What I wrote after trading for 2 years…

When I first started trading, I was given $100,000 by a very courageous boss to see how I would trade.  It didn’t end well.  In total, after a capital injection along the way, I lost close to $150,000.  I was asked soon after to write a summary of what had happened and I learned from.  Here below is what I wrote a couple of years ago when I listed the lessons (each of which might as well be a blog entry on its own).  If you have questions about any of these, just write them in them in the comments:

  • $100,000 is not the same as a million.  Don’t trade “as if you have a million.”
    • [there a misunderstanding with boss, who used those words which I interpreted literally and used risk parameters for $1M instead of $100K, leading to 10x the risk I should have taken to preserve that capital]
  • Small patterns, for small results. Big patterns, big results.
  • Good trades are rare.
  • The mechanics of trading. You don’t always get filled where you thought you would.
  • After so many patterns and staring at the screen for so long you begin to identify unique patterns that not everyone sees.  It helps to discount the noise and recognize a real move.            
  • Conviction is not a good barometer of a trade’s future success.  I’ve been convinced, since the drought of 2012, that the grains had put in a multi-year top.  I’ve been very right on that and I’ve consistently lost money, especially in the one I have been most right, that is soybeans.  Trading and being right are two different things.  Trading is to analysis, the way playing a game is to guessing who is going to win the championship.  
  • Trading is a game. Play carefully and keep your chips so that you have a chance to play when everybody else is done.
  • Let the game come to you.  Don’t chase it.
  • The game can be learned.
  • There’s nothing more exhilarating than winning. Seeing charts skyrocket or collapse in your direction is a gift that I wish many others would experience in their professional life.
  • There’s always another trade. Don’t chase the one that got away. The markets will be there tomorrow. If you don’t trade for a day or two it’s ok, even healthy.
  • End of day price action is by far the most important, however intraday opportunity are often fantastic and hard to pass up.
  • Calendar spreads tell the fundamental story.  They also put you to sleep.
  • Wait.  Wait for the break.  Just wait.
  • No greed, no fear.  Stick with the plan, don’t change the stop out of either feeling, only if new information has entered the market or if it is a trailing stop following a lengthy move.
  • Overnight moves are often “re-covered” during the day session.  Don’t trust them.
  • In times of high volatility, focus on a fewer commodities.
  • When getting urges to do something, do nothing.  
  • Get out as soon as you realize you made a mistake.  Don’t wait for a profit.  A mistake is an entry that didn’t reflect any of the principles you have learned so far.
  • Don’t overtrade.
  • Trade only if you have to.
  • Don’t ever trade in a hurry.  
  • Trade cynically and fearlessly.
  • Envision where your next move will be.  Picture scenarios so that you won’t be caught by surprise.
  • Align:  Fundamental, Technical, and Sentiment
  • Never add to a losing trade.
  • Never marry a trade.
  • Listen to your “gut” b/c it has collected all the relevant information.
  • On 4/1/13, after a gut-wrenching disastrous trading day in the grains where fear and greed clouded my intended trading plan around a report, I wrote this in my journal: “I’ve got the right instincts [the initial plan would have worked out very well]. I just need to maneuver with patience and determination to swing when needed.”  I still believe that and I think I’m getting there.

 

Eventually, that same boss gave me a chance to trade a even bigger account which in the first 8 months returned around 25%, before giving almost all of it back the following 8 months.  Clearly, I was still learning, three years into it.   It was only in my fourth year of trading that I was able to have enough discipline to stick to my trading plan, which led to best the risk-adjusted returns I had ever had.  More importantly, I was really starting to internalize the lesson, gain control of my emotions (albeit, not perfectly) and was being blessed with insights that frankly I attribute directly to Father’s desire to provide for me through this path and not some particular skill I have.  It was another reason it was time to start putting my own to work.

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