A chronology of my thought process/journey after trading my own money for a little over 1 month.
BACKGROUND
I used to work in the financial sector for a bulge bracket bank in New York City. The guy you see on TV wearing a suit walking down Wall Street? That was me. While there, I traded some of my money part time and had huge success. This was the time when the credit crunch hit and it didn't take much analysis to figure out what was going down (everything). I didn't like my job very much and had a decent amount saved up so trying my hand at trading for a living seemed like a no-brainer since I genuinely love it and didn't want to waste my life at a job I hated. Which is what led me back to India. It had nothing to do with a love for my country, patriotism or any of that nonsense. The opportunity was there, I took it.
SETTING UP AND THE FIRST FEW DAYS
Living in a small town in coastal India has its advantages. None of them have anything to do with helping you trade however
. After a few back and forth visits, my account was finally up and running. All I had to do now was to wait for my money to come in! Meanwhile, my anxiousness to start was eating me up. I decided to paper trade till my money came in.
Looking back, I was a headless chicken but at the time I could have sworn I was intelligently guessing. Example (please try not to laugh) "The total quantity sold for XYZ is greater than total quantity bought. Hence it must be going down!". It took me all of 2 days to be appalled at the ratio of effort to gains. Time for a more rational approach.
MACD+(RSI/ROC)*MA(20)-WEMA(200)= Uhhh?
Given my background, I already knew quite a bit about technical indicators but didn't know how to use them intelligently. I didn't have the usual newbie problems of ignoring stop losses. After being around people who lose millions a day, a stop loss leaves quite an indelible mark!
Anyway, I explored the world of indicators and oscillators and started using some of them. I backtested my methodology and was encouraged by the profit%. After a week's worth of trading though, I was in the red. Something was wrong. I didn't feel like I knew what I was doing. So I took some days off to figure out what was off.
The answer? Well, I was expecting the price to behave based on what the indicator said and not the other way around! Indicators are just that, indicators! A deeper understanding was necessary of market dynamics and price patterns.
HIGHER EDUCATION OR: THE STUFF I SHOULD HAVE LEARNED IN COLLEGE
The itch to get back in for some action was too strong to resist and I went in with defined risk limits and stop losses. I ended up losing money in all my trades. Meanwhile, I was reading up on price patterns and S/R dynamics. I still needed to see it work in realtime and the only way was to put my money on the line. Again. That's the only way anyone ever learns.
This time around, I made some and I lost some. Overall, I was still in the red and growing concerned but I consoled myself by reflecting on how I had some basic method in place. I made a list of the things I didn't know at this point and started to work on them. Needless to say I'm still working on the list but checking off the initial few items such as "What kind of a trading pattern does my psyche support?" and "What is my holding period, how long can I sit still/sleep at night with an overnight position?" helped me immensely. And then, I found it, the holy grail! My million $ baby!
ANATOMY OF A METHODOLOGY
After figuring out what kind of patterns my psyche could support, I explored trading methodologies on a high level. Swing, position, momentum etc. (Daytrading was never my thing). I found one that matched and read up on it voraciously. I ignored the list I had made. I took a week off with the intention of using the first half to study and the second half to paper trade. My paper trades showed a handsome profit! I double checked my entries, exits and charges etc and the number still stood! Is this how it feels when you make it as a trader?
The next week dawned and I was ready. A cold, calculating bast*rd ready to relieve novices off their money. By the end of the week, I had lost on every single trade I placed. My money management skills have always been up to scratch, hence I limited my losses greatly.
I was distraught. I viewed myself as a failure. Over the weekend, I reviewed my methodology and suddenly realized it wasn't a methodology as much as a feeble framework of patched up ideas and indicators. Instead of working to fix it as I usually do in such situations, I broke down. I grew frustrated and lashed out at anything around me. The first half of the next week, I still traded just to see how much I could lose. After every loss, I sarcastically congratulated myself. The rate at which I was losing money I calculated, I would be out of money, money that I had worked 14 hours a day for 4 years and saved up painstakingly, in 25 months. And then something clicked.
FIRST RULE OF MAKING MONEY? DON'T LOSE IT
So said Warren Buffet.
I cannot define what made me pick myself up out of my destructive pattern but I soon found myself tweaking my previous methodology to make it more sensitive. I realized my backtest and paper trade settings were flawed and needed adjustment. I started recognizing price actions. I stopped trying to predict what the stock would do next but built rules for every single trade. To keep track and to help me remember, I wrote them down for reference. I realized what my methodology is really about and how to manage risk.
Or so I think. As of now, I'm still in paper trading mode and the results are encouraging. I'm not staring at my screen for 6 hours a day watching candles form and I've learned the key role patience pays. I still have have to trade my money though. You never learn more about yourself as a trader until your money is in the market. I'm guardedly optimistic.
I'm working on my list meanwhile and have come to realize, there is no perfect setup. All you have is the least imperfect one. After that, price is all that matters. Price is also the biggest indicator, not something that's derived from it.
And no disrespect to anyone on this board, but astrology and stock tips from some member sure as hell aren't any way to make money. If you're using astrology to predict market behaviour, I have some fantastic sub prime mortgage CDO's I'd like to sell you!!
Thus far I've been trading for about 5 weeks and have lost 6.25% of my account. Updates next month as to my progress. Thank you for reading.
BACKGROUND
I used to work in the financial sector for a bulge bracket bank in New York City. The guy you see on TV wearing a suit walking down Wall Street? That was me. While there, I traded some of my money part time and had huge success. This was the time when the credit crunch hit and it didn't take much analysis to figure out what was going down (everything). I didn't like my job very much and had a decent amount saved up so trying my hand at trading for a living seemed like a no-brainer since I genuinely love it and didn't want to waste my life at a job I hated. Which is what led me back to India. It had nothing to do with a love for my country, patriotism or any of that nonsense. The opportunity was there, I took it.
SETTING UP AND THE FIRST FEW DAYS
Living in a small town in coastal India has its advantages. None of them have anything to do with helping you trade however
. After a few back and forth visits, my account was finally up and running. All I had to do now was to wait for my money to come in! Meanwhile, my anxiousness to start was eating me up. I decided to paper trade till my money came in.Looking back, I was a headless chicken but at the time I could have sworn I was intelligently guessing. Example (please try not to laugh) "The total quantity sold for XYZ is greater than total quantity bought. Hence it must be going down!". It took me all of 2 days to be appalled at the ratio of effort to gains. Time for a more rational approach.
MACD+(RSI/ROC)*MA(20)-WEMA(200)= Uhhh?
Given my background, I already knew quite a bit about technical indicators but didn't know how to use them intelligently. I didn't have the usual newbie problems of ignoring stop losses. After being around people who lose millions a day, a stop loss leaves quite an indelible mark!
Anyway, I explored the world of indicators and oscillators and started using some of them. I backtested my methodology and was encouraged by the profit%. After a week's worth of trading though, I was in the red. Something was wrong. I didn't feel like I knew what I was doing. So I took some days off to figure out what was off.
The answer? Well, I was expecting the price to behave based on what the indicator said and not the other way around! Indicators are just that, indicators! A deeper understanding was necessary of market dynamics and price patterns.
HIGHER EDUCATION OR: THE STUFF I SHOULD HAVE LEARNED IN COLLEGE
The itch to get back in for some action was too strong to resist and I went in with defined risk limits and stop losses. I ended up losing money in all my trades. Meanwhile, I was reading up on price patterns and S/R dynamics. I still needed to see it work in realtime and the only way was to put my money on the line. Again. That's the only way anyone ever learns.
This time around, I made some and I lost some. Overall, I was still in the red and growing concerned but I consoled myself by reflecting on how I had some basic method in place. I made a list of the things I didn't know at this point and started to work on them. Needless to say I'm still working on the list but checking off the initial few items such as "What kind of a trading pattern does my psyche support?" and "What is my holding period, how long can I sit still/sleep at night with an overnight position?" helped me immensely. And then, I found it, the holy grail! My million $ baby!
ANATOMY OF A METHODOLOGY
After figuring out what kind of patterns my psyche could support, I explored trading methodologies on a high level. Swing, position, momentum etc. (Daytrading was never my thing). I found one that matched and read up on it voraciously. I ignored the list I had made. I took a week off with the intention of using the first half to study and the second half to paper trade. My paper trades showed a handsome profit! I double checked my entries, exits and charges etc and the number still stood! Is this how it feels when you make it as a trader?
The next week dawned and I was ready. A cold, calculating bast*rd ready to relieve novices off their money. By the end of the week, I had lost on every single trade I placed. My money management skills have always been up to scratch, hence I limited my losses greatly.
I was distraught. I viewed myself as a failure. Over the weekend, I reviewed my methodology and suddenly realized it wasn't a methodology as much as a feeble framework of patched up ideas and indicators. Instead of working to fix it as I usually do in such situations, I broke down. I grew frustrated and lashed out at anything around me. The first half of the next week, I still traded just to see how much I could lose. After every loss, I sarcastically congratulated myself. The rate at which I was losing money I calculated, I would be out of money, money that I had worked 14 hours a day for 4 years and saved up painstakingly, in 25 months. And then something clicked.
FIRST RULE OF MAKING MONEY? DON'T LOSE IT
So said Warren Buffet.
I cannot define what made me pick myself up out of my destructive pattern but I soon found myself tweaking my previous methodology to make it more sensitive. I realized my backtest and paper trade settings were flawed and needed adjustment. I started recognizing price actions. I stopped trying to predict what the stock would do next but built rules for every single trade. To keep track and to help me remember, I wrote them down for reference. I realized what my methodology is really about and how to manage risk.
Or so I think. As of now, I'm still in paper trading mode and the results are encouraging. I'm not staring at my screen for 6 hours a day watching candles form and I've learned the key role patience pays. I still have have to trade my money though. You never learn more about yourself as a trader until your money is in the market. I'm guardedly optimistic.
I'm working on my list meanwhile and have come to realize, there is no perfect setup. All you have is the least imperfect one. After that, price is all that matters. Price is also the biggest indicator, not something that's derived from it.
And no disrespect to anyone on this board, but astrology and stock tips from some member sure as hell aren't any way to make money. If you're using astrology to predict market behaviour, I have some fantastic sub prime mortgage CDO's I'd like to sell you!!
Thus far I've been trading for about 5 weeks and have lost 6.25% of my account. Updates next month as to my progress. Thank you for reading.
