So far 2012 has been an insane year. I started the year slammed with projects and didnt slow down until last month. After getting married in February, I’ve been really busy working on the next version of the MAP trading strategy. There have been so many changes in the futures trading arena over the past few years, and my ongoing journey to compete with computer algo’s and institutional traders has been on hyper-drive. The e-mini markets have proven to still be a great derivative to trade, and they’re still extremely competitive.
Even though I haven’t been able to trade as much as I’d have like to, the e-mini markets started the year in a dull trend for the first 3 months. During that time, I forced some choppy days that really gave me a beating. Thankfully, I anticiptated April to start giving us better volatility , and my good execution was rewarded. Each trading mistake is a reminder that trading confidence is a precious asset; much more important than cash.
My second major trading screw up was trading wildly right after I got back from hiking the appellation trail with my Dad. After breaking away into the wilderness for a week, my trading discipline pretty much went out the window the first day or two back. The worst part was the wild trading was in a great market environment! I should have done really well, but I let myself get in the way.
There’s a big difference between losing because of the market and losing because of personal trading mistakes. All we can do is strive to identify common errors and put guidelines in place to help keep us in line. I have a new rule that I won’t trade the first day back from vacation.
After going back and doing some market replay on NinjaTrader, I feel back on track. And since volatility is at the highest levels of the year, hopefully there will continue to be plenty of trading opportunities.
Another lesson this year is a simple, yet powerful cliche. Every time I don’t follow my plan, I get smoked. And the ONLY time I have success is when I take the right trades, under the right conditions, and execute with patience and discipline. It’s so obvious, but something traders at all levels of experience must constantly remind themselves. It’s something we used to talk about in 2007 when the Emini Academy was a small trading group, right on through when we “officially” kicked off our website in 2009.
Here’s a couple of some recent trading lessons from my trading log:
- Trade Skeptically – Always look at the “other side” of your trade instead of trying to root it on. Hunt for the reasons why it could fail.
- Let it freaking go – If the market conditions suck, then don’t try to force trades. Duh…
- Keep in mind the power of leverage and risks that came along with it – For example, one e-mini S&P contract is like trading about $65,000 worth of the stock index.
- Have fun and learn something every day – No matter if you make or lose money, make sure you walk away a more informed or more disciplined trader.
Posted in Thoughts, Trading | 
5 Comments »
Keeping it honest is one of the many things I like about you and your company Chris.
Many companies insinuate that all you need is their magic system and that you will be set from day 1.
No matter the system, a trader will miss trades (some great trades) and take trades that immediately go bad. It takes experience, discipline & most of all confidence in your (proven) system to be able to cut a bad trade early and not worry about the great trades that you miss. It’s hard not to trade after a couple to many days away. Sim trading until you honestly feel that you’re “In tune” with the markets again is the best approach I think.
Anyway, good post and I look forward to your market recaps and insights.
P.S. in light of constantly learning:
“Appellation” is the name given or assigned to something..
You actually hiked the Appalachian Trail… and that’s great you did that with your dad.
Thanks Randy… great insights!
Stock (day) trading mistakes that cause 90% of stock traders lose money
In my small unique book “The small stock trader” I also had more detailed overview of tens of stock trading mistakes (http://thesmallstocktrader.wordpress.com/2012/06/25/stock-day-trading-mistakessinceserrors-that-cause-90-of-stock-traders-lose-money/):
• EGO (thinking you are a walking think tank, not accepting and learning from you mistakes, etc.)
• Lack of passion and entering into stock trading with unrealistic expectations about the learning time and performance, without realizing that it often takes 4-5 years to learn how it works and that even +50% annual performance in the long run is very good
• Poor self-esteem/self-knowledge
• Lack of focus
• Not working hard enough and treating your stock trading as a hobby instead of a small business
• Lack of knowledge and experience
• Trying to imitate others instead of developing your unique stock trading philosophy that suits best to your personality
• Listening to others instead of doing your own research
• Lack of recordkeeping
• Overanalyzing and overcomplicating things (Zen-like simplicity is the key)
• Lack of flexibility to adapt to the always/quick-changing stock market
• Lack of patience to learn stock trading properly, wait to enter into the positions and let the winners run (inpatience results in overtrading, which in turn results in high transaction costs)
• Lack of stock trading plan that defines your goals, entry/exit points, etc.
• Lack of risk management rules on stop losses, position sizing, leverage, diversification, etc.
• Lack of discipline to stick to your stock trading plan and risk management rules
• Getting emotional (fear, greed, hope, revenge, regret, bragging, getting overconfident after big wins, sheep-like crowd-following behavior, etc.)
• Not knowing and understanding the competition
• Not knowing the catalysts that trigger stock price changes
• Averaging down (adding to losers instead of adding to winners)
• Putting your stock trading capital in 1-2 or more than 6-7 stocks instead of diversifying into about 5 stocks
• Bottom/top fishing
• Not understanding the specifics of short selling
• Missing this market/industry/stock connection, the big picture, and only focusing on the specific stocks
• Trying to predict the market/economy instead of just listening to it and going against the trend instead of following it
Mika (author of “The small stock trader”)
Good points… I’ll allow this shameless plug.
Greeting Chris, great blog! I just finished a MAMMOTH piece on day trading mistakes as well. Here is the link: http://realityfuturestrading.com/dts-signal-generators-for-day-trading-the-right-day-trading-tool-for-the-job-ninjatrader-indicators/ I would love to have you pop by and drop all the comments and links you would like. Nice to see someone that has good content!
Best regards,
Ray “Reality” Burke
PS: You are now bookmarked and I OnlyWired your recent post.