Trading. We all start somewhere.
Hello Everybody! In the spirit of transparancy that is surging across FinTwit I figured why not join the blog party. I contemplated back and forth on whether or not I should. But it doesnt take much twitter persuasion to get me to talk blog about something I am so passionate about. some would say I never shut up about it lol. The reason for the hesitation was not because I didnt want to, I hesitated because the already popular blogs from greater, more experienced traders than I are already so invaluable (I've gobbled up every scrap!) I found it really hard to Add Value, everything I thought about talking about was covered! These guys go over it all, The emotional ups and downs of trading, the heart attacks, risk management, the process, determination, TA/FA, FOMO, pressure, everything. So If you have not already I strongly recommend checking out these guys' blogs, Dante's in particular (If by some miracle you haven't already)
@jerrybrack @_jpark89
So anyway How to Add Value. Well likely what I say in this blog HAS been covered before in some way/shape/form but I will do my best, hopefully hearing ideas from different points of view still helps. I know when I first started I didn't care, The more times I heard something the more I understood it so lets get straight to it. I will skip and save the background info on myself & my story for another time, Just know Ive been trading/studying for a couple years now, mainly a shortseller, started studying trading in college, I live in Hawaii, 3:30 a.m. market time, and I wouldn't not wake up every morning for almost anything. Lets talk trading!
So so many topics to talk about but I want to briefly talk about some specific key concepts and philosophies I have learned & embraced that have most evolved my trading. I will try to include examples. Just note that
IN ORDER TO SUCCEED YOU MUST OWN THE KNOWLEDGE. If you want to win, even the correct knowledge wont help you if you dont understand it in your own mind, This knowledge is How I PERSONALLY understand the knowledge. Alright Basic Key Topics....
1. 90% of Traders Fail
I'm sure you have heard this statistic over and over again some say 90% some 95% some 99%. The point is most fail. The first thing that should pop into your head is How can I be in the minority % ? Well, The answer is very simple in theory and difficult in execution. You need to do the OPPOSITE of what everybody else does. Where everyone is stopping out, you need to be entering your position, When people are long, you need to be short, when people are holding for the bigger gain, you need to be taking profit, When they're red, you need to be green. This is a zero sum game. You cant be with the crowd. You need to have an edge. If there is no edge, don't trade. I don't trade everyday, I thought I needed to at first cause I saw everybody doing it and got the FOMO, but now if I dont see a familiar edge, I dont trade.
I, like many traders before me realized that I was always getting stopped out Right before I would have nailed the trade. I am SURE that has happened to you. That is not an accident when that happens, it is 100% intentional. So thats when I learned my first edge. To quote @TBradley90. You have to decide "Who is Stuck?" When I learned how to identify that, I gained an edge.
Btw. Sometimes trying to determine which side the crowd is on, is maddening, and if you have too many conflicting thoughts, just avoid it... Until your edge smacks you in the face. Dont trade.
2. STOPS, Where to put them?
Stops. Tight stops, wide stops. Wiggle Room, Price stops, Time stops, Trailing stops. This, IMO is one of the true magic jujus's of trading. For a short seller, this part of trading is by far one of the trickiest and slippery beasts to tackle. Here's what I mean, thankfully we got a perfect recent example.
Stops are hard for a few different reasons. 1. NOONE wants to cover the top. 2. NOONE wants to have an obvious stop loss. 3. Stocks LOVE to rip ALOT at the Obvious stop loss places, on purpose, to increase the emotions of the triggering stops. All manufactured, all on purpose. Ever catch yourself shorting and Under VWAP with VWAP risk and then saying Wait, I can't stop out at VWAP. Too Obvious! Better make it $3.00, No dont want to cover at whole dollar resistance, how about $3.25 with "wiggle room." Nooo But then Im covering right into the Perk of The lower High of 3.40. Where do you draw the line? Dont want to cover the top, dont want to get run over. Hopefully this is striking a very common nerve. We all have felt the same way! What are ways to cope with it?
When I was new I reached out to & learned from a really good buddy, someone who I'm proud to talk to everyday now, @_jpark89, and asked him this question. He gave me the best answer possible. "You need to put a stop in where your trade thesis is rendered invalid"
That struck a cord. Trade thesis? Wtf was that? I short what I want to go down and Long what i want to go up. Lol. A trade thesis, in this situation, If you Shorted at 2.70 For the "Fade trade" You can't stay for the HOD reject trade or the lower high trade, those are two different thesis's, you can only do that if you ALLOW for it with your SIZE. If you're full sized in at 2.70, You are going to be shitting/hating yourself at 3.25 and that could explain why you may cover up there. So if your thesis is the "Fade Trade" Don't feel ashamed if you covered at VWAP, a break of vwap rendered your Thesis invalid, move on, NEXT, maybe next time have more patience with your entry, or size smaller for more wiggle room, or nothing! You decide!
So What can you do?
Identify a Trade Thesis, Where is your idea wrong? Then size accordingly for how much risk you want to have on the trade if your stop activates. My personal favorite I stole from Alex, I like to cut half position at my stop and cut the rest if it continues or put it back on if it stuffs, but that's just me.
You have probably figured this out but the wider your risk, the larger your confidence interval (stat nerds) = higher probability of success. Tighter Stops = smaller confidence interval = higher chances of the stop getting hit.
One of the biggest things I learned about stops is that Shorting at $2.70 with $3.00 risk does not mean that I'm betting that the stock will go down except if $3.00 activates and then nevermind. My stop placement is stating that I'm making a bet that The stock will not touch $3.00 BEFORE it goes down. I learned to always link Trade thesis with stop placement with sizing to eliminate regretful stop outs.
That brings me to Key Concept #3
3. At the EOD ALWAYS be happy with your decisions.
This is a way to help manage your emotions while trading. This is very much easier said than done. But if you can learn to do it, You are going to have a lot more fun and lose a lot less hair trading stocks, and speaking from someone who cherishes his locks as much as I do, This is my Favorite Rule. My hair thanks me ;)
I try to apply this Rule to ALL of my trades, especially my losses. If I lose or stop out on a stock, It's okay because before I took the trade I took it into consideration. a lot of the times I even mentally take the loss before I enter the trade to help my psyche through the trade. Idk it works for me. Lol. this means If I cover the top, I strive to be able to laugh about it and say aww you dicks got me good!. Is this the case every time? Of course...... NOT! I'm human. But I try to be okay with the outcome no matter what happens after I close a position. If I sell at my target and it was too soon, Im happy with my trade, If I cover into a stuff, Oh well, don't care. NEXT!
To be honest I have a lot more difficult time with this rule in regards to ENTERING a trade. See I'm pretty careful or... a pussy as some individual on TWTR likes to call me, you know who you are...Dick <3, This derives from being a perfectionist which is a dangerously incompatible word with trading. I have a lot more regret in regards to NOT taking trades I should, than taking trades I shouldn't. I'm working on it, and if we're ever in a chatroom together or discuss a stock idea I like, you have my permission to call me out on my pussyness and force me into the trade. Hahahaha anyway a personal favorite.
Well, that's about all I can think about right now I hope you got something out of it, I may open Dms to answer some questions if anybody has any. Oh wait, so just to restate this, None of this stuff matters if you can't put it into your own brain, but one of the things I did, probably what many traders before me have done is I tried to take What I felt were the most unique or best traits of my favorite traders and tried to combine them into my own mold of that combination to create my own style.
My biggest inspirations and the lessons I learned & try to emulate.
Bao: Everything really. Lol But. Rule #1 Live to trade another day & Recycling shares (Another Blog Post)
Alex: Save your trading and mental capital to hit the A+ Set-ups with size & Conviction
Dante: One of the best skills in trading is to learn what stocks to stay the FUCK away from. High Volume + SSR Cya later. Throw ETB in there as well? NOPE!
JPark: Discipline And Consistency wins in the long run. Losses, not gains determine your trading success. This guy NEVER takes Big losses. He posted almost everyday almost a year, losses were/are always controlled.
Nico: NEVER EVER EVER give up! Dont you dare!
Tim G: Don't Get Stubborn, Just don't do it. It doesn't end well.
Auspex: Learn the motive behind the move. It's there, you just have to dig.
Pigs: Teehee!...Nah in this game you need to have balls and he constantly reminds me of my lack of ;) But my entries are still better :P Suck it.
Well I think that's a wrap for now unbtil the next blog. Please let me know of any feedback/ criticism!
Aloha & Happy Trading,
Austin
@AT09_trader @DGtrading101 @TBradley90
@jerrybrack @_jpark89
So anyway How to Add Value. Well likely what I say in this blog HAS been covered before in some way/shape/form but I will do my best, hopefully hearing ideas from different points of view still helps. I know when I first started I didn't care, The more times I heard something the more I understood it so lets get straight to it. I will skip and save the background info on myself & my story for another time, Just know Ive been trading/studying for a couple years now, mainly a shortseller, started studying trading in college, I live in Hawaii, 3:30 a.m. market time, and I wouldn't not wake up every morning for almost anything. Lets talk trading!
So so many topics to talk about but I want to briefly talk about some specific key concepts and philosophies I have learned & embraced that have most evolved my trading. I will try to include examples. Just note that
IN ORDER TO SUCCEED YOU MUST OWN THE KNOWLEDGE. If you want to win, even the correct knowledge wont help you if you dont understand it in your own mind, This knowledge is How I PERSONALLY understand the knowledge. Alright Basic Key Topics....
1. 90% of Traders Fail
I'm sure you have heard this statistic over and over again some say 90% some 95% some 99%. The point is most fail. The first thing that should pop into your head is How can I be in the minority % ? Well, The answer is very simple in theory and difficult in execution. You need to do the OPPOSITE of what everybody else does. Where everyone is stopping out, you need to be entering your position, When people are long, you need to be short, when people are holding for the bigger gain, you need to be taking profit, When they're red, you need to be green. This is a zero sum game. You cant be with the crowd. You need to have an edge. If there is no edge, don't trade. I don't trade everyday, I thought I needed to at first cause I saw everybody doing it and got the FOMO, but now if I dont see a familiar edge, I dont trade.
I, like many traders before me realized that I was always getting stopped out Right before I would have nailed the trade. I am SURE that has happened to you. That is not an accident when that happens, it is 100% intentional. So thats when I learned my first edge. To quote @TBradley90. You have to decide "Who is Stuck?" When I learned how to identify that, I gained an edge.
Btw. Sometimes trying to determine which side the crowd is on, is maddening, and if you have too many conflicting thoughts, just avoid it... Until your edge smacks you in the face. Dont trade.
2. STOPS, Where to put them?
Stops. Tight stops, wide stops. Wiggle Room, Price stops, Time stops, Trailing stops. This, IMO is one of the true magic jujus's of trading. For a short seller, this part of trading is by far one of the trickiest and slippery beasts to tackle. Here's what I mean, thankfully we got a perfect recent example.
When I was new I reached out to & learned from a really good buddy, someone who I'm proud to talk to everyday now, @_jpark89, and asked him this question. He gave me the best answer possible. "You need to put a stop in where your trade thesis is rendered invalid"
That struck a cord. Trade thesis? Wtf was that? I short what I want to go down and Long what i want to go up. Lol. A trade thesis, in this situation, If you Shorted at 2.70 For the "Fade trade" You can't stay for the HOD reject trade or the lower high trade, those are two different thesis's, you can only do that if you ALLOW for it with your SIZE. If you're full sized in at 2.70, You are going to be shitting/hating yourself at 3.25 and that could explain why you may cover up there. So if your thesis is the "Fade Trade" Don't feel ashamed if you covered at VWAP, a break of vwap rendered your Thesis invalid, move on, NEXT, maybe next time have more patience with your entry, or size smaller for more wiggle room, or nothing! You decide!
So What can you do?
Identify a Trade Thesis, Where is your idea wrong? Then size accordingly for how much risk you want to have on the trade if your stop activates. My personal favorite I stole from Alex, I like to cut half position at my stop and cut the rest if it continues or put it back on if it stuffs, but that's just me.
You have probably figured this out but the wider your risk, the larger your confidence interval (stat nerds) = higher probability of success. Tighter Stops = smaller confidence interval = higher chances of the stop getting hit.
One of the biggest things I learned about stops is that Shorting at $2.70 with $3.00 risk does not mean that I'm betting that the stock will go down except if $3.00 activates and then nevermind. My stop placement is stating that I'm making a bet that The stock will not touch $3.00 BEFORE it goes down. I learned to always link Trade thesis with stop placement with sizing to eliminate regretful stop outs.
That brings me to Key Concept #3
3. At the EOD ALWAYS be happy with your decisions.
This is a way to help manage your emotions while trading. This is very much easier said than done. But if you can learn to do it, You are going to have a lot more fun and lose a lot less hair trading stocks, and speaking from someone who cherishes his locks as much as I do, This is my Favorite Rule. My hair thanks me ;)
I try to apply this Rule to ALL of my trades, especially my losses. If I lose or stop out on a stock, It's okay because before I took the trade I took it into consideration. a lot of the times I even mentally take the loss before I enter the trade to help my psyche through the trade. Idk it works for me. Lol. this means If I cover the top, I strive to be able to laugh about it and say aww you dicks got me good!. Is this the case every time? Of course...... NOT! I'm human. But I try to be okay with the outcome no matter what happens after I close a position. If I sell at my target and it was too soon, Im happy with my trade, If I cover into a stuff, Oh well, don't care. NEXT!
To be honest I have a lot more difficult time with this rule in regards to ENTERING a trade. See I'm pretty careful or... a pussy as some individual on TWTR likes to call me, you know who you are...Dick <3, This derives from being a perfectionist which is a dangerously incompatible word with trading. I have a lot more regret in regards to NOT taking trades I should, than taking trades I shouldn't. I'm working on it, and if we're ever in a chatroom together or discuss a stock idea I like, you have my permission to call me out on my pussyness and force me into the trade. Hahahaha anyway a personal favorite.
Well, that's about all I can think about right now I hope you got something out of it, I may open Dms to answer some questions if anybody has any. Oh wait, so just to restate this, None of this stuff matters if you can't put it into your own brain, but one of the things I did, probably what many traders before me have done is I tried to take What I felt were the most unique or best traits of my favorite traders and tried to combine them into my own mold of that combination to create my own style.
My biggest inspirations and the lessons I learned & try to emulate.
Bao: Everything really. Lol But. Rule #1 Live to trade another day & Recycling shares (Another Blog Post)
Alex: Save your trading and mental capital to hit the A+ Set-ups with size & Conviction
Dante: One of the best skills in trading is to learn what stocks to stay the FUCK away from. High Volume + SSR Cya later. Throw ETB in there as well? NOPE!
JPark: Discipline And Consistency wins in the long run. Losses, not gains determine your trading success. This guy NEVER takes Big losses. He posted almost everyday almost a year, losses were/are always controlled.
Nico: NEVER EVER EVER give up! Dont you dare!
Tim G: Don't Get Stubborn, Just don't do it. It doesn't end well.
Auspex: Learn the motive behind the move. It's there, you just have to dig.
Pigs: Teehee!...Nah in this game you need to have balls and he constantly reminds me of my lack of ;) But my entries are still better :P Suck it.
Well I think that's a wrap for now unbtil the next blog. Please let me know of any feedback/ criticism!
Aloha & Happy Trading,
Austin
Nice dude, thanks for sharing.
ReplyDeleteGreat post. Here trading in an Island too, Guam...
ReplyDeleteLoved it bro! Please continue. Got lots of great value out of your blog. I also value my hair!
ReplyDeleteGold
ReplyDelete