"Ian F is a SpikeTrade Member. He sent this contribution from the UK" - Alex
Here are my review notes in the 'cold light of day' from yesterday:
These 2 first trades are examples of what NOT to do - but first some background.
I returned from a meeting after the markets had opened. I immediately saw that the system had triggered 2 trades.
What happened next is something I need to be extremely cautious of in the future.
I immediately thought that because the system had triggered then I needed to be in the trade (albeit with a reduced amount of shares because I was late and the stock had run) and bought the other on the pull back at the buy price. Because I felt 'rushed' in making these trades I really ignored what was going on - if I had sat and analysed what was happening I would have realised that I was realistically too late to be entering these trades. I had thought that August was such a quiet month I was convinced that I needed to be 'in'.
What I was doing was trading on my emotions - I was not giving myself time to digest where the market was and the implications of my hasty decision making process.
I thought because the system had triggered I had to be in - where as in reality my mind had not had time to adjust to such a rapid changing environment. I had not written these trades into my 'manual' trading log because I had been late from my meeting - this 'manual' log is my way of keeping me 'on track' - it enables me to know what my expectations for a trade are. If I have not got that how can I trade?
What can I learn from this?
I must incorporate some sort of 'mental filter system' that ensures that if I do not have the time to diligently write down the potential trades that may trigger - whether that be the WPT or my own system (which is very similar - I guess it mainly differs in the scan for trades process and I also look at shorts) then I really have no right to enter a trade. NO NOTES = NO TRADES.
From now on this will be part of my trading strategy and it will be up to me to control my discipline.
At the moment I am taking time out to type this into my Screen Trading Log as I feel this is a very important stage of my trading process. If I ignored this I might as well not trade - it is fundamental for me to feel calm and collected in what I am doing before entering a trade.
The market has told me (again) that it is the boss, if I want to work with the boss I have to follow my strategy and system. Just like working for a boss, sometimes we get it wrong. If I was working for someone else and I got it wrong, they would want answers and he/she would want to know that I could learn from mistakes. If I am my own boss like in trading then I HAVE to acknowledge my mistakes and do something about it - this is my attempt to improve my trading in the future - I owe it to myself.
Only last week I was telling my partner how much calmer I felt because I felt in control by writing my log diligently and following carefully what I was supposed to be doing. I also owe it to her to constantly be aware of my successes and failures.
This was not about a failure in the system, this was about a failure in my discipline.
Showing posts with label | Psychology. Show all posts
Showing posts with label | Psychology. Show all posts
Friday, September 4, 2009
Wednesday, August 19, 2009
Making Money while Watching Paint Dry - by Stephen A
[Stephen A is an active SpikeTrade Member, one of only two who received a diploma for excellent picks in Q2-2009. He sent us this contribution today - AE]
I encountered a situation yesterday morning that I'd read about but never really experienced, that of a big price move resulting from a volume burst in a very-low-volume stock. I thought it was pretty interesting and might be of value to other new traders.
Steve A
My SpikeTrade pick for the week is NSTC, has been a relatively low-volume stock, about which I said in my pick sheet comments that watching NSTC was "like watching paint dry". Although most of the time that's been true, on Tuesday morning August 18 I changed my opinion.
We've all read that it's prudent to be wary of low-volume stocks, as price can be moved quickly by a sudden burst of traded shares. As a recent arrival to the world of trading, I hadn't actually experienced this, at least to the degree that I did last Tuesday.
The table shows the minute-by-minute action in NSTC from the open Tue Aug 18 7:30 am through 8:23 am MDT. During this period only a few hundred shares were bought or sold in any given minute, and many minutes went by with no trading at all. From 8:07 to 8:08 100 shares were traded, and from 8:08 to 8:09 another 100 shares were traded. A minute went by, and suddenly between 8:10 and 8:12, a two-minute span, volume rocketed to 54,690 shares.
What happened to price?
I encountered a situation yesterday morning that I'd read about but never really experienced, that of a big price move resulting from a volume burst in a very-low-volume stock. I thought it was pretty interesting and might be of value to other new traders.
Steve A
My SpikeTrade pick for the week is NSTC, has been a relatively low-volume stock, about which I said in my pick sheet comments that watching NSTC was "like watching paint dry". Although most of the time that's been true, on Tuesday morning August 18 I changed my opinion.
We've all read that it's prudent to be wary of low-volume stocks, as price can be moved quickly by a sudden burst of traded shares. As a recent arrival to the world of trading, I hadn't actually experienced this, at least to the degree that I did last Tuesday.
The table shows the minute-by-minute action in NSTC from the open Tue Aug 18 7:30 am through 8:23 am MDT. During this period only a few hundred shares were bought or sold in any given minute, and many minutes went by with no trading at all. From 8:07 to 8:08 100 shares were traded, and from 8:08 to 8:09 another 100 shares were traded. A minute went by, and suddenly between 8:10 and 8:12, a two-minute span, volume rocketed to 54,690 shares.
What happened to price?
The chart shows, bar by bar, the languid activity in NSTC leading up to Bar 21. Prior to this bar there were few buyers and sellers; then suddenly there was a preponderance of buyers, and price took off. The stock rallied from about $5.35 to about $5.75 within two minutes, a rise of 7.5%, on a volume of 54,690 shares!
I had gotten pretty bored watching the inaction on the screen, and at about Bar 19 I went to the kitchen to get a cup of coffee. I returned during Bar 22 and uttered an expletive. It is always a shock when a trading truism that begins as mere words in a book becomes a screaming reality. I hadn't yet entered an order, since the behavior of the market was seeming (to me) so unpredictable and I didn't want to get knocked about, and so I wasn't able to reap the windfall.
So, the lessons that I took away from this are:
(1) Don't take sleepy stocks for granted
(2) Big price movements on low volume really happen
(3) If I had truly wanted to enter, I should have been ready
(4) Because I really didn't want to enter into what I thought would be a risky trade, I shouldn't brood over the missed opportunity, or begrudge the stock its spectacular jump.
Best wishes,
Steve A
Sunday, May 10, 2009
Stress and Pain from the Rally - Alex E
We should all be happy during this rally, right? Well, not so quick. In talking to trader friends and reading incoming emails, I sense a great deal of frustration. Today I would like to share with you two emails, one from a Spiker, another from a Member.
Please post your comments, and later I will return with my own comments.
Best wishes,
Alex
FROM A SPIKER:
Dear Alex,
The group beat indexes during the worst bear market, the group beat Indexes during the final phase of last bottoming on February , However the group has been beaten during last rally.
How can you explain this phenomenon?
To be honest, I have a negative return on my personal trading account since March 9, 2009.
What happened to us?
Have we grown into old and stubborn bears?
Have we got a mental problem , imagining that we are smarter than the crowd and while we try to proof it for ourselves, the crowd earns money?
For example, winners of last week were among bearish spikers and their results were modest, compared to Members who were bullish.
Many of us have manically shorted Mr. Market from week to week, but it has been climbing and climbing.
Based on technical and sentiment indicators , market is overbought and there are no ideas for professional traders to buy this market.
Jason from sentimentrader.com has been neutral since beginning of April.
Of course he didn’t participate in the last two weeks of peakining, however he saved his capital.
May we need some rest?
I think, some of us need a psychological advice.
Best regards
*******************
FROM A MEMBER:
Hello Alex,
All the STOCKs that I have been followING for months have increased by 50% and more, some of them doubled or tripled.
At the beginning of March, I was about to jump into the market and buy with both hands. At that time many signals told me a reversal could appear soon. I didn’t do it because that was not the way I learned: chasing the lows, red impulse, massive amounts of money into a few stocks, etc.
Since then, I have been watching the market going higher and higher. All my friends, amateurs, are buying and making money. Even my mother is making money and everyone is wondering what’s going on with me, the most educated one on the topic. The greater fool theory works perfectly as Stephen M suggested it a few weeks ago. They buy far from the averages and their values keep going higher.
I feel very stupid. In fact, I have never felt so dumB. I have the feeling that all the work I perform religiously on a daily basis is useless. In addition to technical analysis and psychology, you can’t imagine how much I read about the financial system, the economy, the complex relations between gold, Oil, USD and raw materials as well as Forex in order to understand the environment I had to face up, aiming at building a consistent system for monitoring the markets and trading in a professional way.
Reading in your books that the market is manic-depressive is one thing. Living it is another story.
I made some money with the energy sector capturing one third of the movement. However, you know how the beginner’s mind works: I can’t help calculating how much I could have earned if … and if … I’m trapped in mental loops of fictive profits with all the values I followed.
You are a busy guy and you don’t have to answer me. I just want my shout to be heard by someone who understands because around me, it is the garden party. Regrets, sadness, bitterness, frustration, I feel very lonely. I can’t imagine the day I will be able to make a living with the markets. I’m ashamed of my poor performance. It is hard to stand back and to see this situation with a pinch of salt.
Have a nice week-end.
***************
Thank you for your sincere emails.
To all - please comment, and I will return with my own comments later
all the best,
Alex
Please post your comments, and later I will return with my own comments.
Best wishes,
Alex
FROM A SPIKER:
Dear Alex,
The group beat indexes during the worst bear market, the group beat Indexes during the final phase of last bottoming on February , However the group has been beaten during last rally.
How can you explain this phenomenon?
To be honest, I have a negative return on my personal trading account since March 9, 2009.
What happened to us?
Have we grown into old and stubborn bears?
Have we got a mental problem , imagining that we are smarter than the crowd and while we try to proof it for ourselves, the crowd earns money?
For example, winners of last week were among bearish spikers and their results were modest, compared to Members who were bullish.
Many of us have manically shorted Mr. Market from week to week, but it has been climbing and climbing.
Based on technical and sentiment indicators , market is overbought and there are no ideas for professional traders to buy this market.
Jason from sentimentrader.com has been neutral since beginning of April.
Of course he didn’t participate in the last two weeks of peakining, however he saved his capital.
May we need some rest?
I think, some of us need a psychological advice.
Best regards
*******************
FROM A MEMBER:
Hello Alex,
All the STOCKs that I have been followING for months have increased by 50% and more, some of them doubled or tripled.
At the beginning of March, I was about to jump into the market and buy with both hands. At that time many signals told me a reversal could appear soon. I didn’t do it because that was not the way I learned: chasing the lows, red impulse, massive amounts of money into a few stocks, etc.
Since then, I have been watching the market going higher and higher. All my friends, amateurs, are buying and making money. Even my mother is making money and everyone is wondering what’s going on with me, the most educated one on the topic. The greater fool theory works perfectly as Stephen M suggested it a few weeks ago. They buy far from the averages and their values keep going higher.
I feel very stupid. In fact, I have never felt so dumB. I have the feeling that all the work I perform religiously on a daily basis is useless. In addition to technical analysis and psychology, you can’t imagine how much I read about the financial system, the economy, the complex relations between gold, Oil, USD and raw materials as well as Forex in order to understand the environment I had to face up, aiming at building a consistent system for monitoring the markets and trading in a professional way.
Reading in your books that the market is manic-depressive is one thing. Living it is another story.
I made some money with the energy sector capturing one third of the movement. However, you know how the beginner’s mind works: I can’t help calculating how much I could have earned if … and if … I’m trapped in mental loops of fictive profits with all the values I followed.
You are a busy guy and you don’t have to answer me. I just want my shout to be heard by someone who understands because around me, it is the garden party. Regrets, sadness, bitterness, frustration, I feel very lonely. I can’t imagine the day I will be able to make a living with the markets. I’m ashamed of my poor performance. It is hard to stand back and to see this situation with a pinch of salt.
Have a nice week-end.
***************
Thank you for your sincere emails.
To all - please comment, and I will return with my own comments later
all the best,
Alex
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