Trade The Journey

Trade The Journey

Patterns!

Top of the Morning. I hope everyone is safe and avoiding some of the madness. As the Coronavirus continues to ravage through the United States, California has become the epicenter. So much so, doctors have to make life and death decisions based on the patient’s likelihood of surviving.

The vaccine rollout has started slow, and there are numerous problems in the supply and distribution chain. The average person won’t receive the vaccine until the summer. If that isn’t bad enough, two new mutant strains of the Virus have traveled from overseas.

Both of the strains have arrived in the United States due to travel from these affected countries. Earlier this week, the attention moved from the Virus to the siege on Capitol Hill by Trump supporters.

His supporters traveled from all over the country to hear his message on voter fraud and a rigged presidential election. Trump has remained adamant that the election was rigged. Emboldened by his speech, his supporters marched to the capitol and broke into the building while the senate and congress were certifying Joe Biden as the next President.

I watched as they broke windows and doors to storm the capitol and stop the vote. Members of the senate and congress were rushed to safety. Five people died, including a police officer who branded himself as a Trump supporter.

I’m sure the full story will emerge as members of the group are captured. The markets closed higher, and Joe Biden was certified as the next President when the government regained control of the capital. The rest of the world watched as democracy in the world’s superpower faced a challenge unknown to its citizens but recognized worldwide.

An attempted coup.

The outcome is worrying, but more worrying is the process and thoughts that went into carrying the plan to fruition. Something has changed, and what I saw concerns me.

There is a growing number of people that feel disenfranchised and willing to act on those beliefs.

 

The dollar continued to fall, while cryptocurrency is cementing itself as a storehouse of value. Bitcoin rallied to over $40,000 for the first time in history and without much fanfare in the media. The altcoins followed suit.

Some still think bitcoin is a fad, headed for a collapse soon. I’m not bold enough to make a prediction, but I am brave enough to add it to my portfolio.

When I look at my portfolio and see the green arrows pointing up on each asset I own, I become a little worried. Either I’m a great investor/trader, or there’s a bubble forming.

The last time I felt this way, I lost half of the value of my portfolio. It took me a year to recover, and now my account value has surpassed its previous high.

The challenge in cutting your position’s size is knowing that the basket of stocks you own could go higher. It’s happened to me more than once. Every time I see the stocks I sold too early, I begin to play the “What If” game.

Both scenarios hinge on the perspective that I knew what the stock would do in the past. I did not.

I exited the position, thinking it couldn’t go higher, and it did.

 

This reminds me of a scene from the wire. Avon, the lead character, visits his older brother, who was shot years earlier, in a hospice with his younger cousin. As Avon sits beside his brother, he uses the opportunity to tell his cousin; you can’t control life. A second earlier or later, and he could meet his demise if he isn’t careful.

The stakes aren’t as high in trading, but they are higher than most feel comfortable taking.

At the moment, I’m reading the Daily Trading Coach by Brett N. Steenbarger, and I like this book because it relates trading to life in a psychological manner. It promotes an understanding of how the patterns you naturally operate with affect your trading.

How can I make trading a function of maximizing my returns and risks with the least inhibition from destructive thoughts and patterns?

I need to be cognizant of what I am doing. The author encourages:

  • Mediation to become a passive observer to your predominant thought patterns.
  • Keep a detailed journal that tracks how we feel and reflects what happened during the trading day.
  • Understand the models we use when trading successfully versus unsuccessfully.
  • Form goals that have an actionable plan.

 


Winning Trades:

I feel optimistic and think of my previous achievements. I feel like I’m on my way to a long trading career. I’ve succeeded in proving my parents wrong, who have shunned the idea of trading. I’m ready for the next trade and eager to place it without completing the proper homework. After the trade is completed, I revisit my account to see the profit added to my cash account throughout the day. I am confident in my chart reading skills. After the emotional high, I look to learn more in hopes of making another profitable trade.

I think learning and analyzing will improve my chances for the next trade. I look for chats, commentators and perform internet searches that reaffirm my holding of the losing position. Thoughts of failure begin to build up in my mind. Why did I think I could trade? Maybe it’ll be best if I give up, no one will know, and my parents will support the decision. I become risk-averse, and I wait for a trade that I am sure will be profitable. It may take months before I place my next trade. I am not confident in my chart reading skills.


Writing this has helped me put words to the process I go through every week. The purpose of this exercise, as the book summarizes, is to develop an awareness of our patterns. Awareness of the process we go through when we act and react can help form a lasting change.

Trading has to be apart of you and what you naturally love doing; otherwise, making these changes can be cumbersome. Every day I learn a little more about the markets and myself.

I still believe that trading is a great vehicle for self-improvement.


This past week:

This past week, I conserved my spending energy and did quite well. I saved more than expected. This coming week, I look to do a little better. My goal is to continue paying off the credit I currently have.

This past week deserves the grade of “C+“.

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