Hi Traders,

Tuesday Jan 2nd to Thursday Jan 4th was good but on Friday I made a mess of things. I was at the gym in the morning before the 2.30pm market open. I bust a gut in the gym (kind of) and came to the market on Friday a little tired & unprepared. I was far too casual and probably needed a bit of a 'time out'. https://zerodha.com/varsity/chapter/knowing-when-to-walk-away/ As described here, I was essentially in a 'psychological slump'.

I located 100 shares short on SGD, a morning gapper. I entered just under $2 shortly after the market open, thinking maybe it would struggle to get over $2 and be an all day fade. I kept 50 shares just in case it went higher but added at about $2.02... showing a lot of impatience here and a lack of perspective of the overall chart picture. There was pre-market resistance at $2.40s and I should have waited for the trade to come to me. My entry was more suited to a long setup (in hindsight) as we also had a pre-market support not far below $2. 

My max loss of $15 was hit on the day but I did something I had been doing far too often.. I went into my client portal and changed my max loss to $25.. giving myself another chance to trade. The rest is history.. I kept doing the same thing and before I knew it I had tossed $139 away + $36 in commissions... My whole entire week's profits thrown away, trying to win back my losses. I traded AIMD, MARA and SIDU.. all mediocre/non-setups. Anything just to get rid of that horrible feeling in my gut.

This is obviously stupid trading and stupid behavior. Its something I have struggled with from the very start of my trading journey.

Some key takeaways:

'A max loss (ML) is not a 'max loss' if you keep going in and changing it. It is a meaningless number.

'Discipline is choosing between what you want now and what you want most'

'Choose the pain of discipline over the pain of regret'

How my week *could have looked vs how it looked:

                    p/l     Commissions     Total

Tuesday:      $40.25        $23                  $17.25

Wednesday: $120.02       $18                 $102.02      

Thursday:    $20.60         $6                   $13.40

Friday*:       $-15 (ML)    $3                   -$18

Friday(actual):-$139.40   $36                -$175.40

Week total had I respected rules

                     $165.87    - $50              = $115.87

Actual week total 

                      $41.47   -  $83               = -$41.53 

 

What a difference discipline can make.

It's tough to take a loss right at the market open and then have to stop trading for the rest of the day.

What I may do to combat this is to reduce my max loss in the am to $10 instead of $15 and if its hit I have to walk away and can return after 2pm once I've cleared my mind and got away for a while, and have a daily max loss of $20. 

I will have to think it through. Having a daily max loss so low makes it difficult to size up and leaves little margin for error. $15 is already quite low.  But for the next 3 months I will stick by this and ensure I'm taking high quality trades. 

I want to practice the patience to wait for the levels I desire to be hit before taking my entry. I want to also have my max loss hit when I get too impulsive and end up losing on the trade. I want it to happen sometimes so that I can get into the practice of walking away.

It's the most underrated skill in trading which has to be developed. Many times I've been able to dig myself out of a hole but ultimately this is a gambling mindset and it will eventually catch up to you, as it did yesterday.

I will have an immediate plan of action when my max loss is hit:

1. Immediately log out of my trading platform and shut down my computer.

2. Get up and hop in my car and take the dog for a walk or a run.

3. Have some recorded voice notes of myself giving myself instructions and perspective.

I am also going to find out if Tradezero can change this auto loss setup to where if I hit my max loss on the day I would have to pay a substantial fee if I wanted to adjust it up that same day. (e.g $100 would be enough of a deterrent). Not sure if they would do it but it's worth a try.

Lets make the rest of January great.

Peace