Thursday, June 16, 2011

Stepping Away for The Time Being

After another frustration-filled session today, I am stepping away for a few days.   For the past two weeks, I've been grinding my account down slowly and even though I am still doing fine for the year with gains around 35%, that's about 10% off of my highs and I am now getting too frustrated to trade effectively.   I entered today with two short positions (DECK and ACOM).   Both were stopped out at the exact highs of the session, to the penny ($80.91 and $37.15) before heading lower the rest of the session.

I entered JVA long as a swing trade this morning at $13.45.  After watching it pullback intraday and then rally back to the highs for the session around $14, I tightened the stop to around breakeven.  I was stopped out there, only to watch it move back up the rest of the session, finishing at its highs for the day. 

Add this to the troubles I've had the past week, and I think I need to do something.  Analyzing the whole situation, perhaps I setting my stops too tight.  Perhaps I have picked the wrong stocks or the wrong side of the market.  Perhaps I am just getting a run of bad luck.   There is a good chance that I've overtraded instead of stepping back and staying in cash. Whatever the reason, I know "it" is affecting my trading, so I think it is wise to step away for a few days, just to clear my head and regroup.     

As I mentioned Tuesday, losing streaks are part of this business and how you handle them is very important.   If you're stuck in one, obviously something is not right with what you're doing, and often times the best thing to do is just take a break.   The market is certainly in an interesting position here with options tomorrow and all sorts of intraday swings the past few sessions, but if a big move occurs, it will have to happen without me.   I'll be back early next week with some thoughts, but I'm going to skip the video this weekend as well.   I think everyone will survive without it.

When I write these "ranting" posts, I know they don't have anything to do with the overall market and what's happening out there, but I do think they're important.   I certainly don't know it all and there are a lot of traders out there much better than me, but I would like to think I do have some idea of what I am doing.  One thing that bothers me however when I read other blogs is that very few if any talk about their actual trades and the psychological aspect of trading.   They just give advice and that's it.   To be honest, that (finding stocks, doing the analysis) is the easy part.   It's everything else that's really hard (like dealing with losing streaks), and I hope sharing these experiences do help some readers out there.   Good luck tomorrow and enjoy the Father's Day weekend.   Take care.


Bhavesh Patel said...

Great post. I just started follow your posts and do my own analysis on them and your advise is great. I hope you come back strongly next week.

Anonymous said...

amen brother

Bhavesh Patel said...

Also, I think you are picking mostly the right stocks. The problem I am seeing is that you are setting your stops too tight e.g. I too entered TSLA around the same time you did. While you stopped out early, I held it and sold it at a 6.4% profit in 6 business days. When I see your other picks it has made a good positive move after you were stopped out prematurely.
Just my take on it. :)

Anonymous said...

I'm with you - not trading tomorrow for the same reason

Sailingbum said...

Your candid observations are refreshing..

Anonymous said...

It's refreshing that you tell it like it is. Your readers can certainly learn from your example to take a break. We can not trade the markets day in and day out. To use the baseball analogy, if you are in a slump sometimes the manager will give you a day off. Hoepfully that will help you break out of the slump. Good luck. I consider myself very lucky to be able to read your first hand account of your trading.

Anonymous said...

Hi Mac-

Your situation reminds me of myself last year where I got bladed up thoughout the summer. What I wound up doing is still following the market and the news, yet did not trade and took off about 2 weeks. I don't think there's anything wrong with your analysis, you just got into the persistant slump that happens to each of us from time to time.

Also I agree that unless specific trades are talked about, there is little value or accountability in the trades and what gives (or does not give) value to other traders reading the blog.

If I could make a suggestion that might help you. The trend at the moment on the S&P-500 is pointing down, and it may make sense to just try and play the general index (possibly short SPY with a 3% stop loss or something) vs. trying to play volatile single stocks.

From a swing trading standpoint, volatile stocks can react unpredicably and while this is good for daytrading, trading single names is tough to swing in a volatile market. Lately I've just been swinging the index myself.


Anonymous said...

enjoy the rest, great things to come when we see you again!

Mac said...

Thanks to all for the comments - very good ones.

Bhavesh - I always keep my losses very small simply because I think if a trade is going to work, it should work right away. It sometimes gets me out of trades early, but it also allows me to miss and still make money because my winners are so much bigger than my losers.

MSH - I agree with your assessment - indexes would be easier right now (although when you see volatility like today, even that's not easy).

I really didn't expect this downtrend to be as smooth as it has been and got out of my shorts from late May way too early.

Anonymous said...

I agree that its a good idea to stop trading until the current market settles down. I think the technicals show a new down trend, but the markets are still oversold and trying to put in a rally to relieve the oversold conditions. As you noted in your previous video, the charts of many leader stocks look terrible, but due to the oversold conditions could easily pop up for a few days before going down again. The VIX continues to rise, but the markets are going sidewise. Too difficult to trade unless you want to day trade. I plan to close most of my remaining short positions tomorrow (most have some profits). I appreciate your videos and candor how difficult it can be at times like this to trade either short or long.

Clay Franklin said...

Better luck next week Mac.

I've been going long since March and lost all my gains from the last two years. I'm really more of an investor than a trader and am learning a lot from you. I need to get better at loss management like at least the CANSLIM 8% rule. Still long UA, GMCR, BEXP, RAX, SNDK, IL, GOOG, APPL, AMZN.
IL and BEXP has been really painful and GOOG is getting there. If GOOG goes to $2,000 in a few years it will be worth it. Now I cannot really sell unless I think these will not be higher by December from where they are now.
I sure picked a lousy time to get into stock investing and trading, it was March.

IVG said...

May be it's the right decision to take couple of days off trading but in my opinion outside of cursing your bad luck lately, you have nothing to worry about - you are in the right stocks, you limit your losses, your account balance is good(in my view 35% YTD is outstanding for a swing trader). Everything else is outside of your control.
I spend the days trading and follow many good traders - and I can tell you that very few are having good times, lately.
I have no doubt though, that will change.
Thanks for the great and honest blog.

Anonymous said...

Great post Mac. And the reason your site rocks IMO is you tell it like it is - good or bad. Getting into the groove IMO is one of the most difficult aspects of trading to fathom. Sometimes it just is. Don't ask me why but I've been totally in the zone lately and not doing anything too much different than you. This isn't boasting because your YTD results annihilate mine. Just reflecting on that strange aspect of "the zone". Thank you for the RAX tip last night which I executed near day end today. Rest up brother and look forward to your return good and fresh. Steve Clem

DrVanNostrand said...

Hi Mac

The Doc is back! taking breaks from the market is healthy. I was on a 2 month hiatus and the market opens closes and functioned just fine without me haha. Anyways I know Bill Oneil always says the big money is made on the long side. Wait for the probabilities to be skewed in your favor. Shorting is the toughest game in town you're quick or you're dead!

Jeremy said...

From what I observe, I think you were a bit overtrading. we all know the market is in a difficult time to trade, you also mentioned that a few times on the blog.

I myself have not traded since early May, except for two trades on 31 May where I thought it was gonna be a follow through day. But it wasn't and I exited quickly. I have not been back to the market since then, and it keeps me out of a lot of trouble.

It is indeed frustrating not to be able to trade, but as a swing trader I convinced myself that I don't need to trade everyday.

I still enjoy your post very much and I truly believe you are a very good trader, and I appreciate your openness to share your drawdown days, cause not many people have the guts to admit that or to share that so that others can learn from your mistakes.

Despite your string of losses, still two thumbs up for you as 35% so far is quite something. I know many good traders didn't make that much so far (sorry for the long post)

Anonymous said...

hi mac
im very happy these few days...

u said about psychological aspect, thats game theory?

whats wrong in the past 4 weeks for me? after oversold and oversold, the mkt ignores it and then ok i shorted at every bounce, then it turned into a big rally for 2-3 gao-up days.

when the rally broke thru previous resistance with heavy volume (i posted a reply of heavy vol day too), i kept a few longs overnite, then the next day was big gap-down.

after big gap-down, it continued with a few days that DayOpen = DayLow (intraday swinging up). after i got use to this pattern, it started gap-up everyday again.

mac, sorry for broken english but i think this gap-up/down days will continue until... end of july.