I finally covered my SAH position yesterday at 3.55, losing little over 5000$ on this position! I don’t have words to describe how painful it was to lose such a huge amount in one trade. I swear, this is the last time it’s going to happen to me. As my friend sJ keeps suggesting me, from now on, no trade without stop loss in place.
Mind you, it’s not that I don’t think SAH will come down [most likely it will start cracking as I have covered]. Looking at the chart, the next major resistance is at 4$/4.20$ and it’s most likely that it will test those levels. I think it was a high time I covered my position before it makes even a bigger hole in my account.
You know why I kept holding SAH? It is because SAH is in auto industry and it’s almost bankrupt [SAH has more than a billion dollar in debt]. But wait. I am supposed to be technical/momentum trader not a fundamental trader. Why am I trying to analyze the company and decides what should be the *right* price of particular stock? Market is already telling me what should be the price for SAH.
So what’s next? I am going to start from scratch again, studying my past trades and finding where I messed it up and what were the right moves. Another shift is thinking about trading in terms of probabilities. [Yngvai's post and experience has been very helpful in this area.]
Thanks to Blue Collar Trader, I watched video of Mark Douglass, author of Trading in the Zone, explaining what it takes to be consistently profitable in trading. It was very enlightening and I have bought his highly praised ‘Trading in the Zone’ book and will start reading it.
Mark Douglass shared a very useful comment about paper trading. Most of the pro traders (including Muddy) think that paper trading is useless. Mark doesn’t think so. He says that if you are able to consistently make money while paper trading but fail to make money in real trading, it’s a great way to realize the mental weakness you have. It’s like a mirror which shows you how mind buckles under pressure. I think that’s a great point. I have never tried paper trading before, but I am going to give it a shot. I want to see if I can make money while paper trading.
Also, if you have been following my blog and have any thoughts or suggestions about articles/books please share them.
Trade well,
RJ
10 responses so far ↓
1 Evan // Apr 24, 2009 at 6:27 pm
RJ,
All I can say is- I’m with you and know what you’re feeling (and at the same time unfortunately).How about we stick to the price action/technicals and quit the fundamental guessing games once and for all?! I’ve been following your blog for almost a year, btw. We’ll get there!
Evan
2 Yngvai // Apr 24, 2009 at 7:39 pm
Congrats on recognizing that the market had made up its mind regarding SAH. It’s always important to know that the market doesn’t care where you think a stock’s price should be….the market is going to do whatever it wants to do.
I would agree that paper trading is extremely useful. I had gone back to paper trading for a while to make sure I got my shit together. If you can’t make money paper trading, there’s no way you’ll be able to do it real trading.
3 Beau Wolinsky // Apr 24, 2009 at 7:40 pm
-$15.71 per share losses, and a four dollar stock….did someone need to tell you that that stock was worthless? This says more about your watchlist selection skills than it does about your trading. If you had a technical reason to trade these stocks, then it’s unfortunate you had this in your universe, however, that doesn’t get around the fact that any amount of fundamental analysis would have told you this stock is essentially worthless. I think you need to refine your watchlist to only be in highly liquid components, and this will take a lot of the fundamental factors out of your technical strategy. This will be more beneficial if you just started from a quasi-approved watchlist than messing around with junk like this penny stock crap. Just a word of advice from someone who knows.
4 IL Torello // Apr 24, 2009 at 8:39 pm
RJ…long time, no hear. School, school, school with me. Oh man, I feel your pain. I admire your perseverance!
5 sJ // Apr 25, 2009 at 7:22 pm
i suggest to spend time studying charts if u want to be technical trader…
learn how breakouts and breakdowns work….
never try fighting the trend and make stop loss part of your trading game plan. Always have exit strategy in place before entering a trade…This way u r always in the game….
everytime one lets emotions let over your trading, you end up losing big…
good luck !!!
6 RJ // Apr 26, 2009 at 9:47 am
Beau,
I didn’t lose 15$ per share. I lost 2.5$ per share. I don’t think I agree that my watchlist is poor. I traded SAH perfectly when it broke down after earnings news. It was my mistake to enter SAH again and hold it for as long as I did.
And sJ, yes, I will be studying charts and be a true technical trader.
Thanks,
RJ
7 Charlie G. // Apr 28, 2009 at 1:12 pm
SAH is a tough little bugger….still holding up.
Paper trading can be helpful, it depends on your personality and how your mind works.
For day trading practice, I find it very educational. My emotions and reactions are very similar as if I was using my real account.
For overnight holds and swing trading, I personally don’t get much from it. The next day I will forget I have open positions. Once I step away from the computer, I’m no longer invested and it changes my risk tolerance, etc.
Good luck, as long as we learn from the mistakes, painful loses can profit you in the long run.
8 johnnyvento // Apr 28, 2009 at 8:37 pm
Sorry to hear that Ramta
9 Yngvai // Apr 28, 2009 at 9:29 pm
RJ,
Awesome that you bought “Trading in the Zone”. I was thumbing through it the other day at the bookstore. Looked like a pretty good book on trading psychology and the things you need to think about when setting up a trading system.
10 Yngvai // May 2, 2009 at 6:58 pm
RJ,
One more thought. One thing that helped me was going back to trading with very small position sizes. Your gains won’t be as much but neither will your losses. And if you can’t make money consistently with small position sizes, you won’t be able to with large ones either. Once you’re consistent with small positions, then you can gradually increase them.
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