Progress Thread: Consistently Profitable Trader

[Jonleehacker]

Wtf is Success Anyways?

I learned something very important this week on my journey to becoming a professional trader.

First a confession of sorts. Whenever I watch the Olympics, or the Super Bowl, or a golf tournament, or most of all the Stanley Cup finals, and I watch the trophy or gold medals being presented, I always cry. The feeling of success that the athletes must experience at that moment completely overwhelms me.

I remember back to being a little kid, all I wanted was that feeling. Even playing ball hockey, every game was the Stanley Cup finals, we were competing to see which team was going to get that feeling. Every football game we played was the Super Bowl.
The Feeling of Success

The first part of what I learned this week is that the feeling of success is still what I crave the most.

You see I have known I wanted to be a successful trader for a while. 22 weeks ago I set my focus on achieving that goal and I've been writing about it on this blog, but I have been trading for 4 years, without a real goal or focus.

Sure I had goals of how much money I'd like to make, all the guru's will tell you that there is no other reason to trade but to make money. But I always felt that my money goals were lifeless and impotent.

Now I understand why.

They weren't connected to the feeling of winning the Super Bowl. As a trader I want the feeling of winning the Super Bowl, of having that ring and having that amazing journey that leads to watching the clock tick down the final seconds with my team on the winning end of the score.
Worst Trading Day Ever

The above realizations about success came after this Tuesday's trading session which I can only describe as my worst ever. Not so bad in terms of how much money I lost, I am good at managing my risk now, so even when I lose 7 out of 10 trades, the losses are very much within tolerance. But a really bad day in terms of focus, direction and sticking to my plan.

I was just flailing away chasing trades (money) all day, and at the end I felt depressed and I felt like a failure that would never get it.

I knew that I was definitely not going to be successful or make any money trading like that. I needed some inspiration and direction. I went to YouTube and typed in "success" and the following video came up.

[video=youtube;ok8OHYQdDDI]http://www.youtube.com/watch?v=ok8OHYQdDDI[/video]

The narration of the video is awesome about how badly you want success and how important that desire is to actually achieving success, but it also reconnected me with that feeling that I wanted as a kid.

What the video leaves out however, is "what" success is. I can't just want "success." Success is nothing on it's own.
In Order to Be Successful, I Must First Define Success

I realized that success in trading is whatever I need it to be to create that "Super Bowl" feeling.

I have been, up until this past Tuesday, trading with dollars as the feeling of success that I have been chasing. Every day I define my success, my Super Bowl feeling as whether or not I made money and how much.

It is another very interesting thing about the video above, it is all about success, but they don't show images of players winning gold medals or Super Bowls, the visuals are all of a guy practicing.

The only way someone can win the Super Bowl is to derive the success feeling from his practice. A professional football player doesn't practice slipping on his Super Bowl ring, or cashing million dollar paychecks, he practices the elements that can lead to those events. But beyond that, he derives the feeling of success from practice.

Primarily learned that the feeling of success has to be cultivated. The only way we can cultivate success to derive it from things that we can control. That's why the football player defines success as excellence in his practice. That way he is in complete control of whether or not he is successful.

Winning the Super Bowl has too many elements of chance to be a reliable measure of success, but practice does not. The funny thing is, that most likely the team that wins the Super Bowl is the team that carries most strongly the feeling of success before and during the game.
Success in Trading

What clicked for me in this whole thing was that: one, I need to cultivate the feeling of success. I need to want that feeling as much as I want to breath after a minute of being held underwater, and two, I need to clearly define what gives me that feeling.

The most important thing I realized was,

You can't have success if you don't first define exactly what it is.

Every morning I go for a run as soon as I wake up. I just like to get a bit of a sweat, I just head out the door and run until I feel like turning around and going home. (This is actually a pretty good synopsis of the way I've run my entire life up until now.)

After my success realization I decided that when I run, I want to have the feeling of success every morning. So I went to Google Maps and picked out a building exactly 1 mile from my house, turns out, how metaphoric, that building was my bank!

Anyways, the next morning, I got up, full of vim and vinegar and ran the two miles to my bank and back.

Now I was feeling successful! Same run as always, but now I was filled up with a feeling of accomplishment and achievement.

Each day since, I've decided that success means jogging one building farther down the street. I tell you in the 3 days since, 2 of them I felt like complete shit and the last thing I wanted to do was to jog at all, never mind 2+ miles, but I was so attached to that feeling of success, I did it anyways, and compared to how badly I didn't want to do it in the first place, it wasn't even that hard.

In my trading then, the day after my worst, most disheartening day ever, I decided that success would be measured by only one thing, how well I followed my trade entry plan. Every time I looked at a possible trade, I asked myself, "is this at least a score of 7/10 on my entry rules pattern sheet?"

If it wasn't a 7, then no trade, no regrets even if it turned out to be a massive winner because it would not have given me a feeling of success anyways. The only way I could have the feeling of being a successful trader was to follow my rules. That's it.

And that feeling of success is all that I want.

The day after my terrible day, armed with my new definition of success, was by far my best day trading. Nice profit, but more importantly followed my plan, traded my rules and felt damn successful. The kind of feeling where you know you have taken a big step forward on all levels in your life.

Thursday and Friday I slipped a little bit, but still a major improvement over chasing money and not knowing what success even was.

I am getting it now: define success as something that is within my control that will also lead me the the Super Bowl feeling of success if I do it well enough for long enough.

All I can control with trading is when I get into the market and when to get out. I have updated all my score-keeping to focus on continual improvement of those two factors. Those are exercises that the guy in the video would be doing if he was a trader.

Thanks for reading,

Jon

 

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[Jonleehacker]

It's my goal to be a consistently profitable, professional stock and FX trader by May 1, 2013

This has been my goal for a number of years, and I feel like I am at a place where in my head I am sick of thinking about this goal and not taking any serious action towards achieving it.
Hence this post.


In order to achieve my goal, I have done an analysis of my past efforts at trading, determined what worked and what didn't and will formulate a strategy and plan to reach my goal.


There are two primary reasons that this goal has not been accomplished.


1. LACK OF FOCUS


I have never made a serious commitment to it. For the past 7 years I have been involved in Internet marketing, and have only dabbled at stock trading, even though it was what I always saw as my real passion and my most likely fastlane vehicle.


2. LACK OF DESIRE TO DO THE REAL WORK


I used to play a lot of golf. And at one point I was taking it quite seriously. The fact is that if you want to improve as a golfer, you need to be on the range a lot, which isn't the most fun. Actually the golfers who are successful, do find practicing on the range fun. But not only that, it requires ruthless self examination. If you analyze your play and you are losing strokes from the second cut of grass, you must spend hours working on shots from the second cut of rough, and guess what, those are the shots you hate practicing the most.


A trader's job is to create hypothesis about the market and the opportunities that it is presenting, to take trades based on those hypothesis and then to manage risk. That's it. But there is still so much that can go wrong in that simple job description.


My analysis of my last few years of trades and hypotheses is that I am very good and developing trading ideas and good enough at managing risk, but where I have my biggest opportunity for improvement is with actually executing the trades based on my analysis.


It seems as if somewhere between the perfectly viable ideas that are based on my years of learning technical analysis, and the actual act of placing a trade that is in harmony with my idea, the wires get crossed, and I either talk myself out of my idea (most likely due to fear) or neglect it due to having too many distractions and other things going on in my business life.


The evil step sister of talking myself out of my solid trade ideas is to take reactionary trades, based on spur of the moment emotions like fear of missing out on a big move, or greed, which are the trades that end up being complete traps set by more professional traders.


So unlike almost any other professions, I believe the primary work of becoming a professional trader, at least for someone with my make up, it between my ears. Finally I get this fact. I've read at least 10 books on the importance of being consistent, having a plan, being disciplined, etc in trading... but HOW?


I believe the answer is to work with a trading psychologist and unblock or rather re-wire the emotional patterns that scramble the signals from the original viable trade ideas, to their execution that results in my fingers clicking the mouse to move my money into or out of the trade.


THE PLAN


So going forward, my strategy is to develop a structure to focus as much of my energy as possible to trading between now and May 1. 2013.


The reason for this public post is to ask for help in holding me accountable to my goal. I am in a financial situation where it really does matter that I make it (which is also probably why I didn't ever take it seriously in the past).
Abraham Lincoln reportedly said that, given eight hours to chop down a tree, he'd spend six sharpening his ax.

The plan is broken into two parts. The first is from now until Dec. 31, and it consists of sharping the ax. This involves clearing distractions, writing a trading business plan, refining my tracking systems, creating a timeline for goals and milestones, and creating a support structure to give myself everything I need to succeed. I may be trading during this time, but it will not be my primary activity.


The second part of the plan, the 120 days part, is part where I focus entirely on the trading process. The plan is set, the strategy for improvement is in place, the money is budgeted and I just strap into my system and go until I can pronounce myself as a professional trader.


The other important thing I realized is that if I want different results, I need to stop doing the same things. One example from this week is that I have started printing out and marking my charts on paper rather than staring at the computer screen. This seems to be much more relaxing and enjoyable and has a nice side benefit that I can refer back to them, to build confidence in my analysis.


I DONE THIS - Week 1's Accomplishments

• Created the timeline spreadsheet from now until May 1, 2013 and started filling in milestones and goals
• Found at least one person willing to keep me accountable (hopefully more will result from this post)
• Developed a plan for measuring trader performance based on questions that I asked professional traders that I know on Facebook (profit and loss is a poor measure of trader performance since luck does play a part in trading. You can make money and still be a bad trader, and you can lose money, even with a perfect trade - so a good measure of trading must be based on other variables).
• Pulled out my previous trading plan, ripped it apart, boiled it down and started re-drafting it into something that will get me to my goal.
• Organized my office, my goal is to have a Zen-like trading zone to enable focus and mental clarity
• Read my old business plan docs and put notes on them to carry to new one
• Printed out some charts and did market structure exercise on paper for the first time
• Started purging and cleaning Firefox bookmarks and unsubscribing from any internet marketing newsletters
• Started compiling links to trading psychologist resources and put them on my blog with the goal to find someone to work with during my 120 day challenge
• Started to do exercises to develop more awareness of my current feeling state (being unaware of feelings is the hidden saboteur in trading)
• Met with a friend who it looks like will take over and grow my affiliate business as a Joint Venture project (big goal accomplished to have this off my plate).
• Started learning about Auction market theory and volume at price analysis
• Listened to my first trader psychology webinar
• Did a market structure exercise on RIMM, AAPL and SPY
• Outline of new trading plan completed and started on first draft
• I sold almost half of my investment in a startup that I am involved in, to raise funds and to allow me to de-stress, reduce my responsibility and focus

NEXT WEEK


Simple goal this week, and a big one. Complete the first draft of my trading plan. This will be a lot, all goals, money management, trading systems etc need to be at least roughed in.


Do market structure exercises for SPY, SLV and EURO and formulate trading hypotheses for these markets
Do more trader psychology study and exercises.


.... If you read this whole thing, thank you very much, I'm impressed. My commitment is to update once a week on Saturday from now until May 1, 2013. Even if things are not going well, I will do that. Feel free to kick my virtual a$$ (via PM, on FB or my blog) if you don't see an update by end of day on any Saturday between now and then. Words of support, encouragement and wisdom are also highly appreciated.


If you have any questions, let me know.
Thanks,
Jon

 

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[Jonleehacker]

This week's update:

Making the transition from prep weeks to plan execution and promptly shot myself in the foot, but makes for a decent read with some good lesson's learned.

Day 4 of 120 Days to Profitable Trading |Jon Symons

Dust myself off and vow to do better next week. The market is actually the best teacher there is, instant feedback!

 

[Jonleehacker]

Some good progress this week, including my first 3 trades and almost losing my shirt when I put in an order for 10 times the number of contracts I actually wanted (at least I didn't create a flash crash )

Not sure if anyone is actually following along with this thread, so I'll just post a link to the full write up on my blog

Prep Week 5 of 120 Days to Profitable Trading | Jon Symons

If you are following and would like more details or whatever, ask a question here or reply and I'm happy to elaborate.

I am a member of a trading group on facebook and some very experienced and successful traders have been giving me great feedback on the process steps that I'm taking, which is nice validation.

 

[Jonleehacker]

Day 102 to Profitable Trading – Unstoppable

The following crude chart is a perfect illustration of the current state of my trading.

By almost any objective measure, this was a difficult week. Four losing days and one small profitable day. On both Tuesday and Friday, I was so down I was ready to quit.

The funny thing that keeps happening is that when I get crushed, I come up with a clear understanding of what I need to do to go forward and even more determination to get to my goal of being a professional trader.

After one of the moments when I wanted to tap out, I came across this post about the hurdles one needs to overcome to be a trader.

To be honest, that’s part of what I love about trading. There is always a new challenge, something to over come, and something to grow you in some way.

The thing that most people aren’t ready for is the fact that growing hurts. It hurts your bank balance, it hurts your emotions and it can hurt you mentally, too.

​

This week actually turned out to be, in terms of confidence and learning, my best week ever as a trader.

Permission to Learn

This was the first IMPORTANT lesson that I learned this week. I have been completely identifying and measuring my success in terms of P&L. Of course this is the ultimate measure and the only real reason to trade is to make money.

But just like a brain surgeon has the ultimate goal of healing people via brain surgery, but they don’t start out cutting into live people’s brains. They realize that they need to learn A LOT, before they are really able to perform surgery successfully.

I haven’t been giving myself permission to learn, and that has been a huge burden emotionally. Every losing day, I would be beating myself up with inner dialog of failure and hopelessness, and finally this week I saw how ridiculous that was.

The Prize – Putting it into Perspective

I believe that when I am a successful trader, I will have a virtual license to print money, never lacking for anything financial again in my life. I will be able to work from anywhere in the world that has a decent internet connection, I will have no boss and no clients and I will get to work at something I love and am very passionate about, for only a couple hours a day.

That’s the prize for me.


That prize is damn well worth going over a few hurdles to achieve.

It takes some effort and learning to achieve that prize.

Every book about success in any field that I’ve ever read stresses that the way to success is to focus on process rather than results. This is the lesson of the week for me.

This week I fell in love with the process of becoming a successful trader.

This Week’s Stats

In accordance with what I have expressed above, I’m going to focus my stats analysis of the week on the few key metrics that represent better process.

Expectancy (what I got back for every $ I put at risk) = -.28

Total Trades = 27 (17 Losers – 10 Winners)

Winning Percentage = 37%

What I am learning is that day trading is much different than my long term trend trading. In longer term trend trading a low win rate is to be expected because you are searching for the outlier type big trends that make a massive profit. This has been my style up until now.

But day trading is different. And I need to make the adjustment in how I exit trades.

What is happening to me is that I am puking out of trades waiting for them to establish swing lows. What I should be doing is exiting on strength and then re-entering on the swing low.

I have been guilty of expecting and wanting every trade to go to the moon. Which is good method for longer term trend following, but for shorter term trading, especially with options which have a pretty big spread, it is expensive to sell on pull backs.

When I look back on my trades this week, I see that my winning percentage could easily have been 90%. I am good at getting into winning trades, but I haven’t yet become consistent at selling into the surge in my direction. In trend trading you don’t do that, you always get stopped out in some way trying to capture as much of a trend as possible without overtrading, but in day trading, overtrading is the de rigueur.

Going Forward – Next Week

Since now I realize that it is all about learning, I have set a learning goal for myself for the upcoming week.

Next week will be about winning %

My goal will be to exit trades aggressively once I get clear of the break even line (including spreads and commissions which I include in all my win-loss and p&l calculations).

This way I will be focusing on finding high quality entries, and making profitable exits. Once I can get my win % up, then I can begin to fine tune the exits.

Unstoppable

I believe this week I have finally made the shift from chasing profits to chasing continual improvement. I have fallen in love with the process of being a successful trader.

I now know that success is certain, because I will not give up until I get there. The reward is in the process, not the end result. Look back at the two lines on the top chart. I used to be trading in fear that the P&L was going to drag my enthusiasm down and I would be a failure, but know I know that the green line (which is more than confidence: love of the process and ability to learn and grow) is much more powerful and it will certainly pull the red line up.

Thanks for reading, you can read my blog for the entire journal of my trading.

Jon

 

[Jonleehacker]

Week 2 Update.

Overall, a very successful week, I really feel like this week was a big victory as I stayed on track in the face of a big headwind. The most interesting thing was the motivation that knowing that I HAD to update this thread provided - it was a big part of me moving forward this week... so thanks to everyone who is reading along.

I posted all the grisly details and play by play commentary on my blog, but here are the highlights:

I Done This List Week 2

• reviewed trading psychology webinar, and took notes
• bought the full trading psychology course and downloaded
• called immigration for clarification of bringing Edit here
• got charts setup with indicators for my trades trades
• created trade entry checklist for system
• created pre-trade self awareness checklist
• printed out and completed structure charts exercise for SPY
• watched and took notes on trader psychology course module 1
• worked on schedules, and review section of trading plan
• organized goals in Project Plan
• revised and simplified weekly review process
• completed first draft of trading plan! Woot!
• revised all related trading documents

Next Week, Next Steps

In the upcoming week, I have a lot of things to accomplish. The most important is to re-establish a mentor relationship and have my trading plan reviewed. Then get started on back-testing scripts. My trading system is discretionary, but I believe there is a lot to be learned from programming at least part of it – with a focus on tuning exits (which was the most challenging section of my trading plan).

Besides that I will continue to work on my trading psychology course, which I am LOVING, and then start to ease into some of the routines that I will use when I am trading, by doing my market preparation scenarios for 2 days.

Looking forward to next week's progress.

 

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[craig1928]

If you haven't got the book trading in the zone by Mark Douglas yet I'd highly recommend it.

 

[Toao]

If you consistently keep up following your plan and achieve it I have no doubt you'll be successfull. I'll follow and watch you ;-)

 

[CarrieW]

I am sorry that I was not able to start with this yet. I wont make excuses, but there were other far more pressing family matters that I had to attend too and am still not done with

this situation that is going on is not likely to be resolved anytime soon unfourtunately...

right now I have to focus on what is going on


sorry... I will be following along and once this is done I will be able to go thru them myself.

life! ugh!

 

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[Jonleehacker]

Week 3

Another very successful preparation week towards my goal.

Feeling much more solid, as I'm so happy that I'm spending my time building strong foundational systems around my trading before I re-enter active trading.

The highlights for me this week were:

• having a professional experienced trader review my trading plan
• implementing changes in my plan based on his feedback (expanded markets)
• setting up and committing to 1 year of having all my trades reviewed by a mentor
• wrote some killer scanning scripts that will save me hours finding setups

Next week, the goal is to see if I can automate my scripts further to send me SMS on setups. Also to begin my final trading routines and lastly to mark support and resistance lines on all the time frames of all the markets I will be trading.

If you want the details, it's all on my blog:

Prep Week 3 of 120 Days to Profitable Trading | Jon Symons

I really appreciate any comments, encouragement or feedback.

 

[Pete799p]

keep up the good work. I have been following along. I used to trade options back in college, gave me something to do in class.

 

[Jonleehacker]

Okay, this week's progress report it up, the final week of preparation for my 120 days to professional trading challenge...

The highlight this week was my "Trader's Manifesto"

My job is to find big trends, get on board, and ride to the end. Losing and break even trades are nothing more than a business expense in the process of finding the next big trend.

Always play to win big!

Cut losers short, let winners run. NEVER remove a stop.

Don’t miss big moves… If you do miss, get to a lower time-frame and hop on board.

This is no limit to how much money I can make (free my mind from the tyranny of limitations, especially in numbers and percentages). Exit trades based on charts, not P&L.

Size positions based on predetermined percentage of equity

Always look for a place to add more to a winning trade. Once you have your stop at break even if there is another valid entry- take it.

Always look at higher time frames for confirmation.

Full update here: End of Prep - 120 Days to Profitable Trading |Jon Symons

...Any comments and feedback welcome as always!

 

[MonTexan]

Nice summary in your manifesto...lots of nuggets in there. I especially like the ALL CAPS in the "never remove a stop" part. I have done this before and learned the hard way. Sounds like you have as well! Congrats on taking action and I look forward to following your progress, Jon.

 

[Jonleehacker]

I especially like the ALL CAPS in the "never remove a stop" part. I have done this before and learned the hard way. Sounds like you have as well!

When I looked back at my track record as an amateur, it was shocking to see, that if I had just never let my losses exceed my predefined risk amounts consistently, I would have been very profitable.

I think that's the point when I realized what trading was all about... money management!

 

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[MonTexan]

"Missing a trade is also a big no-no in my plan to become a professional trader, as I imagine myself getting paid to trade for some big company, and I can see my boss chewing a decent strip off of me for missing a trade like that."

I don't think you should be so worried about missing an opportunity. Good opportunities come around all the time, and the simple fact of confirming your trading system's validity by reviewing market action is worthwhile.

Also, it's easy to sit and say "I should have made that trade, that was so black-and-white, I missed easy money there" etc. But confirming your suspicions after the fact is the easy part. Being so confident on the front end while not knowing the eventual market is the tough part...that gets to the heart of your self-identified problem of execution. Knowing when to enter a trade, where to place stops, when to take profits, etc. is all about execution and where all the money is made and lost.

 

[Jonleehacker]

This weeks update, including advice from a pro on how to go broke chasing 48,000% returns and updates on two trades that I was in this week.

Why I love trading… Jan 125 NFLX calls, yesterday .05, today $24… only a matter of time before I catch one of those and make enough with three mouse clicks to own a private island.

I have a few very successful trader’s as FB friends and one of them, called me out:

But don’t forget the headwinds you face in the market every day. You are fighting commissions, vig, market friction, slippage, mistakes, and the bid/ask spread. It all sounds easy, but in reality is like walking barefoot over hot lava. Your first comment particularly bothered me when you said, “only a matter of time before I catch one of those and make enough with three mouse clicks to own a private island.†Catching one of these is the mentality of keno and lotto ticket buyers. You don’t ever catch anything, and get that phrase and idea behind it out of your head. It’s very destructive to your bankroll to even have that thought in your head. Trust me on this one as I’ve been there, done that.

Day 25 of 120 Days to Profitable Trading



Overall, my confidence and determination are growing steadily. The two trades pictured in my blog post are probably my two best ever, not in terms of results, but in terms of process and being under control. I sincerely feel for the first time that my goal of being a full time professional trader is achievable.

Any comments, questions or feedback is welcome.

 

[Pete799p]

This weeks update, including advice from a pro on how to go broke chasing 48,000% returns and updates on two trades that I was in this week.


Why I love trading… Jan 125 NFLX calls, yesterday .05, today $24… only a matter of time before I catch one of those and make enough with three mouse clicks to own a private island.

I have a few very successful trader’s as FB friends and one of them, called me out:

But don’t forget the headwinds you face in the market every day. You are fighting commissions, vig, market friction, slippage, mistakes, and the bid/ask spread. It all sounds easy, but in reality is like walking barefoot over hot lava. Your first comment particularly bothered me when you said, “only a matter of time before I catch one of those and make enough with three mouse clicks to own a private island.” Catching one of these is the mentality of keno and lotto ticket buyers. You don’t ever catch anything, and get that phrase and idea behind it out of your head. It’s very destructive to your bankroll to even have that thought in your head. Trust me on this one as I’ve been there, done that.
Day 25 of 120 Days to Profitable Trading

This trade reminds me of a missed opportunity a few years ago. I was looking to short the banking sector and was trying to decide between citi and bearstearns. I noticed for some reason there was a strange amount of volume on puts that were at a %50 devaluation but for some dam reason I went with citi as the option price fit better with my 1-3% portfolio per trade max. The puts were about $0.25 for about a $25 put with a trading price around $50. A few days later the company dropped to about $2/share. I still made exactly what I had expected to make off of my Citi trade it would have been just insane to have caught that deal. In the end I did learn a lot, if the economy starts to melt down and you see a troubled company see a 1000% growth in put volume at a deep discount you might want to consider jumping on the bandwagon.

 

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[^eagle^]

I have recently over the past four months become consistently profitable as a part time trader. I'm rooting for you! Plenty of pips to go around.

Is this face book group a private group? Do you have to be invited? I would like a professional to look over my trading plan.

I have a lot of positive comments at forex factory about my method. Not a lot of band wagon jumping as I make them do a lot fundamental analysis. I get the feeling that most traders are Tech heavy and think when indicator X is blinking and indicator Y is green you pull the trigger and make millions.

Another thing I really liked was your talk about exits and reentries. Good stuff. Here's to becoming pros!

 

[Jonleehacker]

Thanks eagle, congrats on hitting the consistantly profitable goal, e

The group is by invite only... but if you want to friend me on FB, I'll add you: https://www.facebook.com/jonsymons

 

[Jonleehacker]

January Month End Review

In the Stats

• Method Adherence (how well I followed my systems) = 74.5% (my goal was 80%)
• Total Profit / Maximum Loss = 5.7
• Average Time in Winning Trades / Average Time in Losing Trades = 6.3 days
• Overall: Winners: 3, Losers 3
• The newsletter Trades: Winners 1, Losers 2
• My Own Trades: Winners 2, Losers 1
• Expectancy - Overall (expectancy is the average amount you can expect to win (or lose) per dollar at risk) = $.60

Positives Steps:

• avoided some bad trades, that were close, so good discretion shown
• did productive work on emotional self awareness
• had 2 grade A trades, one was managed exceptionally well
• developed processes for stock trading so this will allow me to scale into hundreds of more trading opportunities
• progress on scripts to minimize scanning time

Areas for improvement:

• trade management – knowing the difference between high volatility and end of trend
• missing trades – do rehearsals, is it self-sabotage, or just something I need to loosen up about?
• need to be better at anticipation
• go beyond the hard right edge, and into the future, and run possible scenarios
• expand into stock trading. refine scripts to be more accurate

A more detailed analysis and for the plans going forward, see my blog: Journey to Profitable Trading - January 2013 Review

 

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[fsna.hartley]

I recently knew somebody who does this, and yes he earns double the money just in two hours and he was like in college or something because that's what I saw from his Facebook page. I don't really know how this kind of trading works but I admire your will power on reaching that goal of yours. Good luck and keep it up! You're doing a great job!

 

[Twiki]

Thank you for posting these updates. You have a lot of guts detailing this process... trading is such a tough area to succeed in. I appreciate you sharing the gory stuff!

 

[Jonleehacker]

First, my apologies for missing last week's update. I did email in to my accountability partner, but so little happened that it didn't seem like it was worth writing a blog post.

This week's (& month's) update on my goal of becoming a professional stock trader... including stats and metrics from the month. In a nutshell, if there was a dog days of winter, I'm in it, or as Seth Godin calls it, "The Dip"

Day 60 - Journey to Profitable Trading. Feb '13 Review. | Jon Symons



Overall, the last 2 weeks have been a big struggle on every level. My goal this week is to get back on track now that I'm back home and can get my routines more stabilized (I have been in Florida for the past 6 weeks, working from a kitchen table, missing my extra monitor, and with unreliable Internet).

 

[Jonleehacker]

A couple weeks late due to travel and unreliable internet connection, but the explorations in this post are actually pretty interesting, and I was having a lot of revelations about the cost around trading, and I think I uncovered a big step towards my goal of consistent profitability.

[h=2]Part One – Commissions[/h] About 90% of the week’s loss went to commissions. Partly that is because I’m trading such small size that commission as a percentage of each trade is large. Even though it is a bit of a feel good for me to deduct out commissions, it is really just mental gymnastics. Commissions are real, so it is pointless to separate them from bottom line profits and losses.
The only thing useful about looking at them separately is to encourage the SMB motto, in their excellent post The Path to $1k:

This is me trading my best set ups, more often, and with more size.
​

Eliminating low quality trades is job one, and this will reduce commissions, just from the point of view of having fewer trades.
[h=2]Am I just Another Addict Pretending to be a Trader?[/h] I had a very interesting thought go through my head while trading this morning. It went something like this, “Do I really want to do this, or am I just being self destructive?â€
As I finished trading, I couldn’t get this feeling out of my mind.
I started to see an addictive behaviour, one that I am very familiar with from my health challenges. A part of me that enters trades looking for a feel-good. Nothing feels better than the hope of making money. The story goes something like this:

“Almost certainly this is going straight up from here. You’re going to see the most vertical green 1 minute bar in the history of trading and you’re going to make $100,000 in the next 30 seconds.â€
​

Honestly these are the thoughts that are going through my head as make the decision to hit the Send button and place an order.
All rational process of proper pattern identification sometimes flies right out the window, and this addict takes over and wants his drug.
For those that don’t trade, think of a food that you crave, you know it is harmful to you, but you want it anyways. For me it was chocolate bars, I was very sick, and I knew they made me worse, but I still ate them. At the moment I bought them, I was able to convince myself it was not going to be bad for me, the only real thought in my mind what how good that creamy sweet flavour in my mouth was going to be.
It’s that same thing now in trading, it’s almost like the rational thought process just goes away for a few seconds, just long enough for me to find myself in an emotional trade.
Fortunately, I have faced this type of behaviour in myself before. Although, it certainly isn’t an easy thing to overcome, it can be done with increased awareness and taking responsibility. In short that means probing to understand what the benefit is to me to taking self destructive trades.
It is not aways clear cut emotionally to accept success. Many of us were taught that successful people were bad, or cheaters, or rich people were thieves. When we start to taste success or wealth, these beliefs can kick in to “protect†us from actually despising ourselves, which would be psychologically devastating.
[h=2]Exact Same Trades $220 More Profit[/h] For fun tonight, I went through my trades from the day before. In terms of P&L, it was a “bad†day, down $124. I have been trading options, just so I don’t have to put much money into my trading account and because I consider myself in learning mode so I trade small numbers to keep the stress down.
But I had this hunch tonight. I went back over all of my 8 trades for today. The exact same trades, same amount of money at risk, only rather than trading options, I bought $30k worth of shares in each position. Again, exact entry point that I had with the options, and exact same exits (when I buy or sell an option, the confirmation message I get also shows the price of the underlying, so it is easy for me to calculate the equivalent trades on the underlying security).
Rather than a $124 loss, I would have had $100 profit. Also, there would have been less risk, since the spreads are lower and since I’m trading large caps, much more liquidity.That’s a pretty significant difference, considering I did not a thing differently in my trades.
This $220 difference is pretty much the cost of the spreads on the options that I’m trading.
[h=2]It’s All About the Spreads[/h] From my thoughts above, as I was placing a trade in VZ, I took a screenshot showing both the options and the stock spreads.

Let’s break down a trade of 500 shares. For sake of demonstration we’ll imagine buying and then selling the position instantly, since we are only interested in the cost of the commissions and spreads.
Option Trade
Buy 6 Contracts at the Ask price = ($2.70 x 600) + $7.50 commission = $1627.50
Sell 6 Contracts at the Bid price = ($2.62 x 600) – $7.50 commission = $1564.50
Cost of Options Trade for 6 contracts of VZ = $63
Same Trade with Stock
Buy 600 shares at the Ask price = ($51.13 x 600) + $5 commission = $30683
Sell 600 shares at the Bid price = ($51.12 x 600) – $5 commission = $30667
Cost of Stock Trade for 600 shares of VZ = $16
That $47 tossed in the trash, times 8 trades I make on the average day, represents almost $400 a day.
It would be pretty ironic if I was a couple days away from quitting last week, when in fact the only thing hurting me was having my account underfunded because I was in “learning mode.â€
[h=2]Further Investigation of Headwinds[/h] I decided that I needed to be more certain of my conclusions. One day and one test trade aren’t enough evidence to declare that I had made a major breakthrough towards becoming profitable and start trading $30,000 positions rather than $2000 ones.
Therefore, I went back over two weeks of trades, and ran them all through my trade tracking software, this time recording them as stock trades rather than options.
(NOTE: The following are not necessarily “position sized†properly. I am just buying $30,000 of each irregardless of the risk, so lower priced stocks are taking on more shares, therefore wins and losses of lower priced stocks may be over-sized. Some day traders do trade and size positions using exactly this method, so this method is not completely off the mark for the point of these tests.)
The number in brackets is the difference for the day by switching to stocks rather than options.
April 13 Options -124 Stocks +120 [+244]
April 12 Options -142 Stocks -249 [-107]
April 11 Options +8 Stocks -51 [-59]
April 10 Options -47 Stocks +176 [+223]
April 9 Options -177 Stocks -22 [+155]
April 8 Options -136 Stocks +58 [+194]
April 5 Options +18 Stocks +459 [+441]
April 4 Options -396 Stocks -169 [+227]
April 3 Options -12 Stocks +251 [+239]
April 1 Options +211 Stocks +770 [+559]
Total of $2,116 over my returns from trading options in 10 trading days, trading very small risk positions. That is very significant. If my conclusion is accurate, which I believe it is highly probable that it is, it means that I am only one small shift in trading away from me being a decently profitable trader.
On a $30,000 account, $2,116 is a 7% return in 2 weeks, just from the savings on spreads.
[h=2]Wild Day, Torture & Mulligan[/h] Interesting day. I put in my first order, a buy at market, and it took 3 minutes to fill. In that time the market turned, so I figured it was cool that somehow my order didn’t get filled. Just as I figured I was safe, I heard the “ring†to signal a filled order. Oh-oh!!
By the time my oder was filled, it was past my stop already.

I didn’t know wtf was happening, but immediately I hit “Flatten†to sell at market. What followed was 27 minutes of pure agony as my order just hung in limbo and BIDU slowly sank, dragging my P&L with it.
By the time my sell order had filled, I was livid and into a massive loss.
Anyways, long story short, I shot off a nasty panicky email.
About an hour later, I received a phone call, informing me that Thinkorswim had experience “order routing issues†(no shit!) and that my loss had been credited back into my account.
Whoosh! Felt like I was playing Monopoly and sitting on a Get out of Jail Free card.
[h=2]Summary[/h] What a week! Could I pack any more drama into a week of trading.
Anyways, this was almost 3 weeks ago now, and I still haven’t had a chance to process my revelations about the differences in costs with trading stocks vs options as I have been.
I will hopefully be back to trading next week with a properly funded account trading stocks

 

[LibertyForMe]

I submitted my previous post to Reddit, since I thought was pretty good.

Anyone that would help me out with an upvote, I'd appreciate it:

Success in Trading... Do you really need it? : finance

You may want to put a little teaser text followed by your link in the reddit post. It looks blank, and you have to click on the heading to get taken to your website. But I am not a big redditor, so I may be out of the loop on common practices.

 

[The-J]

I considered this, actually.

Problem is, I simply don't have the capital to throw away in order to learn the game.

Good luck!

 

[Jonleehacker]

Problem is, I simply don't have the capital to throw away in order to learn the game.

Yes, becoming a trader has to be thought of just like any other well paying career, like a doctor or lawyer, there is a cost to get the education. If you take that attitude, then it de-stresses the losing that happens while you learn the business.

 

[CarrieW]

I would like to follow you and join in.

I have been trading for awhile now too and need to get my a$$ in gear...

I was at a point a few months ago that I was essentially even and then I got all screwed up again. I haven't been spending any time on trading lately and that HAS to change. its coming up to the slow season in forex and it is the perfect time to regroup and put everything down on paper, just like you are doing

so if you dont mind I will follow along

 

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[Jonleehacker]

so if you dont mind I will follow along

Go for it Carrie. In next week's update I will post my schedule/timeline of goals.

So your task this week is to complete the first draft of your trading plan and do an honest assessment of why you haven't stayed with it consistently (the key here is to not blame any external factors)

 

[CarrieW]

I love homework! (I am such a dork!)

I really do better with specific goals and projects to work on, I have been so dead set against doing that and that is probably the biggest thing holding me back.

I will see what I can come up with

thanks!