I’ve really been going through it this week.
This month has been a tough one for me. Not only am I down around $10k, but I have been violating my trading rules.
I have rapidly increased my size past my designated limits. I have removed my daily stoploss and increased my individual position maximum.
During my trading I have disregarded entry and exit requirements, entering trades early or late and not cutting trades from running too far offsides.
I have committed a million sins. My losses are 1000% my fault and so many of my errors have been unforced.
That said, I ran into several important lessons this week.
One of those was having too much size during a nanocap company’s earnings which had a $1.50 share price. The swing of that stock for each tick it moves is much, much larger than for even $15 stocks.
There also was an IPO that had multiple circuit breakers and I got caught offsides in a sweep where I hesitated to enter aggressively, trying to get out via limit orders and ended up hitting my daily stop, liquidating me at the very bottom tick.
And a Chinese pump and dump where I tried to force a position to work, assuming it was going to fail after its 300% runup, when it still could go another 1-4 legs (and did) up, causing me to be disastrously offsides and sustain a huge loss, averaging into my short as the stock went up.
And a fourth, I had just successfully navigated trading earnings for a company that I was more or less done with unless something jumped out to me on the tape, and I was in a group call with a trader that has a sharp model for trading earnings. He was convinced to effectively blind short the stock until the next day’s open, despite it rising several percent following positive earnings numbers. If I was sitting in a quiet room trading, I never would have taken that position. In fact, the tape didn’t look favorable for it even if I squinted. However I decided to “go with” his trade and effectively copy trade him, something I have been warned a number of times against doing when you don’t agree with or understand the underlying reasons (in this case a black box).
Trading each of these stocks resulted in a four figure loss. If I added them together, they equal probably 80% of my losses on this month. And all of those were just this week! And this is roughly the conclusion of my third trading week this month!
It’s clear to me that I am making large errors.
It’s also clear to me that I am RAPIDLY learning from my mistakes.
It’s ALSO clear to me that there are a HUGE number of mistakes that can be made while trading.
What is not clear to me is that I should drop my size down.
While trading a 30k position max, I navigated trading with differing sizes based on the circumstances. I also had a feedback loop to be more sensitive to sizing down or up in various scenarios.
I also enforced my own stop loss and monitored my risk, both during trades and across the trading day as a whole.
I became a meaningfully better trader this week. I am a completely different trader than when I started this month.
So what do I do? I have at least another 80k to burn before I start to question my sanity. I can lose 180k if I really wanted to. More even depending on my conviction.
Do I really think I will lose 80k before I reach profitability?
I would be shocked if that is the case… so should I continue on trading with “big” size?
I am only 67 days since beginning to work with my trading partner and 52 days into clicking buttons. Not even two months of clicking in.
On the one hand, I am an immature trader, inexperienced in the manifold ways that trades can go wrong and struggling to properly let winning trades run. So I’m good at losing and bad at winning.
On the other hand, my rate of improvement driven by diligent documentation, self reflection and iteration on a huge number of strategies and situations feels incredible. Every 3-4 days I feel clearly like I have leveled up.
How far off can profitability really be?
I traded 139,608 shares today. That is excessive for my age and proficiency. However the reps and screen time, in my opinion, matters!
My entry rules in various situations are much more refined than two weeks ago. Some of my strategies are able to be implemented quickly when they come up without having to consciously think about where or how to enter.
I feel similarly across each of the aspects of my trading mechanics.
I am committing trading sins less frequently and with lesser magnitude.
I am treating cheap stocks with more respect and approaching them more judiciously.
I am clicking in less to volatile stocks and having sharper entries.
I had an earnings trade for MU that was actually just beautiful. I couldn’t have done that a month ago. It felt controlled, intentional, well executed, and I succeeded in trading the tape profitably.
Also, I was quite harsh on myself at the start of this blog post. I have traded many situations adeptly. There will always be lowlights.
And for increasing my size prematurely and removing my stops, I found I was running into an issue while trading $10k max position size. I was using $10k as the modal position size when really it ought to be the least common size.
When I bumped my max size to $30k, I used a lot more $10k-25k positions and rarely was in for the full $30k. I also did some four figure position sizes while testing situations.
It’s possible, given my high stakes poker background, that trading where positions have three figure risk is necessary to adequately navigate sizing properly.
It’s also possible that that statement is complete cope and I should simply be more disciplined when trading smaller.
It’s also, also possible that when I am down on the day, I increase my position sizing across the board and less frequently use the bottom quartile of my position sizes, as they won’t have a meaningful impact on my (effectively arbitrary) daily P&L.
My opinion is that it is some combination of all three and that the actionable item for tomorrow is to have my primary goal to be more intentional about sizing appropriately, and scaling my position sizing down when in the red on the day – which given I am a losing trader, is the majority state of being.
Anyway, as this post’s title implies, I am determined!
There is only one objective in my life right now and that is to reach profitability as quickly as possible.
I will look to close this week out with SHARP trading tomorrow. Not aiming to get unstuck for the week.
The goal of being net $1 up looks far away, but the opportunity to become a better trader during preparation and review tonight, and during my screen time tomorrow is right in front of me.
Cheers.