Today was a bummer. 1% loss. No money made. I hate these days. I really do. They feel like such a waste don’t they?
I took several positions in my overnight system and woke up to find a huge mess and made the decision to close them down.
I had made a few minor mistakes in analysis and position sizing so I had that feeling in my gut like dude, you are on thin ice. You better do something or this loss will be much worse. Well, I actually closed the trades at -2.9% and mitigated 1.9% of it in NY to finish with a manageable 1% loss on the day.
Had that been a couple years ago, I would have been throwing keyboards and emotionally melting down. You know, that really proud moment when, after you just lost 20%, you also have to clean your room back up and buy a new keyboard. Maybe I’m the only one I guess…
Ever been there?
Ever that feeling in your gut like you just walked into a trap and at any moment you could find your self staring at a situation you really really don’t want to deal with?
I have many many times.
But I am going to point you back to what I said a little earlier. “I made the decision to close them down”. I didn’t always do that…
That is seriously one of the biggest difference between a profitable trader and a break even or worse trader. It’s a huge difference in me these days. The ability to say no, your done. I guess it goes back to yesterday’s post as well. The instant gratification side of me says “I need this win. I don’t want a loser. I don’t want to say I had a loss for the day. I don’t want to have to answer for the loss”. That’s the selfish insecure amateur at work who is bent on your destruction. Where the pro says, ok, you are wrong. Fix it. Quickly. Don’t hesitate. Or you aren’t wrong but your neutral now and the market is now in a better position to throw a big punch. Run. Fast. Stay a pro. Stay in control at all costs.
THE DECISION PROCESS
I would say each decision to close or stay comes with a certain set of criteria I go by:
- Size of risk- Did you position size well enough to be able to allow yourself to sit through full stop outs? If yes, then you can move on to the next question. If not, kill it immediately. If risk is out of whack, you will make dumb decisions unless you take back control.
- Validity of Analysis- How is my analysis playing out? Have things changed? Sometimes my analysis doesn’t change but I know I have gone from an edge to a coin flip and that alone is enough to move me along most times. If your analysis hasn’t changed and risk is in line, you decide to stay. If not, kill it and regroup.
Those are the main two decision points when I get into a losing trade. After that I take into account the news and, like today, try to find out if it’s just some order churning to illicit trading and get people trapped for a big event tomorrow.
Did I always act like this? Did I always show calmness under pressure? Like I said before, my account and my keyboards would tell many harrowing tales.
I was THE ABSOLUTE WORST RISK MANAGER IN THE ENTIRE UNIVERSE. I will gladly admit it. I will admit that every time I took a trade I would try so hard to never lose and in the process, lose a ton. I still suck really bad at things like poker. I hate saying that. I know it’s weird they usually correlate but I suck at it. I am a horrible gambler.
“Being afraid to lose a little means your guaranteed to lose a lot”
I just quoted myself there by the way. I say that a lot.
I used to hold my losers and “hope” basically for the best. I had the gut feeling like I was in too deep, I knew the PA was changing, but I couldn’t admit the obvious and take the loss. It was not possible. I usually put myself in positions by way of risk and size that I had no choice BUT to be right. So instead I would take 3x that loss and be like well, good job Shonn. Well played. You stuck to your hope cannon and realized it was firing feathers.
And on top of that, you created a big hole that you can’t dig out of. Now I know what I can get out of in NY. I like the days much better when NY get’s to add to the days totals but if it needs to, I know what it can clean up. I don’t want a loss bigger than that. Ever.
I used to stomach so much more draw down than I do now.
I used to give the market control over my money and emotions and ask it to please be nice to me. That’s how it is supposed to be. You should be nice to me. Now, I know what the market is, and I will do everything I can to hit first and hit faster and then go sit down and let the market be pissed that it gave up some it’s wealth to me.
That’s our job. We need to be in control of our money, our risk, and our emotions. If any of those is out of sync, it will be a long day.
Have a great day.