Through the Looking Glass

Discussion in 'Journals' started by illiquid, Mar 6, 2010.

  1. Okay, another journal for you all. More introspective, less nuts-and-bolts, but complete with weekly P/L for all you voyeuristic pervs out there :)

    Bit of background: I'm a completely self-taught trader. I took one econ course in college and became a studio art major, mostly because I liked working alone and having complete control over my own success and failure. I've always been a bit outside the loop socially -- the independence and self-reliance of trading only served to magnify this later in life. But fortunately trading is one business where you can succeed and still get away with being a complete basket case if you'd like.

    So it took me somewhat longer than most. 8 or 9 years thereabouts until I managed to figure a few things out that get the bills paid on a more or less consistent basis. But I'll have to say it first, learning about the markets in isolation with nothing but scrolling figures and some bank to test things out in real time is one hell of a fucked up way to make a living. As an individual trader you can never really be sure about most things in this business, much less why the market went this way or that. And so as one proceeds along that road of learning how to trade, one tends to fall into certain patterns of thinking that may or may not require medical attention in the future -- more on paranoia later.

    But eventually, you settle upon a framework that works for you. Within that classic existential struggle between man (trader) and a seemingly meaningless (random) world (market), you really have no choice but to make something up and stick with what works. So keep in mind as you follow this journal-thread that there isn't really any point in asking so much about my methodology; it's the same as asking if I believed in god and if so whether he had blonde hair (so as to determine which portrait you were going to buy to put above the headboard in the master bedroom . . . get it?) Of course I'll get to which markets I trade, what time frames, etc. But those are all, for your own purposes, "incidental", as Dr. Lecter would say in that dismissive tone.

    Bored? Well of course you are, it's Saturday and the markets are closed. Silly. :)
  2. If the first post came off sounding like I'll be lecturing you all from behind some exalted podium, let's nip that in the bud right here and now. Instead, what you have here is a trader on the cusp of becoming a consistent and confident trader, but has yet to cross that line for any appreciable length of time.

    Offense is my strength. I can count on both hands the number of consistently profitable "setups" (for lack of a better term) I've accumulated over the years in a number of markets across several time frames. I will never be in want of edge, so long as there are markets on the move. But running against this advantage is a deep-seated tendency to take things too far the other way, an urge to take the greatest risks when I can least afford to. It's my achilles heel, a fatal flaw that has always prevented me from riding that steady curve upwards that I believe my trading can eventually achieve. I've struggled with this for longer than most would believe possible for someone still in the game; you'd think after so long a trader would have either solved the issue or given up entirely. But for me it's always been a battle with a sword that cuts both ways.

    One reason I've come to realize for the above for which there is no excuse is pure arrogance. I have enough innate confidence in myself to know that I can always make money when it comes down to the wire (pun intended). Yet instead of dismissing higher-risk, lower-reward situations in favor of the best setups, as what you would expect a confident trader to do, I tend to get sloppier and more lax as my account accumulates. The attitude becomes: why not take a chance, try something new, see what happens, learn something while you can afford the tuition. Inevitably, that tuition gets paid -- and perhaps then some. Rinse and repeat.

    On the surface, it borders upon blatant self-sabotage. But what I also realize is that I would have never achieved an understanding of the markets and myself as a trader that I have now if I never kept trying to push my limits. My best insights have nearly always followed my biggest disappointments, giving me the excuse to make the argument that the two come part and parcel. Counterintuitive ironies abound in trading, so it doesn't surprise me to accept this for what it is. But I've gotten to the point where enough has been enough. Lately it's become more of a choke factor more than anything else, as I spend more and more time and equity focusing on mistakes while what still works keeps working without me.

    Ok, I think that balanced things out a bit. What you'll come to find on my P/L profile here are streaks of profitablility, followed by sudden retracements that can get ugly if I'm not careful. I might have a profitable month of say 15k, but my daily p/l will be far too volatile in comparison with the monthly result -- say +5k, +2k, +7k, -2k, -8k to achieve a "decent" +4k week. My goal here is to chop off both ends and maintain a more steady equity curve.

    Oh yeah, I trade equities via prop, mostly intraday but some overnights as well. I max out at 2k shares per position, but only because I usually trade the higher priced and more volatile/less liquid names. I've been working hard at trying to even out the volatility per position instead of just taking full size every time, and it's helped me recently in my stated goal.
  3. leave one end in and we will have a lof of fun each day. you know which end we pervs are waiting for, don't you? :p :D

    neke gave us weekly fun, but we need daily fun. your thread will be immensely popular.
  4. I'd like to appease the audience but I'm gonna take a page from neke and lescor and just post p/l weekly. We can try selling refreshments before we go NC-17 :)
  5. ammo


    profit will do that , show your ego the door, in most games you have human opponents or peers and you gauge them as the ones to beat, the market is not human, hence no ego, this is a traders biggest nemisis, it gives the market another leg up, which it doesn't need
  6. Redneck


    Ego = The scourge of us all…

    Well that and a strongly held opinion of course – but then I could argue holding any opinion 1 millisecond longer than necessary is also ego based …..

    Success to you Illiquid

  7. For me my ego really shows it's ugly face during the losses/givebacks, refusing to take the first small loss or worse yet watching a good winner fall all the way back to negative, I'll tend to take things personal. Which is natural -- hey it's zero-sum after all -- but what is dead wrong is wanting to take revenge in the same position, same direction. Admit defeat and move on.

    And crazy how that works, amass a bunch of arrogant yet fragile egos together all straining to prove themselves "right", and collectively they can lay waste to any notion of rationality.

    A strong opinion is usually the source of both my biggest losses and greatest gains. I am not so much in that "you do not need to know where the market is going to make money" camp. I do believe there are times you do need to hold an opinion through a bit of adversity. I think the difference for me is when an opinion is just "assumed", as opposed to formed and reinforced by hard evidence, that will determine if stubborness will yield failure or success.

    Those that trade without any opinion trust the market implicitly and take the last print as gospel. Others just know "it's all a scam" and will mutter "fucking bullshit" all the way down til they puke. I'm somewhere in-between.
  8. NoDoji


    Strong opinion is definitely dangerous. I'm glad you experienced the balance of strong opinion leading to some of your best gains, because for me it's ONLY led to my greatest losses.

    Over time I found out that a strong opinion leads to early trade entry + average down into a larger position at a "better" price + placing a stop at a level that you KNOW price will never get to.

    The sum of these parts = trade stopped out at ridiculous price level for a head-shaking loss, followed by a shallow move further, and then the big reversal which takes price to that level you knew was fundamentally due.

    I devised a solution to this problem, which can suddenly afflict even the most disciplined traders. When you form a strong opinion and are seeing that big $$ home run in your mind's eye, write down the price that the stock will NEVER get to, that absolutely ridiculous level that fundamentally would make no sense whatsoever.

    Then place your limit order at that price and wait for the fill.

    All the best to you!
  9. ammo


    sunday mumbo jumbo, there are 4 types of ego coping methods, 1 Move with ... is to compromise and work with life, an accomplished trader.......... 2 Move towards the opposition.... ,give in,get along so as not to get hurt...small point stop trader ,death by a 1000 losses ............... 3 move away from danger.....the fear to trade because u might take another loss ............................. 4 Move against ..every thing is an enemy and you must defend ....the contrarian trader .......................... oversimplified but there is some truth in it, look back at several threads you have read and you willl see a lot of self appointed genius's having pissing contests and the bigger jist of the point they are making is usually i'm right and you are a moron ...... it's more about coping poorly than trading... until one gets some handle on their ego, and this is no easy task, they will always be giving money to mr market
  10. Redneck


    This is a thought I had some time ago but had no good place to post it… it agrees with Ammo’s post wholeheartedly.

    So I post it as food for thought only…… (not intended toward Illiquid)

    Losers – Hate em or Love em – the end result “should” be the same

    People are different: (well duh!)

    The way we perceive things is different, the way we approach things is different – not wrong necessarily – just different

    In my quest to learn/ understand how I learn – I had to learn what motivated and pushed me to achieve my desired results.

    One thing I picked up was – some folks are wired to want/ need/ desire things (go toward) more than they are wired to not want things…

    While other folks are wired to not want/ be repelled from/ dislike things (move away from) more than they want these things…


    Go toward Folks

    Want success – they will chase it till they are successful, or die trying

    Like their losers – they willing accept and take them – thus preserving their capital

    Move away from Folks

    Fear failure – they are repulsed by failure to such an extent – they end up successful.

    Hate their losers – they cut em quick to get away from them – thus preserving their capital

    Two completely different perceptions, two completely different approaches – resulting in identical outcomes… And neither is better or worse – just different.

    The commonality between both groups - I think - is they are driven, and passionate (not necessarily emotional) about that which they do

    Now if I were to extrapolate a bit…

    imo the direct opposite of the above two is apathy…

    I firmly believe apathetic folks should not trade – for these types will get into a loser and think oh well it’s no big deal…

    When in fact loses are the biggest deal

    My point is that regardless of what our perspective/ approach is – it is vital we identify it and work within it to become a successful trader… Lear how you learn… Learn what motivates you... Learn if you move toward or away – and work within your constraints (we all have them) to achieve your goals…..

    And if your not passionate about what you’re doing – move on

    #10     Mar 7, 2010