my story

Discussion in 'Journals' started by traderkay, Jul 9, 2001.

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  1. hi guys (and girls:) here's my little story. i'm posting it mostly for my own benefit (the way tutor benefits from teaching) cause i wanted to put my experience together and kind of look at it from the outside. I started trading in 99 I think with little capital. It was the mania time - a POS firm announces a web site and its stock goes up 50x. im sure you all remember those times. well many of you would say it was a good time to start because you could buy anything and it would go up. well it wasn't for me because i was going short. i tried to look at the companies that were shooting up and it was mind boggling how such POS could go up in such an extreme fashion. So being kind of a contrarian by nature and reluctant to follow the crowd I shorted those stocks. You didn't even need to know fundamental analysis to see that the forecasts of bright future for a POS that just announced a web site or something like that were complete nonsense. Anyways, I shorted them as they were shooting up. Every one POS that I shorted went down but I had to wait months and months while the stock was doubling on me. By the time it came down I was so scared I covered at breakeven. So that's how I spent maybe 1/2 year. I thought that I was being rational, I was being "right", the crowd was idiotic for running these stocks up and I was doing the right, "prudent" thing. Sadly I couldn't be further from the truth. I always put on huge positions relative to my equity. So for months my equity was tied up in losing positions but thats just icing on the cake. After half a year, I took another big position, it went against me, I disregarded my stop, became an investor, the usual sad story. Also I let some personal factors interfere with my decision making. Also regarding stops, I didn't really think I needed them. I kind of expected to be right every time, I don't know how but I did. I considered stops something that's too boring and probably unneccesary. So when that big position went against me I was blown out. I was out of the game. I went thru the typical denial stage of not looking at my account for weeks and trying to convince myself that I don't care about this "trading thing". I tried to forget about it, I occupied my mind with other things. But 1/2 year later I decided I wasn't going to be beaten so easily. As painful as my defeat was and as stupid and degraded I felt, I decided to keep at it.

    Well I wanna talk a little about the reasons of my downfall. Well the reason is simple: it just seemed too easy for me. You joined any trading chat room and all you saw "supertrader sells ABCD +12", etc. rarely did you see someone posting a loss. It seemed like there wasn't much to it, it seemed like everyone and their grandma was making a killing. Naturally I didn't want to miss out. Noone in chatrooms was talking about risk management and taking losses. To be fair a few people were but very few. Most were just chasing the latest hot stock or craze or guru. Another big reason is I assumed a direct cause and effect relationship between firm's prospects and its stock price. I learned the hard way, that assumption is very false.

    So anyways, I decided to keep at it. I haven't had the capital to trade so since then I've been studying about the market. Plus I figured why would I need the capital if I don't have a winning strategy. I got completely disappointed in fundamental analysis for obvious reasons. So I concentrated my studies on technical analysis and risk management. I learned many counterintuitive truisms such as you can win less than 50% of the time and still be a net winner if you cut your losses short. That's counterintuitive, ok? A good "stock picker" is only good if he picks more winners than losers right? Wrong. I also learned about trading with the trend. That concept is counterintuitive also at least for me. If something's "expensive"(high) humans don't want to buy, they want to sell(short) because the thinking is something will happen and the price will become "normal" (lower) again. I have't found a winning strategy yet but I feel like I've progressed a lot and I'm getting closer. I'm papertrading trying different stuff out. My timeframe is swing trading. I feel pretty stupid about the way I started out. I wanted something for nothing. I was taking stabs in the dark, completely didn't know what I was doing. I'm serious about succeeding and I will persist until I'm successful. Many successful traders have blown several times and/or spent year(s) before turning the corner. Sometimes it seems like I'll never get there but I look at many of you guys who are kicking ass and it inspires me and I keep at it. Meanwhile I found on the net many successful traders who are happy to "give back" for free, I think many of them post here on elite boards. I for one am thankful for that, you're my inspiration.

    Sincerely,
    Trader Kay
     
  2. My advice to you is to keep at it, find something that works, and then get really good at it. Papertrade in a notebook, and then show your results to someone and hope they'll give you a stake to trade. That's what I did after I blew out my first stake (my own life savings, 600 bucks left in that datek account now). I kept at it for 9 months in a notebook, and posted my results in it every day, all the trades, and finally my dad banked me. Make sure you tell them that you WILL LOSE IT. My dad knew to trust me to it cause I would figure it out eventually. I lost almost half before I finally figured it out though. Many people never master it. I've heard that it's 90%+, so make sure you have something to fall back on.
     
  3. jmcgraw

    jmcgraw

    p2: Many of the ones who make it are the ones who have nothing to fall back on. :)

    My dad has told me "have something to fall back on", I respond: "why should I waste time with something to fall back on if I'm not going to fall back?" ;)

    Trading IS a hard game. Not because it is inherently so hard, but because the price is so high when you dont play well.

    If I had another way to make a good income, I might have been tempted to fall back on it in the darker moments... Especially if I had more responsibilities.

    Luckily I'm young and dont have a family to support. (not to say that someone with a family is unlucky!)
     
  4. huby

    huby

    Thanks for your post Traderkay. It takes guts to tell your story. Since you did, I'll go ahead and tell mine. You'll probably get a kick out of it. Maybe we can all learn from each other's mistakes. We should change the name of your post to "TRADER CONFESSIONS". Not that we should dwell on the negative but sometimes it's refreshing to know you're not the only dummy out there who broke all the rules.

    I got started in the markets at the absolute worst time. I started at the end of 1999 during the height of the great bull market. I had just finished reading all of Wade Cooks books and thought I was ready to take on Wall Street. (Oh...If I'd only bought "Market Wizards" instead. It's sad but I actually debated between the two in the book store in early 1999. Wade's book looked more flashy so I went with it.)

    I read it, then read the others, then paper traded, then paper traded some more, then some more, finally I couldn't take the excitement anymore and had to open my account. I took my life savings of $15,000 and sent the big check off to Ameritrade. I started out doing covered calls. That was neat, but too boring. As I got called out at the end of the month with my profits I would look at the stock I had purchased and thought to myself, gosh if I'd only bought those calls instead of sold them I would have really made a killing. So I started buying all the calls I could on all the hottest tech stocks.

    By the time the Nazdaq hit 5,000 I had turned my $15,000 into a little over $30,000. I honestly thought I would be a millionaire by the time I was 30. I was 26 then. I was a complete MORON! I even remember making a bet with my friend that the Nasdaq would pass the Dow within two years! Ha! (Guess I'll be buying him dinner pretty soon). Making money like that was the worst thing that could have happened to me. I would have been much better off starting in April of '00 and losing half of my money right off the bat. It would have humbled me.

    When the market did turn down, for some strange reason I didn't think buying puts would be that good of an idea because the markets would surely turn around soon right? One day while listening to Wade Cook's tapes in the car, I learned about selling naked puts and how it was "impossible to lose" with them. This was just the strategy I needed for those volatile times. NOT!

    To make a long story short, I rode my entire account into the ground within 4 or 5 months. The worst part was that I didn't tell my wife. I was a little stressed to say the least. So I borrowed $15,000 from my grandma so I could have capital to earn the money back. If I could just go back to what I was good at...buying calls, I could earn the money back. RIGHT!!!! I lost all of her money within another two months. Mostly because I put almost all of it in one trade. Intel-September 2000 calls. Take a look at a two year chart. You'll understand. To top things off, I lost my $70,000/year job at this same time. Now I wasn't stressed. I was comatose! I seriously wanted to kill myself. I would never do it, but I honestly hoped everyday I would get hit by a large semi truck and die. I wished I had never heard of the stock market and I was determined never to return.

    About 3 or 4 months later I was visiting my wife at work when I noticed that in her same building was a company called "Bright Trading". I wandered up there out of curiosity and there met a man who had made over a million dollars in 2000 trading stocks. I couldn't believe it. Here I had about killed myself because of the stock market and this man had made a killing somehow. I was determined to find out what real trading was all about.(By the way, the man I talked to was the manager who has been a professional trader for about 15 years and I don't have any connection to Bright-this is just how it happened).

    I've since read every book I could get my hands on about trading and have studied my butt off trying to learn this amazing career. I've worked two jobs all year to build up some capital to trade with and in the last three months I'm happy to say I've turned $12,000 into $16,000. I'm light years away from where I want to be, and I am truly a beginner, but at least I don't want to kill myself anymore and I'm on the right track. I've got a real broker and equipment now, and I've learned important words like "stop loss" and "risk management". Hehe. I don't think those words appear at all in any of Wade Cook's books. I can't beat myself up over my losses. In fact, to get over it psychologically, I printed up two diplomas for myself. One in losses, and one in hard knocks. Hey, I have a double major! All it is, is tuition money people.

    I'd like to thank all of the traders here who offer their honest advice and support. It is wonderful to have a community like this where we can all grow together. Hopefully someone can learn from my mistakes as well. Good luck everyone, and don't EVER, EVER, EVER GIVE UP!!



     
  5. I think it is great you guys can share your stories with all of us. It takes guts for both of you to be so candid. Thanks.

    Huby, your story sounds like something out of Market Wizards. Mabey, that's where you're headed. :)
     
  6. vvv

    vvv

    WOW!

    thanks for having the courage and honesty for sharing those two experiences with everbody here.

    i believe that trading has more to do with you as a person than with anything else, and that in turn has a lot to do with being honest with yourself.

    a trait that both of you possess.

    take it from there and i'm sure that with the proper discipline in using your techniques you'll both make it.

    all the best to both of you.

    ps: i'm sure you've read them, but i'll recommend them anyway: *reminiscences of a stock operator*, *amazing life of jesse livermore* by richard smitten, *trade your way to financial freedom* by van tharp, obviously the wizards, and maybe another very good book, *what i learned losing a million dollars* by jim paul - - all available @ amazon.
     
  7. Babak

    Babak


    "Press on: Nothing in the world can take the place of perseverance. Talent will not; nothing is more common than unsuccessful men with talent. Genious will not; unrewarded genious is almost a proverb. Education will not; the world is full of educated derelics. Persistence and determination alone are omnipotent."

    Calvin Coolidge
     
  8. blueem

    blueem

    I read the previous stories and thought this sounded therapeutic. Kind of like the "Losers Anonymous" Elder talks about in his book "Trading for a Living".

    Hi, my name is blueem and I am a loser!

    To make a long story long, I started an online service for the oil and gas industry in 1993 (pre-Netscape, you will recall). After several years, false starts and one bankruptcy (gee, you mean you can't pay the mortgage with pageviews?), I was fortunate enough to be bought out by a NASDAQ traded B2B company in June, 1999.

    I thought I had it made. I had 12,000 restricted shares at $22. By March, 2000 those shares traded up to $143. You can do the math. It's about $1.7MM.

    I didn't know anything about the stock market. I sat and watched those paper profits add up and thought I was RICH !!! I thought this was normal.

    Friends told me I could protect myself with something called "options" and I even read one article about a mysterious "costless collar" in Industry Standard. I remember calling Schwab about this in February, 2000 and they didn't know what I was talking about. I called them again in April and was put through to their derivatives desk. They DID know what I was talking about and said I could put this position on at no cost and protect my price until the stock restrictions expired.

    I thanked them and said I would think about it and call back. This was the most expensive phone call I never made.

    I sat through the Mar-June crash and watched the stock plummet from $143 to $28 in 26 trading days. My friends were happy I have a one story house. If I jumped out the window, I would probably live.

    I held on - only to be sucked in by the late summer rally. I was convinced the price would recover! And it did. The price rose back to $60 by September, 2000. Since the restrictions were expired, I could have sold at any time. Did I sell? Heck, no. I was a millionaire and wanted my money back. I mean, the market "owed" me!

    By October, the price had dropped into the $20's and I finally sold my shares for $22. Good thing, too. The shares are trading at $1.50 today.

    It's hard to describe the relief that comes from sudden wealth and the horror that comes from losing it. I still grieve.

    Well, I had never seen ANYTHING that could give or take away money at this rate. I decided I had better learn how all of this really works.

    In October, 2000 I began to read everything I could find on trading. Of course, I started with the cheesy Electronic Day Trading Made Easy type books and worked my way up to actually useful authors like Tharp and Schwager. I opened an account with CyberTrader and got set up with QCharts. I stayed glued to my monitor for 6 hours every trading day. Over the course of 3 months, I traded JNPR, QLGC, CIEN, etc. and promptly lost 50% of my trading capital - about $10,000. This was attempting to trade intraday trends and take out $1 per day on 1,000 shares.

    Fortunately, I stopped trading in May to re-group. I am looking hard at using a trend-following system and/or trading breakouts on volume. I am finding, though, that I presently have "trigger-lock" since I now know how easy it is to lose money in the markets.

    What have I learned?

    1. Trading is hard and I am ignorant.
    2. Don't believe anything you read about "buy and hold".
    3. Alway, always, always cut your losses short.
    4. Never, never, never let your profits get away from you.
    5. Position sizing is paramount.
    6. Commissions and slippage can kill.
    7. Never listen to CNBC.
    8. It REALLY hurts to lose a million dollars.


    OK, I feel better now :) Your fellow "loser", blueem.
     
  9. Nice story I'm going to add a few things to your rules though and go through them.

    Trading is hard -yes at first, but with time , discipline and knowledge it becomes easy after awhile.

    Buy and hold can work but THIS is the time to do it not 2 yrs ago. Only buy and hold solid companies after a crash.

    I can heavily out perform the market overall just by trading though.

    Never, never, never let your profits get away from you. This is true. BUT don't take very small profits and large losses. Don't cut your winners short.

    It hurts badly (but not as much as losing) if you were long at 26 and you got out at 26.5 and a few weeks later it is at 143.
    The golden rule is let profits run and cut losses short. All you have to do is use a trailing stop even on so called buy and hold. Just say you will get out if it ever drop 25% below it's high price.

    #5 "well said"

    #6 yes they can, lately with the internet though it is a lot more reasonable. When I was a broker it used to cost 5% in and 5% out. I had commissions of $8000 for one trade. I could never get away with that now.

    #7 Never listen to CNBC this is usually good advise. Most of the guys don't trade or can't out produce the indexes. Don't follow the herd --lead it. But it is possible to trade on news they report. I do it all the time. It's in my father's new book on how to.

    #8 I keep my losses small so can't feel empathy on that one. I can understand what it feels like as I've had my drawdowns.

    Robert Tharp

    PS.....I'm swamped with work right now but I'll post a link and give you my story in a few days here on this message board.
     
  10. dozu888

    dozu888

    With a fullp-time job and trading as a hobby for 2nd income, I never had to endure as much pressure as a pro trader does... do feel lucky though as when I started I had a mentor to get me on the right track with technical analysis (although the mentor himself blew up in the crash trying bottom fishing :(

    made some profit swing trading nets and use it as tuition playing intraday, was bloody the first month, even-steven 2nd and 3rd month, then read "Market Maker's Edge" by Josh Lukeman, had 5-month winning streak going, felt like a genius.... of course then run into problems like overtrading, trigger-shy etc etc and therefore drawdowns. Came across 2 books "Disciplined Trader" and "Trading in the Zone" by Douglas, kinda stablized mentality towards trading. Still working on it.

    Highly recommend the books mentioned above, especially Douglas' 2. Read them through, try to understand what he is talking about when you sense the emotions during trading, then read them again.
     
    #10     Jul 10, 2001
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