What I Learned in 2014

What I Learned in 2014

January 2015 marks my 1 year anniversary in day trading.  I felt that in honor of my 1^st year, I would reflect on the things I have learned over the past year.  In education, reflection is the key to becoming a better educator. I have used it to become a better teacher, and about halfway through 2014 I realized that I could use it to be a better trader as well.  In this blog I will share the things that I have learned about my trading that has consistently helped me to move forward toward making this a career.  I know they have worked for me because when I stopped and looked back over my first 5 months, made adjustments, I went from $800 to a little over $9800 in 6 months.  Yes I used too much leverage and traded with way too much size in relation to my account size, which is a mistake I will not make this year.  As I looked over what I did, I see that I was 1 trade away from blowing up! I will be more responsible this year.

Lesson 1:  It is so easy to get lost in the market, in a trading community, or just life in general.  It is not wrong to be driven in the pursuit of success.  To be successful in anything I do I know I have to have passion and be driven to accomplish my goals.  It is when I get lost and disconnected from the world around me that the problems come in.  I learned I have to stop and self-reflect to make sure I’m still on the right track to accomplish my goals. I have to take time to specifically focus on questions about my goals and my general state of mind.  it wasn't until I started taking steps back each week to analyze where I was in reaching my goals, to decide whether based on what I have learned this week, are my goals realistic, and how I may need to adjust my strategic plan to reach my goals, that things started making sense to me. I had to detach myself from Twitter, chatrooms, charts, etc.  I had to set aside time each week to unplug from everybody and everything.

Lesson 2:  I learned that I can’t try and take short cuts and find deals on everything.  With the exception of FINVIZ, Twitter, and YouTube, all the tools I need to be successful costs money.  I know the TOS platform and other platforms are supposedly free but we pay for it in other ways.   I can honestly say it is all worth it.  For instance, I pay $150 a month for EquityFeed. If I find just 1 or 2 trades I have made my money back.  Everything after that is just gravy.  I look at everything as just the cost of doing business.  If I use the tools correctly and I trade correctly, I make money.  Anyway, it’s tax deductible!

Lesson 3:  About halfway through the year I realize I hated OTC’s.  I especially didn't like shorting them.  It seemed like shorting crappy OTC’s was the only way make money with them.  So in May I started looking for something different and that’s when I found Nate at Investors Underground and his DVD Textbook Trading.  Before I bought in I watched some of his video lessons posted on his YouTube channel and asked a few people I knew.  I made the mistake of jumping in chat too soon because I spent more time trying to figure out what they were talking about.  I spent a couple of weeks on the video and got a good fundamental understanding of how the community trades and their lingo. It helped me learn which setup I liked the best without paying any tuition in the market.  Once I got my bearing it was great.  So the lesson I learned is that if you join any chat, make sure you take some time and learn the language of that community.  It can determine whether you will get anything from your subscription or not.

Lesson 4:  I learned that for a new person starting out that it is best to focus on one type of setup at a time.  As I said before I used the DVD to help me identify the setup I liked the best.  Make sure you can correctly identify and trade that setup before you start looking at another one.  When I did that I started making money.  I put all of my time and energy in to studying everything about the setup I liked the best.  I planned to build up some capital with it before I start branching off.  So in 2015, I will start learning short setups.

Lesson 5:  I learned that you really only need to follow 1 Guru and his community.  If you’re trading GURU A’s setups, don’t look at GURU B to give advice.  It doesn't work.  I did my homework and found someone that is genuinely interested in teaching you to be an independent thinker and how to understand every part about their trading strategies.  I knew that if I wanted to be successful in this that I had to learn how to stand on my own 2 feet.  I am not in chat during the school year because it doesn't benefit me.  I will get back in during the summer and when I go full time, I will be in chat full time.  I know that there are free chatrooms out there but I will not contaminate my mind or cloud my judgment.  I am successful trading and I am not going to mess that up.

Lesson 6:  I needed to trade small to eliminate as much emotion from my trading decisions as I could.  I came up with an amount I was willing to loose and stuck with it.  I started trading 100 share positions on stocks less than $3.  There were limited opportunities in NASDAQ’s but I wanted to practice identifying and trading patterns.  As my winning % improved, I took larger sizes.  I was able to get all of the dumb mistakes you make when new out of the way and gain valuable live trading experience.  I did not paper trade because I felt it wasn't real.  For me there is no emotional attachment to fake money.  Trading small helped me learn how to manage my emotions when a trade didn't move the right way initially.  I learned how to respect the plan and if a stock didn't cross the line in the sand I set before the trade, it stays on.  90% of the time the stock came roaring back and I was green again.

Lesson 7:  Cut losses quickly.  Sometimes I had to admit when I was wrong.  I had a hard time with this because I felt that if I was wrong, I was not learning and I might not be cut out for this.  I had to realize that even the best traders are wrong.  The setup may be right, but the market decides if you are right or not.  Once I was comfortable with this and knew that I was able to cut losses fast and not worry about a winning %, I could trade with more size.  Since I had a small account I had to protect my capital and could not afford big losses.  I learned that cutting losses quickly had to be a part of my trading plan and that it could actually allow me to make more money in the long run.

Lesson 8:  I learned that I needed to take profits on the way up.  It is hard to do with a 100 share position but I had to set a goal to take profits when a stock reached a certain point, regardless of what I thought it might do.  When I started trading with 1000 shares, I could take ½ off at 3% gain and let the rest work.  I figured that I would not trade a ticker unless I expected at least a 5% overall move anyway. Now, I always take profits on the 1^st red candle during a move.  I always make sure I pay myself something.  I had so many trades that I could have made $75 to $100 on but didn't take some profits off the table and ended up losing.  With a small account these $75 and $100 wins add up, especially if you do several a day.

Lesson 9:  I learned to only trade when I have a setup that I like.  I learned not trade out of boredom.  I learned not to chase stocks that setup but I missed my entry.  I had to realize that I am only trading 1 strategy and if the market is down or slow, I may not have any trades that day or I may miss the entry on the one that setup.  The next day may bring more than I can handle.  I had to learn to be patient and only trade my setups.

Lesson 10:  I had to reduce my trading station from watching 4 screens to 3.  Too much "noise" when I'm trying to trade was killing me.  I was missing more trades than I found because I was looking at too much.

Lesson 11:  Last, but not least, and I should have known this from the start, there is no substitute for education. Textbook Trading and Tandem Trader were my best investments.  Without them I would be nothing right now. Watching all the video lessons I can and participating in all of the webinars I can I know makes a difference.  I had to take a step back, take my time and learn what I needed to so I could be successful.

So I can sum it up like this; Reflection, Education, Patience, Education, Patience, Reflection.  I know I will never stop learning in this business.