From: Trading Guy (trading_guy@hotmail.com) Subject: A Daytrader's Story Newsgroups: misc.invest.futures, misc.invest.stocks, misc.invest.technical Date: 2003-02-04 08:31:30 PST A Daytrader's Story The following is a true story of my career in daytrading. All the events described herein actually happened and I am posting this both as a catharsis for myself and a cautionary tale to anyone who is currently daytrading or has notions of doing so. For obvious reasons I wish to remain anonymous therefore certain specific details not relevant to the account will be omitted. I am married with two young children, and have been self-employed for several years. Up until spring of 2000 business was booming and life was good. As luck would have it, right before the economy started its downturn that spring, we purchased a much larger house and took on a much larger mortgage payment. Also we racked up some credit card debt along the way. Business really took a downturn the fall of 2000. By spring of 2001 things were getting desperate financially. Having always had thoughts of daytrading for a living, or at least to supplement income, I decided to open up a trading account with one of the major online brokers with money borrowed on a credit card. Initially, I made some small profits trading mostly tech stocks. The roughly $8,000 account grew to about $10,000 in a months or so. Bear in mind I had zero experience daytrading, though I had bought a couple of books. If something was going up, I bought. If going down, I shorted. Candle patterns, support/resistance and all other forms of technical analysis were foreign to me at that time. After a while I started losing money. I was not cutting my losses as I should, only bailing out at the lost minute. I had no trading plan in place, or even reliable charting software. In the fall of 2001 (just before the terrorist attacks of 9/11) I closed that account, borrowed more money and opened an account at a different broker. This broker used RealTick software (so advanced charts were available) and also required a minimum of $25,000 to daytrade. Readers may remember the pattern daytrading rules that went into effect around that time. This required constant replenishing of the trading account as losses caused it to dip below the $25,000 minimum ? funds often borrowed from credit cards. I started using technical analysis much more also: support/resistance and moving averages, studied candle patterns and so on. Trading was almost exclusively the QQQ's. Small profits were made over 2 or 3 days, following by a day or two of huge losses that would more than offset any profits made. For example, I might make $300 for a couple of days in a row, and then suffer a $1200 loss the next day. It was during this time that a started having real doubts about my ability to daytrade. I should mention at this point that I treated my daytrading career as a business. It wasn't ever meant as a "get rich quick" scheme or thrill seeking. I was always attempting to determine a method of taking consistent profits with minimal losses over a period of time. I spent evenings and weekends poring over charts, trading books and so on. Even after getting beaten up over and over by the market I kept coming back. Sometimes I would take some time off to regroup, but never gave up. I was very serious about learning the skills to be a professional trader. In early 2002 I joined a daytrading group and bought a video course in order to learn about daytrading the QQQ's. I tried mightily to apply the principles learned (and they seemed sound), but either always seemed to get wiggled out of an otherwise good trade, or have the trade turn against me. Later that spring I moved my account to yet another trading firm, and continually had to replenish my account. At this time I started pulling money from my IRA. I felt I could justify this since I was treating the trading as a business, and many business owners pull capital from their retirement funds. Also, the debt was getting so deep (and my business was barely covering it's own expenses) that learning to daytrade successfully seemed the only option. In the late summer of 2002 I moved my account to my current trading firm, one that allows me to trade e-mini futures with low commissions. My first month there I actually made a tiny profit ? my first profitable month out of over a year of daytrading. I was elated and felt I had finally "figured it out". However, this was not to be. Subsequent months led to more losses. I no longer had to maintain the $25,000 account minimum since I was daytrading futures, but felt I had to trade somewhat large positions in order to recoup previous losses. I developed trading plans that seemed to work on paper (even allowing for slippage), yet when I tried to trade the plans they never seemed to work. There have been times I felt there was someone on the other side of the screen who was watching my every trade, causing the market to go against me at every turn. I even questioned if my own trading firm was somehow working against me. Which brings me to today. Total daytrading losses are nearly $160,000. Funds in trading account are around $5000, which is basically all the money we have left. My confidence has been destroyed. I should mention that my wife has been very supportive along the way, perhaps too much so. I have completely and utterly let my family down. It is apparent now I should have stopped earlier on. It was not an addiction ? I've read the symptoms and I had none of them. My stomach was often in knots as the trading day started and I was always glad when the trading day was over. So trading was not something I "had to have". It may be possible to consistently earn money daytrading, but having tried to learn all I can I am very near giving up altogether. This has been by far the most stressful year and a half of my life. To take trades that by all accounts should work (buying at support, selling at resistance, etc.) and have them go against you again and again and again. Missing huge moves because the signals weren't there. An so on. It's easy to look back and see the mistakes I made, but at the time I could (and in some cases still can) justify every one. It was, after all, a business I take very seriously. At this point I would love to have a mechanical approach I could use until my confidence gets restored somewhat. I will likely spend the next few days at least attempting to make some decent trades. I hope this story will help any current or would-be daytraders out there. If you want to daytrade, start small, and know what you're getting yourself into. If anyone would like to post responses, please be kind. I've been knocked around enough?..
I think this story was a plant by the SEC. They witnessed qdz's and qdz2's campaign against the PDT rule. Yet another attempt to keep the masses down, I suppose.
Lessons of his? No.1, first for the most, yes, victim of PDT rule. PDT forced this guy to trade large and lose large before he really knows about trading. PDT rule is a killing knife. Without it on one's neck, folks would learn to day trade gradually with smaller account without borrowing from credit cards to maintain a 25K balance. No.2 brain washed by manipulators... I think I have elaborated on this point quite often recently. Just keep it short for you to think while reading through this tragedy.
If you do not have 25k that you don't need to feed your family or keep food on the table, you have no business trying to daytrade for a living. If you do not have this amount regardless of your situation or responsibilities, then you also have no business trying to daytrade for a living. With less than 25k you will be trading low priced stocks which are worthless for trading. They don't move. How much fu***** volatility is there in a $7.00 issue. Yeah, you're gonna take that 1000 share position and make that dime. Bull****. Secondly, there is NO manipulation. Whatever manipulation exists is part of the fun and often gives serious clues as to what is REALLY about to happen. Learn it and love it........ Nkhoi, I am truly sorry about your situation. Losing money is not fun. I just think a spade should be called a spade so to speak. The PDT rule did not kill you and neither did manipulation. You killed yourself. "Its never you against the markets, its just you versus you." -Mark Douglas
Keep thinking like that Qdz2. For Nkhoi and others, people should be honest with themselves before they get to this point. I didn't, but, things change.
I think you people are missing the point that nkhoi is merely reprinting something that was posted by someone else on another board. I don't think this is the story of nkhoi.
So, if this isn't Nkhoi's story then we don't have to pussyfoot and we can say exactly what we think bout the story. Yes, the guy was an idiot for having let things go that far. But ..............., hey I too have to admit that I dived into the water without really knowing how to swim. The point is that in real life no-one in his right mind would set up as a surgeon, an electrician or whatever without sufficient training. Yet, that point seems to be conveniently overlooked by so many people where trading shares is concerned. The question as to how we can bring home the message to someone else to be careful (as otherwise they will be eaten alive) I just haven't got any idea how to go about that. For example, the following story illustrades the point. A friend of mine couldn't find employment and approached me for help as he wanted to take up share trading. I provided my system as well as ample examples and a list of essential books to read. I certainly made it clear that he knew to use weekly charts to get a signal and to use the daily chart to finetune his entree point. I also made it very clear that the next 6 to 12 months wasn't a time to make money so much as a time to learn. I therefore suggested to him to split up his money into ten lots and to commit only a small amount of money to anyone position (say US$ 250 to $ 500) and I emphasized again that, even though, because of brokerage it would be hard to make money, that that was the best way to go about learning this business. My last suggestion was to initially to trade no more than one or two positions at a time. Within three days he had ten positions, all much larger (ten times the suggested size) than I had suggested and eight of them were not even selections. (The price for those was trending down instead of up). Now, after all that advice he still managed to stuff things up for himself. His total loss wasn't unsubstantial for his financial position. Now you tell me, how can one get a message across to an idiot ? freealways
now there's something (finally!) i can agree with you on, free. absolutely correct. i think the need for preparation is taken so lightly because of the very few perceived barriers to entry into trading. (hell, it's routinely promoted as an 'anyone can dot it' opportunity!) so, people being people, usually choose to take what they think is the easier route. the statistics amply demonstrate the wisdom of this.