Monday, November 23, 2015

Eating Humble Pie!

I have to face the facts.  I am in the middle of the first major struggle in my brief professional trading career.  I have tried for weeks but I just couldn't put my finger on it.  I even talked to a professional hedge fund manager who told me it was psychological but I just couldn't wrap my mind around it, To this point I was always able to determine what caused me to lose my way.  I have a pretty good reflection system and it seemed to always work without fail.  In this case it just took me longer this time because I just didn't want to see the truth.  My problem is 100% psychological.  It wasn't because I didn't understand the market.  It wasn't that my setups were not working.  It was because I let some things get in my head that I shouldn't have.

At the end of October I ran my numbers for the year and I was $14,000 away from hitting 100k for the year.  For starting out on January 1st with 5k I felt pretty good about myself.  My plan was to start trading full time in June but I actually didn't make any more money trading full time at home than I did trading while at work.  So when they offered me a contract for the 1st semester making more money it was a no brainer to jump on it.  I could bank more money and build some more security.  It worked great at the beginning.  Then the wheels started falling off.

I had the market timed perfectly around my job.  I knew when my setups had the best chance to move.  Then the afternoon offered a lot more opportunities than it does now.  Then we had the "Great Flood" here in South Carolina.  I had 2 weeks off where I was back home trading on my station. During this time I became a moderator in the chat room and I started trading with Speedtrader. Changing brokers wasn't to much of a switch because DAS is DAS but once I got back to school my setups started happening earlier so I would miss them.  I would take a solid setup that would come back and take me out only to turn around and make the move I was looking for.  Or I would have a solid setup but no follow through on the move after confirmation.  After a while I became frustrated and chased a couple that ended up biting me.  All it takes is several losses in a row to start you into a downward spiral.  Especially when you're not used to losing!  I was beginning to feel like this guy:

I didn't have a strategy to get back on the right track.  Well I did but I forgot about it.  Whenever you get lost you always go back to where you started.  You get back to your go-to setup that you should know like the back of your hand.  Start small and then slowly build your confidence back up.  Take only the solid setups.  I was trading all over the place.  I was looking beyond my setups for a big win to get back in the game.  My trades were looking like this!  I just couldn't put anything together the right way.

It is so easy to get caught up in trying to make back your losses or feel you have to make a trade.  Even though I tried not to let that 100k mark creep into my mind, it snuck up on me.  All of this can be overwhelming.  I see how a lot of traders never come back from their first slump.  They continue in a downward spiral until they hit bottom.  I realize now that this is inevitable and it will happen a many more times in my trading career.  The key is learning how to manage it.  How I manage this will further define me as a trader.  The last thing I want to be known as is a statistic or a one hit wonder.  I have been searching for this my whole life and I have finally found it.  I remember when I bought my first computer.  I was determined to make it pay for itself.  I knew one day I would be able to make a living on my computer.  Now that I have found it, I do not want to watch it go away.  I will work as hard as I can to make sure that it doesn't happen.

The bottom line is I'm starting from the beginning.  Taking it slow and building myself back up.  Taking only the most solid setups.  If I make it to 100k by the end of the year, that would be great.  If not, oh well.  I'll just catch up with it next year.

Sunday, November 15, 2015

The Stock Market Outlook for the Week of 11/16

The stock market slumped to its second-biggest weekly loss of the year Friday, breaking a streak of six consecutive weeks of gains. The biggest decliners were the retail sector due to negative reports and forward looking statements by some of the biggest retailers, energy and large growth sectors.

With third quarter corporate earnings season almost over, of the companies in the S&P 500 that have reported results, 73% of them have beaten earnings estimates, but only 44% of them have exceeded sales expectations.

Analysts are currently anticipating a 3.8% decline in corporate earnings for the third quarter, which is an improvement from estimates of a 7.2% decline that was made at the beginning of earnings season.

Over the past few weeks momentum levels in the large caps rose to unsustainable high levels and are now declining just as rapidly, erasing the strong gains we saw in October. The bears are controlling the markets, with less than 30% of stocks trading above the 200 day moving average.

The 20 day or the short term momentum levels are below the 40th percentile in the broader market and will more than likely move into the low 20th percentile before the market begins to consolidate.

The big news for this week is going to be the FOMC minutes, which will shed some light on what the FED was thinking a few weeks back. Aside from the strong employment number last week, data remains mixed and FED may decide to push back the rate hike till March, which is the most likely scenario.