In My Birthday Suit

You didn’t think I would be naked in here, did you?

I must admit that the past couple of days have weighed on my desire to write. I related all too well to Fly’s post about this being a “Stupid Business”. Not only do I do this for a living, and only this, with no other day job; not only have I been doing it for 5 years full time; not only do my trading profits pay for fully half of our family’s expenses, but … I don’t also have a client managed account that pays me fees….so it’s all personal trading profit that keeps my bills paid.

Needless to say, no profit does not pay the bills and sadly, like plenty of other folks, profits have eluded me of late. The market gods were kind enough to give some back to me today, but I am sure it is only because it is my birthday.

As I look back, I could have lost more, if I hadn’t sold the losers when they were losers. Monday’s action really hurt me. Nearly every trade I owned coming into the week was down 4-5% by the end of the day. I wasn’t making bad choices, just having a streak of bad luck in a very choppy market. In a conversation with Chess that day (always good for some Zen feedback), he reminded me that all gamblers/traders have streaks of bad luck. He reminded me to stick to my rules and honor my stop losses. I did that. He suggested I stop working so hard because at times, hard work is not rewarded in this “Stupid business” and is often punished. …Sigh!

I have been punished. Certainly I have spread myself thin as I discussed in recent posts and have over traded, but I also just a had a streak of bad luck. It happens. The answer is to take a day off and move on, but of course, I can’t bring myself to take a day off. I will continue working and just try to make good decisions and sometimes that means sitting on hands for awhile because “delayed gains are better than losses”. But I will still be here researching, charting and doing math to figure out my next move.

Tuesday was a pisser. At first it seemed that all my stops were for not….that following my rules was a mistake. Most of those stocks that I sold at a loss were back up by Tuesday morning. But by the end of the day, the market had found new lows that continued into Wednesday. Stopping my losses where I did, proved to be a savior against more losses. I am glad I kept it light. The moral of the story is to be disciplined and ALWAYS follow your rules, because more often than not, they will protect you.

But for just a moment, let’s say that I hadn’t taken those losing tickers off when I did. Would it have been right to continue holding them…into Tuesday’s sell-off, into Wednesday’s sell-off? Would it have been too late for me to sell them at more than 10% losses? No, it wouldn’t. Holding losers only risks more losses. I know many traders are tempted to believe the ticker will eventually come back, but this would only be a waste of capital. Protecting myself from having further losses, I held the cash that allowed me to go in and day trade some good runs today, on my birthday, and try to scratch my way back. If I were still in those losers and even if they were up today, it would take me longer to make up those losses that I garnered along the way.

Always sell the losers! For another reason as well…holding on to losers messes with a trader’s head. When you are always looking for that come back, it doesn’t bode well for confidence either. If your thesis is no longer intact, if you wouldn’t buy the stock right here, right now….dump it! And don’t look back.

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