by Stevie Swai
I didn’t know it at the time, but 2 years ago when I lost almost my entire trading account, that it would not only be one of the biggest lessons of my life, but one of the biggest blessings. I had been trading for about 6 months with a fair amount of success. From day one, it was love. I fell completely in love with trading. I didn’t know why and didn’t care, but I had been swept off my feet by my new flame and couldn’t think of anything else. My mind was filled with markets and trading all the days long and my newly found darling even followed me to bed at night. In a word, I was ‘hooked’. But unlike being sweetly seduced like a bee to a flower or a bear to honey, I was actually the flailing fish at the end of the pole being reeled in, gutted, and cooked for dinner.
Yes, the markets reeled me in, chewed me up and spit me out, and didn’t give a damn about it. But in hindsight, it’s very clear to me how I allowed it to happen. I had let my interest and enthusiasm for making money, and my over blown ego, to walk me right into that pond in the first place. And I take full responsibility for ending up as lunch on the market’s silver platter. I had simply gone blindly into this relationship without knowing anything about it nor myself.
I thought I knew myself. I thought I knew myself really well in fact. Wrong. The markets showed me facets of myself I never even knew existed: greed, ego, attachment, obsession. Ugh! Even seeing those words on the page makes me quiver, but they are all in there, inside of me, and I’m glad I’ve finally been able to confront the little beasts and make peace with them. It needed to be done. Why? Because by confronting all my weaknesses, I learned how to approach the markets in a much healthier way and become a better trader.
Greedy has never been a word I would use to describe any part of myself. I mean, I’m always willing to take the smaller slice of pizza and think nothing of slipping a homeless guy a five. I’d never think of being paid for doing favors and chores for my friends and neighbors and almost never take any item back for a refund. So how did greed contribute to blowing my account up? It contributed by not appreciating the profits that were there on the table and taking them. I thought there would be more, more, more. Opportunities were lost with the blink of an eye and let’s not even talk about not setting stop losses due to ‘over assurance’.
Two of my most memorable trades gone South were Conatus Pharmaceuticals(CNAT) and Synthesis Energy Systems(SYMX). I took a position in CNAT on January 3, 2015 at around $8.50/share and enjoyed the ride up to close at $10.63 on the 6th of January. Now $2.13/share profits are crazy good right? I thought so too, but I was looking for more, more, more. I got so involved in all the euphoria and the chatter about this stock on Twitter and in chat rooms; this stock was going to the moon and everyone was going to get rich. Well, to make a long story short, the only ones that got rich were the ones who dumped it right after earnings came out after close on January 8th. By the end of the day on January 9th, this stock was at $6.19. I made 3 mistakes: not taking my profits when they were just laying there on the table; not being aware of the upcoming earnings report; AND not setting a stop loss. And the fact that I can even admit that I didn’t do that is part of dealing with my ego. What in the world was I thinking? Oh yeah – I wasn’t – #braindead. That one experience started me on a downward spiral that continued until May.
Well, I say continued until May; it continued through May. Somewhere around the end on April, I read that John Paulson had bought a 10% stake in Synthesis Energy Systems. I jumped into the stock having a feeling that the news would drive up the price. I was right. At it’s highest closing price on May 5th, I was up a whopping 35%. So what did I do? Not a damn thing. I sat there waiting, like a catatonic moron, for more, more, more. So you see, there’s kind of a theme here. So what’s the lesson? Take the profits. Just take them. Just do it. Better to get out early than lose the opportunity.
I mentioned ego, attachment and obsession as other pesky things I needed to look at within myself. Holding on to positions, getting too attached. Then there’s the ego, again. That’s a big one; actually having to admit you’re wrong. Sometimes getting into a trade is not a good decision and just admitting you’re wrong, getting out and cutting losses is something to master because managing risk is the most important thing you can do for your account. It’s not about making money, it’s about NOT losing it.
So, I guess you can say, through losing my account, or most of it rather, I learned more about myself psychologically than from just about any other experience aside from becoming a parent. And it’s been one of the biggest blessings in my life because once I was able to fund another account and start again from square one, I found that I am a much better trader. These days I trade with a plan, a much better and more grounded approach, less focused on hitting home runs and more on hitting singles. Trader Scott taught me that, in fact. Building up an account is like building a house; you lay one brick at a time.
And, the most important thing is to have a plan. And there’s not THE plan, a one size fits all plan. It’s important to find our own plan and stick to it. I found my plan through knowing my personality. I found it best that I get in and out of a trade as quickly as I can. Like jumping in and out of a cold shower or jumping on and off of a subway train. And even when I get out too early, I think nothing about it. I take my profits and move on to the next trade. No attachment, no emotion. Because as much as I love markets, they don’t love me. The market is alive, but it doesn’t care if we are there. They move and they change and owe us nothing.
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