Trade The Journey

Trade The Journey

A New Year is upon us!

Top of the Morning. The new year arrived a couple of days ago. Everyone, including myself, breathed a sigh of relief. 2020 was finally over.

I’m sure no one needs a recap of last year, so I’ll move on. It brought a smile to my face, reading last year’s post. I made two small accomplishments: I continued my goal of writing a post weekly for another year, and I used my journal to improve my trading.

You can find last year’s post here. I feel inspired by reading last year’s post. I was still learning how to trade and referring to trading in general terms. Patience and impulsivity were the main themes of the post.

This last year showed me that I had to manage both of these mindstates to avoid financial ruin. I’m prone to placing trades on impulse when I feel overconfident or missing out. After losing my shirt on a couple of trades, I become more patient and eager to complete more analysis.

That’s valuable self-knowledge and an aspect of trading that is often ignored. After you learn the patterns and have a set of workable strategies, someone must execute the trades. Don’t neglect to work on yourself.


Biggest Learning Lesson:

Focus on risk management. I watched Paul Tudor Jones’s documentary, and for some reason, his statements on risk management made sense, and I applied it.

Please focus on the risk, and the profits will take care of themselves. When I planned my options trade last year, I thought about how high my profits would be if the stock performed as expected. Now, I work more on managing my risk by identifying how much I’m willing to lose.

I would say my experiences confirmed this perspective of managing risk first and foremost. The biggest loser I had this year was an options trade, where I refused to accept the stock’s upward trend. Instead of looking at the sideways movement as a base for a bull run, I looked at it as a case for a continued downward trend.

I didn’t set any price levels on the risk side to close the trade so I ignored the signs and paid dearly for the learning lesson.

Surprise of the Year:

  1. Watching the markets briefly shut down to prevent a collapse.

Everyone kept buying while I stayed on the sideline, convinced the market would drop further. It never happened and instead, the market made new highs. Magazine covers highlighted the market’s rebound as a disconnect between wall street and main street.

I was wrong and missed the opportunity to buy stocks at bargain prices.

The more I trade, the more I see how forming generalities encourages a flexible mindset. Exactness is not a good trait to have in trading.

When I think about the fear, the feeling of entrapment with the stay-at-home orders, and the protest occurring around the country, it was tough to remain bullish or optimistic.

It was like nothing could shake the buying, and suddenly there were bargains everywhere in the market. I remember seeing social media advertisements advocating becoming a trader.

I looked at the market as an investor instead of a trader. A trader would have traded the direction of the chart, not their perception.

Final Review:

I started trading weekly options toward the end of the year. With weekly options, you have one week to make a correct forecast on the stock’s direction.

The one thought that keeps me on my toes is that anything can happen. When I first started paper trading, I’d try to predict the next bar. I’d be right a few times and wrong the next ten times.

I kept trying to predict. My confidence fluctuated based on how right or wrong I was. Then I realized that wouldn’t work.

I had to manage the trade like a supervisor monitoring an unreliable employee. You have to plan and watch especially if you want to prevent this employee from causing additional damage.

You just never know when the market may decline or rise for untold reasons. That’s what’s so tough about trading, managing your expectations.

 

This year’s goal is to improve my risk management skills and continue developing a trading strategy. I feel that options will be my preferred trading instrument. This past year, I surmounted the hurdle of understanding how options work.

I kept returning to credit-spread trades. I look to expand my options trading style. I feel that this year will be my breakout year.


This week in Review:

I received some unexpected blessings this past week. I was able to save a bit more than usual. I also bought a little more cryptocurrency. I kept my spending to a minimum and conserved my spending energy.

This past week deserves a grade of a “B.”

Leave a Comment

Your email address will not be published. Required fields are marked *