It seems fly was speaking to me today, his “Be Original” post really hit home with me, and if you missed it, I suggest you give it a gander.
I agree wholeheartedly with his philosophy on conviction. Some of my biggest winners, if not all, were made with conviction. Here’s an excerpt from his blog:
“Conviction is a hard thing to manage. It’s not as easy as some people think. Most people believe being stubborn or ignorant is conviction; but that’s simply not the case. To have conviction in a name, one must be fully educated about the facts supporting the reason to be long or short. When a person is stubborn/ignorant, he’s simply being lazy, leaving fate to be decided by time and luck.”
Conviction is something I thought I had with $AAPL @ $430, however the trade went awfully wrong. I entered the trade a few weeks ago, as the stock traded back above $430. It went to $470 almost in a straight line, and I was patting myself on the back for nailing the bottom.
The stock quickly reversed, and I was a deer in the headlights. I watched it plunge for 4 straight days, all the way back below my entry price.
Once it was back near my entry price, I decided that the sell-off was unfair, due to the market correcting, and decided to give it an overweight positions, adding some April4 weekly options to take advantage of an upcoming pre-earnings run.
Then, the horrible jobs number came Friday, and capitulation was in my sights. I held the position for the majority of the day, as I was not about to sell another gap down. However, 30 minutes before the close on Friday the selling accelerated, and quickly. Capitulation was here.
I sold my stock position and my calls near $422, and watched it trade through $420.
15 minutes later, the stock quickly reversed, trading back above $420 swiftly and with volume. I wanted my position back.
Which brings me to the title of this post.
How could I? How could I go long the very name I just sold, which was once at a profit, but now a loss. Not only did I lose money, but I’m sure I brought others along for the ride, never a good feeling. The trade was so public, and for a reason (to force better discipline) , that there was no way I could buy it back.
The stock closed last Friday like the bottom was in, and I knew I sold it.
The trade replayed in my head at least 20 times over the weekend. But, there was nothing left to be done.
The chart ended up on my monitor more times than I would have liked it to have been over my weekend scans, and I wanted to buy it back.
Monday came, and I was looking for my entry near $423, but I couldn’t pull the trigger. I got a case of the “what-ifs”. What if the trade went again me again? I personally could handle the loss, but the thought of losing more money for others was too much.
Coming into the week I tried my hardest to look at it from a fresh perspective. I wanted back in, but the publicity of it all was too much to bear. I decided to pass.
Maybe this is what separates me from an elite trader? or maybe this is the penalty for being a blogger/trader and keeping things public. Would I have played it differently all together if it had not been for the blog? I’m tempted to say yes, but in reality I have no idea how it would have played out.
One thing is for certain, this is the hardest part about being a trader/blogger.
___________
You’re welcome $AAPL longs, the bottom is in, I sold it.
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Good post. Please allow me my 2 cents. If the trade was not a full-on long-term trade but a possible intermediate play for earning run, use trailing stop. As to buying back around $423 on Monday, you had a perfect tight stop setup below Friday low; that was a low risk trade in my book. If you made it clear in public where you put the close stop; no one could fault you if the trade didn’t work.
Also, for short-term swing trade, I always strive to do away with the “thinking” part. The “thinking” never helps but only interferes…
Thanks for sharing!
there were a million things wrong with this trade.
The low risk play should have been played, and that is the reason for the post.
Conviction was lost, and so was money. I could not see clear through my own fear.
This post serves as a reminder for me.
Apple is a very “loaded” play. It’s got a ton of press, lots of hedgies talking their own book, fanboys, googlers etc etc – and most people probably have their own feelings too. So, when you put your money down you’re straight away in a world of emotional turbulence and “opinions” and it’s hard to stay objective. Seems like these names deserve the same treatment as the first 30 mins of the market – try to grasp the facts amidst all the opinions, make your own plan, or, probably better, simply stay away – take positions where there’s no emotional interference. Then again, sometimes the first minutes and the hyped market participants are where the market gains are to be had. No matter what, a trade log/journal/blog is necessary if it’s not public then it’s necessary to pretend that it is and “imagine” increased scrutiny – this all fits in with establishing a sound plan.
It takesa big person male or female to put it out there when we are wrong. This will be a hiccup when you look back at it later. If you grow from it, then it was well worth the journey.
Along with ZenHunter’s line of thought , I agree. I use a modified GuppyTrading CBL for my own peace of mind.
The only way out is up, RC. Onward and upward. You’re an idea house and we’ve crushed trades side-by-side all year. Get it pimp.
I also took fly’s post home. I think a pen as sharp as his cuts all of us…for the better.
You did make the call when it went from 430 to 470. It was your management of the trade that went awry, the original idea was right on.
You should really write more, this post is excellent.
agreed
Good post RC. Nobody is right all the time. Forget about it and move on.
Yes, great post. I often wondered how the transition from a private trader to directing a trading room such as 12631 affected your trading. It must some how?
Anyway, on to the next trade. You and chess run a excellent service.
If you want to be in this business, I think you have to decide what you really want out of it. Do you want to pay your mortgage or do you want to pen great prose. I dont think the majority can do both.
Unless you are a rare bird who can write effortlessly and research and trade and deal with the emotional baggage of under or over performing + LIFE, you got to chose which battle you will fight.
We compete with monsters. they have better access, better information, more money, more resources – how can we compete with them when we split our time by arguing about a busted trade with some guy who just bought 3 shares of an $11 stock and is pissed it’s, “down.”
Best of luck.
Yeah, don’t worry about the rest of us yahoos in terms of taking trades. I see everyone’s trades as ideas to compare to my own trading thoughts, not as absolutes. It is our decision making about following trades and even then I find that timing is critical – as in, even following similar trades I can lose or gain where others do not, simply due to time scale and attention during the day. So, it is such a multi-variable thing don’t worry about it, the leadership you provide is in the setup, idea generation and so forth which I (we) learn from and apply in our own way. Everyone has to manage their own style, entries, exits, trades, and I am certainly painfully aware that I can’t just follow blindly. The risk taking is assumed 🙂
RC, I sympathize…from both perspectives. There is nothing more frustrating the knowing you are right, bailing out at the worst moment, then watching it run like you knew it would. It’s almost as if the stock gods specifically shake YOU out and the move on.
I used to write a little finance blog (Fly used to get it) that went to maybe 500 people, and I found that it required me to have more conviction and always seemed to put me in that hard position of trying to be right, yet think clearly about what’s best for the portfolio, the trade, etc. I actually gave up the blog around a year ago, because I found it too difficult to manage the “expectations” of the blog, what I said on there, etc. against trading what I saw in front of me.
There is no right answer, but I think you manage things pretty well, so chalk it up to a bad trade and don’t look back…too many opportunities ahead.