size. Plus, I would trade things not even related to the system. These seem to be a common errors for many beginners that can and often do bankrupt traders. For me, it was a very painful lesson to learn. While I still battle trading too large occasionally, for the most part I have got that under control. Furthermore, after much reading I have learned proper risk management that is very important to long-term success. This is akin to what successful sports bettors do to determine proper bet sizing to ensure they are not exposing themselves to too much risk such that a cold streak can bust them.
My main focus now is on developing a couple trading systems that not only work and are fairly easy to incorporate, but fit my personality. I am currently working on one that seems to have good potential, but until I see it in real world trading, I will not know for certain how well or poor it really does.
One trade from yesterday illustrates very much what I have been going through. I sold CMG short at $279.1 based on what I think was good logic and charting. I had an initial target of ~$260 for the stock. My current risk (or R) my system allows me is a loss of 1% of my account on any given trade. However, because I got greedy on how much I wanted to invest, I put the stop loss at a tighter point (284.1) than I should have given where the support was. Essentially, I set the stop ~$5 above where I sold short. This would give me a roughly 4:1 reward:risk which is pretty strong. I should have set it a few dollars higher meaning I just couldn't sell as many shares (thus reducing my profit potential=greed) and/or been more patient and waited for a better entry point. Today the stop got hit as the daily high got to $284.57 before falling fast to close the day at $272.88. As a result instead of a $6+ paper profit, I took a $5/share loss. Even as I was setting my stop, I was internally questioning it. These types of amateurish mistakes add up quickly, and to be honest, I am really pissed at myself because I feel I should have been better, and I definitely need to get better. I am definitely struggling at this point.
Anyways, I plan on updating this blog fairly regularly. This is partially a therapeutic way of writing down my thoughts, but also I think it will help my growth in trading. Hopefully, other people will also learn from what I write about and not make the same mistakes as me.
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