After writing the March Results post, I decided to read my entire Stock Trade section of this blog. I didn't know what I was looking for, but I felt that I was doing something wrong in my overall stock trading approach. The WWE trade would have never happened unless there was a pattern of behavior I wasn't seeing. So I checked and then, after about 20 minutes, I I found it. And it's a big one.
Ever since I started trading for real this year, I've been very confident. Extremely confident. And that's a very good thing. My problem is what I do with that confidence. The WWE trade, for example, wasn't a bad trade. It made $350 before it tanked. But, because I was so confident, I didn't put any safeguards for the trade. There were no Stops, no predetermined sell price... nothing. And even when I learn a lesson, I make money and then lose it by making the same mistake again. The exact same mistakes! It was crazy to see how that was going on and I hadn't a clue. I made the WWE trade at 9:36am, the second the market opened and I saw that it had already gone up 30 cents. Instead of waiting until my usual buy time I bought immediately, fearing that it would keep going higher and I would miss out on more profits. After that, I checked it 20 minutes later and saw it was already up 40 cents. Satisfied, I turned off the computer and ignored the stock market. No safeguards or anything. I didn't check the stocks again until 11:40am. That's over two hours where anything can happen (and "anything" did happen). Once I saw that it was down by over a dollar, I didn't know what to do. I had no plan, and that was my biggest problem. In order for me to succeed in the stock market, I have to treat it exactly like I do my real estate investments.
I know I'm going to succeed in the stock market. I know I'm going to do well, that's simply a fact. My confidence is something I've always had, and is always a good thing. But if I use my confidence as an excuse to make sloppy trades, I'm going to fail. To use a real estate analogy, what I'm currently doing in the stock market is essentially this:
"I know I'm going to succeed in real estate, so I'm going to move in tenants that are Section 8 and Public Assistance. I'm not going to do my background checks. I'm not going to learn from my mistakes and somehow it'll still work out in the end!"
That's what I'm doing in the stock market right now, and it's just crazy logic! Even though I know I'm going to succeed in the stock market, I still have to follow the rules I set for myself and learned from the mistakes I make. Making the same mistakes four times in 3 months is just ridiculous. If I were paying attention and treated this venture like my real estate ventures, I would have only lost money on one trade, January's AAL trade. Everything else would have been a win. I would have gone into the WWE trade with a stop of $17.16, so that the stock would automatically sell if it went below that number when I checked it at $17.20. I messed up and it finally caught up with me, so now I know what I have to do. I see my problem and have fixed it with the Lessons Learned post idea. Now let's see how much I make for April.
P.S.: I've already recognized the obvious pattern of 2015: lose, win, lose. I lose because I trade sloppy, win because I traded carefully, and then lose again when I forget the lessons I've learned two months before due to my confidence in the profitable month. While this should mean that April will be a good month, I want to make sure that I make good money after April. We'll see if I can finally break this pattern.
Ever since I started trading for real this year, I've been very confident. Extremely confident. And that's a very good thing. My problem is what I do with that confidence. The WWE trade, for example, wasn't a bad trade. It made $350 before it tanked. But, because I was so confident, I didn't put any safeguards for the trade. There were no Stops, no predetermined sell price... nothing. And even when I learn a lesson, I make money and then lose it by making the same mistake again. The exact same mistakes! It was crazy to see how that was going on and I hadn't a clue. I made the WWE trade at 9:36am, the second the market opened and I saw that it had already gone up 30 cents. Instead of waiting until my usual buy time I bought immediately, fearing that it would keep going higher and I would miss out on more profits. After that, I checked it 20 minutes later and saw it was already up 40 cents. Satisfied, I turned off the computer and ignored the stock market. No safeguards or anything. I didn't check the stocks again until 11:40am. That's over two hours where anything can happen (and "anything" did happen). Once I saw that it was down by over a dollar, I didn't know what to do. I had no plan, and that was my biggest problem. In order for me to succeed in the stock market, I have to treat it exactly like I do my real estate investments.
I know I'm going to succeed in the stock market. I know I'm going to do well, that's simply a fact. My confidence is something I've always had, and is always a good thing. But if I use my confidence as an excuse to make sloppy trades, I'm going to fail. To use a real estate analogy, what I'm currently doing in the stock market is essentially this:
"I know I'm going to succeed in real estate, so I'm going to move in tenants that are Section 8 and Public Assistance. I'm not going to do my background checks. I'm not going to learn from my mistakes and somehow it'll still work out in the end!"
That's what I'm doing in the stock market right now, and it's just crazy logic! Even though I know I'm going to succeed in the stock market, I still have to follow the rules I set for myself and learned from the mistakes I make. Making the same mistakes four times in 3 months is just ridiculous. If I were paying attention and treated this venture like my real estate ventures, I would have only lost money on one trade, January's AAL trade. Everything else would have been a win. I would have gone into the WWE trade with a stop of $17.16, so that the stock would automatically sell if it went below that number when I checked it at $17.20. I messed up and it finally caught up with me, so now I know what I have to do. I see my problem and have fixed it with the Lessons Learned post idea. Now let's see how much I make for April.
P.S.: I've already recognized the obvious pattern of 2015: lose, win, lose. I lose because I trade sloppy, win because I traded carefully, and then lose again when I forget the lessons I've learned two months before due to my confidence in the profitable month. While this should mean that April will be a good month, I want to make sure that I make good money after April. We'll see if I can finally break this pattern.
No comments:
Post a Comment