Debugging

It has been pretty much business as usual for me since I last posted. Last week was not great at all, although I was able to trade Silver successfully and end up positive on the week. That's one small victory I will take, but I am still overall negative on the month.

The first two days of this week have also been negative for me, so it looks like I could end up the month negative -- the first time in several months. Of course, this means no paycheck and some potentially pretty hard times for the next few weeks. I also can't help but look ahead to the upcoming holiday season and realize that it is going to be much different for me and my wife this year. This really makes me sad, but I realize I put us in this situation chasing my dreams. I have to feel blessed to have someone like my wife who is still supportive of what I am doing. In fact, she is probably more supportive of me right now than I am of myself. She still believes I can do this. Unfortunately, I am still having serious doubts.

I guess it doesn't help my situation either that small emergencies have been popping up recently which have cost us some serious cash. Our refrigerator went out the other day. Not only did it cost $300 to fix it, but we lost all of our food in the freezer and most in the refrigerator. That was probably another $200 - $300 to replace. We had to take Kim's car in for maintenance. That was almost $600. The electrical system in my car is starting to go haywire. I don't have windshield wipers and the seat belt sign constantly beeps when the car is started. The estimate to get that repaired is almost $1000. Not to mention, I still haven't replaced my side mirror which I broke a couple of months ago. It is starting to fall off and is going to have to be fixed soon. The estimate for that was about $350. Well, at least I have my health right? Maybe so, but I need to go the doctor and get some things checked out. I just haven't felt the same the last couple of weeks.

I know ... here I go again ... "Dave the Downer" (wah, wah, waaaaah). With each day that goes by, I truly envy those people who are optimistic. It is a mindset that I wish I could just experience for one day. I wake up each morning and go into work, and really think "OK, today is going to be different". But it never takes very long for reality to set in. Today, I lost 7 trades in row from the very beginning, and psychologically I was out of it. I was afraid to trade for the rest of the day because I literally think that everything I do is going to be wrong. My win percentage the last two weeks has still been in the 30% range which is pathetic. So, what can I do?

The best analogy I can use for how I am feeling and what I am doing these days is that I am in a constant state of debugging. I remember when I used to program and there would be a bug in the code I was writing. Some bugs were easy to find and others were real doozies. For the doozies, I would spend hours going over the code, inject stops in the debugger, and pull my hair out trying to fix the problem. Eventually, I would find it and fix it, and the program would work as I wanted it to. But it really was a painful process coming to that point. With trading, it feels as if I have been debugging the same code, the same problem for the last seven months and I can't figure out what the problem is. With programming, at some point, you can let other people look at your code and they might be able to help you out. I have had other people look at my trades, and they say "Well, it looks like you had a good entry and the right idea, it just didn't work out." Why is it then I just happen to pick all the right trades that never work out? I go home at night and reveiw charts and try to find a strategy that will work for me. I come to work the next day and try to execute the strategy, but what seemed so good in back testing the night before just doesn't work the next day. I am trying different things ... I am trying to debug the program ... but every morning is the same thing .... CORE DUMP. When will my program work?

Speaking of programs, one bit of good news. The IT staff at work actually granted me permission to write my own tickers for stock conditions. I have mentioned these in previous posts, but basically these will allow me to see stocks which meet certain entry criteria which I program. I am looking real forward to this because I have been requesting some tickers for a couple of weeks now and they have never been built. At least now, I will be able to take this matter into my own hands.

So, that is what I am off to do now. I am getting ready to VPN into the work network and start coding my tickers. I hope, at least, the debugging of these will be kept to minimum.

After further review ....

I wanted to write a real quick entry before I headed out this morning.

First, thanks to everyone who has posted a comment on my blog recently encouraging me. I have found it difficult in the trading business to keep things in perspective at times. Trading really puts a person's ego right there on the line. You make a decision and you know very shortly whether you are right or wrong. When you are wrong a considerable amount of time, it takes a pretty optimistic person to keep their chin up and keep fighting. It also takes a well-grounded person to always keep things in perspective, and to remember what is truly important in life such as spiritual and personal relationships.

I had a chance this weekend to take a step back and reflect on my journey so far. In particular, I looked at my thought process and what I was placing first in my life. I have to say I am ashamed. However, I am ready to move forward from here, and give this trading thing another go around for a few more months. This time I will remind myself daily of what needs to be important to me, and I will try to do a better job of keeping things in perspective. Oh and maybe picking up a second job will help keep me busy and keep my mind of trading in my down time.

Changes Ahead?

I don't know how many people even read this blog, but recently, I caught a little flack for my posts having an overly negative tone. I don't know whether it is only because I choose to blog when things are going bad, and therefore, I have something to vent, or whether I really am a "glass half empty" kind of person. Truly, I think it is a lot of both. So, as much as I would like for this to be a "utopia" post to prove the naysayers wrong, it ain't gonna happen.

Today sucked. It was my worst losing day ever ... a little over $800. I cut myself off a little after 1pm because I was just making bad decisions. I was trading emotionally and irrationally, and as a result, I lost a lot of money. Like a compulsive gambler or someone with an addiction, I knew what I was doing was wrong, but I kept doing it over and over today. I had 3 winning trades all day ... 3. And a whole bunch of losers.

And that has kind of been the pattern since late September. Last week, I was profitable but only a total of $25. This week has been an utter disaster for me. I think I am down a little over $1K this week alone. My winning percentage has dropped from over 60% the last couple of months to slightly under 30% the past couple of weeks. My winners are small, and my losers are huge. I have tried to spend the evenings reviewing my trades and figuring out what I am doing wrong, but I can't figure it out. I have sat down with my coach and other successful traders and tried to review trades with them. They say I am not taking profits quick enough when I have them. Maybe that is the case, but I always seem to dig myself such a big whole in the morning that I think each trade is going to be the one that gets me out. The majority of my trades start off good as 5 to 15 cent winners but I rarely ever take profits. Instead, I let them go back down and eventually I get stopped out of the trade for a 10 to 15 cent loser. Now, consider I trade with 300 to 500 shares at a time and each losing trade I make costs me between $30 and $75. It doesn't take too many of these to add up to $300/day or more in losses.

I know what many of you are thinking ... why don't you just take profits early from now on? Perhaps that will do the trick. However, I don't trade frequently, so my profits will never be large if I do this. Also, there is the risk reward ratio to think about. Ideally a trader wants a 1 to 3, risk to reward ratio. Considering I win less than 30% of the time, mine has to be more along the lines of 1 to 4, and that is to just break even. Therefore, if I am willing to give 10 cents, I need to try to make 40 cents on the trade. And frankly, finding those 40 cent trades are much harder than you would think. I also realize if I took quicker profits that I would have a higher winning percentage too, so I wouldn't need the large risk to reward ratio. After writing and thinking about this more, I am definitely going to try it tomorrow and see if it makes a difference. Maybe I have just been too greedy these past couple of weeks.

Regardless, the last couple of weeks have really made me do some serious self-reflection, and I am close to coming to the conclusion that I am just not cut out to be a trader. As I have always said, I love the challenge of it and I love the trading environment. However, there are some psychological and emotional characteristics that a trader must have, and I am just afraid I don't have them. Could I train myself to have them? Good question. But I am getting older, and you know what they say about old dogs and new tricks. I have always thought of myself as being resilient and able to bounce back from defeat quickly, but I am proving to myself day after day that is not the case. I am internalizing my daily failures and they haunt me. I know I need to shake them, but I have a difficult time. I am definitely my own worst enemy, and that certainly can't be the case, especially when you are playing against the market.

So, the big question is ... how much longer do I give myself? From the start, I said I was going to give myself one year. As much as I would like to hold myself to that, is that really the smartest move? I am now in my seventh month of trading, so that leaves 5 more months. However, I have already burned through over $12K in savings on this journey. Sure, I still have a little more, but I sure would hate to burn through another $12K and realize there is no pot of gold at the end of the rainbow. I have put my whole heart into being successful in this new career. I have constantly educated myself and tried new techniques. Sure I had a good run with SLV, but honesly, that was short-lived. Heck, I lost $100 today in that stock alone thinking I could still trade it. I'm sure there are more systems and techniques out there I haven't tried, but realistically, how many am I going to try and burn time and money in the process. On recommendation from RB, I have tried to coach myself positively the past few days. Especially today, but the same outcome occurred. I don't know how much longer I am going to give myself, but I do know the holidays are around the corner and the bank account is already drained. Add to that a perpetual losing streak, and I medication may be in the foreseeable future (if I can afford it).

The next big question ... what am I going to do for a living? I have thought about this a lot recently. I have thought about returning to the tech industry. Who knows ... maybe I could get a tech job at the trading company and play ping pong all day. That would be nice. However, I am not sure I would want the reminder of my failure haunting me on a daily basis. But everything has its price. I have also thought about pursuing another tech job, but I don't think I could program anymore. I am way out of practice and haven't even looked at code for the past several months. I wouldn't mind doing something in the financial industry, but most of those jobs are in Chicago and New York and I don't want to move there. I suppose the best opportunity I would have would be going back to teaching. In fact, one of the Math teachers at my wife's high school resigned recently, and they have posted his job. She mentioned it to me, so I think I am going to send my resume to the principal and just see where it goes from there. Ideally it would be cool to teach in the afternoon and trade in the mornings especially since the school is real close to where I work right now. We will see. I don't think I am ready to return to teaching full time right away, but that all depends on how desperate I get.

So there you have it. An extremely long post. Perhaps it is entertaining, or perhaps you don't even care. Whatever it is, positive or negative, it is where I am at in my life right now. Am I at a crossroads ... probably not yet. But I think I can see it not too far down the road from where I am at. Here is to hoping there is a side road or two along the way before I get there.

Who moved my cheese?

This past week was a tough week for me. It was my first losing week since probably sometime in late May or early June. I was really fortunate to have a good couple month run there with SLV, but as I mentioned in my last post, I think the party is over. Not that there isn't still a party going on with that stock/ETF. It is very volatile and can make a person a lot of money in a short amount of time. However, the reverse is also true, and that is what seems to happen to me every time I traded that thing now. It isn't as correlated to the futures contracts as it was just a couple of weeks ago, and well, I think I mentioned some of the other problems in my last post as well.

So, what this basically comes down to is: somebody moved my cheese. For those of you not familiar with the book, it is a metaphor on changes in life and how to respond to them. I can't just keep losing money in SLV anymore. I have to move on and find something different. So, once again, it feels like March and April all over again for me, but I guess that is what this job is all about.

And I'm not the only one who is having their cheese moved either. Starting the end of next week, the NYSE is beginning to phase in a new "hybrid" trading system to keep up with other electronic exchanges (such as the Nasdaq). What this means is that there will be much fewer arbitrage opportunities for those traders who are considered hyper-scalpers. Unfortunately, that accounts for probably 60-75% of the traders in the office. The NYSE had a test run of the system on Saturday, and several of the traders came in to check it out. I stopped in as well on my way to a wedding yesterday afternoon. All in all, the outlook appears bleak for a lot of those traders. They are going to have to find something different to trade because it will be harder for them to get the easy 5, 10, or 15 cents they are used to. They used to make money because they were fast on the keyboard, but speed just won't make a difference anymore. Changes are ahead for everyone.

Yesterday at the wedding, I was able to talk with a guy who is a main programmer with Instinet. (Instinet is an order transaction service for trading stocks, to keep things simple.)He has been a programmer in the stock industry for well over a decade. He told me that he used to day trade back in the late 90s during the dot.com days. Back then, making money was so easy and he described to me how he did it. With the advent of electronic day trading, there were numerous arbitrage opportunites that were serious low-hanging fruit. He said he used to make thousands of dollars a day without even thinking or sweating losing any money. Since then though, things have changed, and he said he won't day trade anymore. There are too many things that are stacked against a person, and being successful takes a lot more time, effort, luck, and pain (in handling lossess, that is).

Which makes me feel that, once again, I am late to the game. Had I started trading when I got out of college the first time, I would have been able to participate in the "hey-days" of trading. I also felt like I was late to the game when I made a career switch from Math teacher to Software Engineer. I remember there being hundreds of companies coming to UT to interview students in the late 90s, but then the semester I finished, the market tumbled, all those companies went belly-up and hardly anyone was hiring. Without my volleyball connection at IBM, I would have been without employment. I guess I need to be thankful for the opportunities that have been given to me, but it just seems like I am always a day late and a dollar short.

So where does this lead me -- where is my new cheese? I would be lying if I said I haven't thought about returning to a "regular" job. I have really started to miss the regularity/security of a paycheck. Yet, it seems I hear at least one story a week about someone who has been working their job for over 10 years being let go due to outsourcing. So is there really long term security, or is it just temporary? I know that there is security in what I am doing as long as I can figure out some way, any way, of making money. There will always be a market, and I am my own boss, so I call the shots. Its when the shots are continuously wrong, that really begins to become mentally and emotionally strenuous. I just don't know anymore. Maybe next week will find me some answers to my questions and how I feeling.