Thursday Feb 13

Got my ass absolutely handed to me over the last few days. I bought DGAZ right before a strong two-day rally. I have learned so much from this mistake.

So both with the bitcoin trade over the weekend (which was also frustrating because I fat-fingered my sell, and I think that triggered my frustration with also not taking more profit and led to a whole series of events where I'm now down almost 10%) and the DGAZ trade was that I didn't respect my stop loss. The obvious lesson would be "well just respect your stop loss" but if it were that simple I'd already be doing it, so the question is "Why do I struggle to respect my stop losses?" I have a few ideas but I'm still very far from a sufficient answer to that question.

There are two impulses that drive all my worst decisions in trading. The first, and worst, is "You're gonna miss it!" A lot of people call this FOMO (fear of missing out). I don't love FOMO because it implies (to me at least) that I'm missing out on something other people are catching, or that I'm being excluded from a group. Maybe people don't mean that, but that's how I hear it. It's not the fear of exclusion, but the fear of missing an opportunity that I'm referring to here.

The second, and almost as bad, is "I could get more!" This usually happens after I have a significant win. Two times I've had my wife be like "Are you out of the position?" and at her encouragement I sell, despite having a lot of emotional resistance to doing so. There's something about getting a big win that makes me greedy, and I think literally every time I've stayed in that trade I end up losing money rather than getting more.

I've also changed my plan. We're under a little more financial pressure than is comfortable and I had a sudden realization while I was under all this pressure watching /NG have a strong two day rally while being in the inverse ETF. In my thinking, my two options were "hold out till I hit 30k" or "take out everything you need right now" and I didn't really like either of those. I felt really stuck. And then all this pressure built and built and suddenly like the genius I am I realized I had more options, so the new plan is, for now, I'm trading for profit off of 15k (so, anything above that comes out of my account). I really like this plan, and I've noticed that the added immediacy or short term reward (however much is in my account at the end of the week is what I get paid) makes managing my risk much more motivating and concrete, rather than an abstract best-practices principle.

/NG is becoming heavy (I'm still holding DGAZ), and I think we can make back everything and then some. I've learned a lot from this mistake and my pressure tolerance has increased as well, which, isn't as necessary for a day-trader per se, but if I change my strategy later it may become more necessary.

(You may be thinking "Why didn't you just sell at your first opportunity? You didn't learn your lesson at all!" The thing is, /NG has been trending down heavily for two months, I don't see a reason for it to turn around, and it rarely moves up or down consistently for more than a few days during this cycle, so I knew it would turn around relatively soon, I just didn't know when. Had I respected my stop loss earlier, I could have bought in at a significantly better price and everything I'm making back would have been profit on top of what I hadn't lost in the first place. But given what was happening on the charts, after a certain point it made sense to just hold out and wait for a reversal. Live and learn)

Long term, I think /NG is going all the way down to the mid or low 1.60's (that's the low from, most recently, early 2015). So I'm leaning into that pessimism. Along the way I'm going to try to be smart about buying and selling, but I'm going to be very conservative and generally hold rather than not holding.

Thanks for reading!

Monday, February 10, 2020

It's actually Thursday Feb 13. I haven't re-read or edited this, and I'm just gonna push it out for now.

Lost some money on bitcoin over the weekend. I had a good position, took it off, made about $200, and then I was mad that I missed some of a larger move. We broke 10k, looked like institutional investors were coming in. I thought for sure we would go to 10,400 but it stalled out around 10,150. I bought back in and then I didn't respect my stop loss. And then it turned around and I lost all my profits and then some.

What was my mistake? 

My big mistake was ignoring my long-term goal. I had profits and I took them, and then instead of saying "this is good enough" I thought "I think I can get more!" despite the less-than-perfect timing on my exit. My second big mistake was not respecting my stop loss. My third big mistake was trading while I was really tired and generally not taking care of myself, so my head wasn't clear.

Today: NG dropped a lot over night. Closed at 1.849 and opened today around 1.776. I had a strong voice in my head telling me to trust my pessimism. We'll see if that voice is correct, but I'm trusting my pessimism and trying to take a careful position. 

There are two lessons I need to learn and the one I'm going to focus on this week is trusting my stop loss. I really don't like doing this. Before I've been punished for leaving a position too early, but I think this is different because I'm also picking my entries more carefully and I have day trades available. I think in general it makes sense to have a hard stop of $200 and a soft stop slightly higher than that, maybe around $125 in case it was a risky trade. But I've gotta get used to trusting my stops or else I just hand over too much money. 

I also need to establish rules about holding over night, because I'm not going to *never* do that. Something to think about.

Tuesday, February 4, 2020

A Smattering of Thoughts

I think to myself over and over again that trading is difficult in the same way weightlifting is difficult (for a retail trader, at least). It's really not that technically complex, the difficult part is consistency and psychology, not mathematical or analytical prowess (although those are advantages). 

Why don't more people do this? I originally had a long-winded few paragraphs about this, but I think it's just a few self-explanatory things. 1) Most people perceive the stock market to be extremely risky, and are risk averse. 2) Most people don't know (and don't want to learn) how to think probabilistically. 3) Lack of exposure and exaggerated cultural narratives, i.e. there are only big winners and big losers and everything is dependent on random chance. 4) They don't have an interest or a need.

I like risks. I get bored easily and I find risk exciting. This is one reason I paper traded for a year, I knew I was going to want to jump at everything and I would probably lose a lot of money (and I did). I enjoy statistics, although I would not consider myself a math guy, despite generally being comfortable with it. I experienced number three until I saw an ad on youtube and realized that trading was a skill that could be learned and was largely not dependent on luck (although extreme luck can make you rich or blow up your account). Once number three was out of the way, number four became huge. I had a need (I like my life, but at the moment I'm much less wealthy than I'd like to be), and that largely fueled my interest until I became good enough that it was fun and interesting.

Anyway, natural gas is way up today (a day later than I thought, grumpy face) on the cold front hitting. I don't know how long this'll stay up but futures jumped about 7 cents which is a decent move. I sold UGAZ (a little too early) and took a small position in DGAZ (also a little too early) and now I'm just waiting for it to stop trading sideways. I'm out of day trades until Thursday so I've gotta be really careful with my sizing.

That's it for today, thanks for reading.

Thursday, January 30, 2020, Morning

This is totally unedited and...I don't have an interest in editing it.

Report comes out in 20 minutes. Took out the new support yesterday and dropped down to 1.828. Really glad I didn't hold UGAZ overnight because my hypothesis was totally wrong lol.

Time is a good way to beat the irrationality of markets.

Irrational isn't the same as unpredictable.

I've been trying to figure out if there's any kind of pattern to the spikes/dips when the NG report comes out. Last two weeks it's moved up during the first hour of trading and then dropped. The news has basically been the same both times (slightly lower reserves week over week but much higher year over year) and we're in a medium term downtrend.

I didn't know TOS added new time frames, but I've been wondering how to get historical data so that's pretty great.

I'm also trying to figure out if I should just buy and hold for a long long time, and how I would decide to sell. I'm trying to trade *less* and generally doing a good job of it (by that I mean reacting to moves less). I've left a good chunk of money on the table by not just holding my position despite serious turbulence. That said at *some* point this has to turn around and it's very difficult to guess where that would be.

I guess it comes back to what my goals are. My goal is to hit 30k by July 3. I only need to make 1.2% a week to do that, and honestly that's so easy from a technical standpoint. Emotionally it's difficult though. I think I have a...revealed goal (kind of like a revealed preference?) of "Catch every big move." And that desire peaks through and tries to get my attention. In reality, I can easily do this on three day trades a week. It's possible I could do it way sooner but I need that big time frame so I don't get too eager/ambitious and end up taking dumb losses because I size too large or enter/exit at a bad time.

Wednesday, January 29, 2020

Lots of trades today. I'd been holding DGAZ (an inverse ETF* of natural gas) for a few days and sold this morning for a profit of $871.23, 5.56%. Natural gas has been extremely depressed lately for a few reasons. First, it's been an unusually warm winter basically everywhere (North America, Europe, and parts of Asia), so demand for natural gas is down. Second, supplies are way up. I think this is partly because of fracking? Not entirely sure. Third, the largest driller of natural gas in the US, EQT, was recently downgraded to junk status because many of its assets were heavily devalued (I don't fully understand what this means, but I know it's bad news). So natural gas has been plummeting from what I think were unreasonable highs back in November.

Anyway I sold DGAZ this morning. I watched the price action and over three trades bought 300 shares of UGAZ at an average of $46.26. NG (natural gas) had broken its recent support and established a new one. The natural gas report comes out tomorrow, and there's a forecast for a cold front, so my thesis was the recent establishment of a new support, the news of a cold front, and the report coming out tomorrow might give UGAZ a little boost. That said, my position was very large, I'd already made another $249.00 (1.51%) on it, which is more than what I need to average per *week* to hit 30k by July 3, and we're kind of in new territory, so I didn't want to leave the risk on overnight (my original plan was to hold, watch for morning price action and if it was moving up, sell 10 minutes before the report came out). I sold at $47.09

One of my biggest problems up to this point has been timing and sizing my trades properly. Most of the time I would enter too early (and too large) and leave too late. Within the last week I've been focusing more on this, so instead of going in 100% at the first sign of a profitable trade, I start small (1/10 to 1/3 of my maximum position), watch for confirmation of support/resistance/trend, and then increase my size as the trade moves in my favor. I used to think this was a dumb strategy that caused people to leave money on the table. In reality, it's one of the best ways to catch the meat of a move while also avoiding unnecessary risk (and anxiety). What I'm learning is that a significant proportion of winning is just not losing, which sounds obvious on paper.

I've also started using what I call Risk Units. One risk unit (1r) is 1/100th of my maximum position in any given trade, so at any point I can decide how many risk units I think it's worth. I think this is a clearer way of thinking about it than number of shares, especially since I tend to just pick round numbers.

Plan for tomorrow: Two more days left in the week, natural gas report comes out tomorrow. Earlier this month there was news of another cold front that ended up missing us, so I think bulls are cautious at the moment, although we're seeing some upward motion. I think if we get more signs that the cold front is actually going to hit and a decent report, we could trend up for a few days (although long-term I think we still have some space to move down before there's a trend reversal). I probably won't hold over the weekend, but I can decide that Friday. Depending on the price action overnight, I may daytrade the morning levels and still sell before the report (which comes out an hour after markets open), or I might just wait until Friday when we have more information and the volatility from the report has kind of died down.

Thanks for reading!

*An ETF is an Exchange Traded Fund, which is traded on a stock market and intended to mimic the performance of something else (in this case, natural gas futures). I could just trade actual Natural Gas futures except that Robinhood (the brokerage service I currently use) doesn't offer the option of trading futures.

DGAZ is the inverse ETF trading at a 3x multiple, so if natural gas futures go down 1%, DGAZ goes up 3%. UGAZ (which I also frequently trade) tracks natural gas's performance directly, also at a 3x multiplier.

Introduction

I'm a musician/teacher and amateur trader. This is gonna be my trading blog, which you can read at your leisure, or if I get good enough, as study material! My ego rages unabaited.

Personal History (this is a bit over-wrought, but it's my blog so whatever): 

I grew up pretty wealthy. My dad was an anesthesiologist at the Mayo Clinic and my mom was a stay-at-home mom. I did well in school, was (am, I guess) an eagle scout, participated actively in my Mormon church, played a lot of classical music and was decent at it, lived in Mongolia and became semi-fluent in Mongolian (my accent was pretty good, my vocabulary was decent) and spent four years attempting to be a student at Brigham Young University. Sometime between graduating High School and turning 25 everything I thought I wanted in my life changed. I was dealing with some heavy-ish trauma and mental illness, I had no idea why I was at school or what I hoped to get out of it, but I was failing most of my classes and couldn't figure out what was going on. My girlfriend at the time suggested I visited a therapist which I did, and about a week later, at his suggestion, I dropped out. (He didn't coerce me or anything, he just asked if I'd thought about it and I literally never had, and it seemed like a great idea) 

October 2012 I dropped out, floated around in Utah for about a year, and then spent a couple months in Saudi Arabia working for my brother (check out the Al-Baydha project). At this point I still believed I would eventually finish school and that I was on temporary hiatus. Maybe this is still true! But 8 years later I doubt it. Anyway, I didn't like living in Saudi Arabia (although it's cool to be able to say that I did), but I did like living with family, so at the invitation of my sister I moved to San Antonio and lived with her and her family in February of 2014. I worked as a bank teller for three months before getting fired. I hated that job. Admittedly, I wasn't great at it, although my co-workers liked me a lot more than my boss. After that, I had the brilliant (to be read sarcastically) idea that I should teach music. I'd done this a little in high school and loved it, but I had written music off as a viable career. Anyway, I started teaching, picked up a few students, had a lucky break to teach at a private school for a few months, but lost that job as well (all my students graduated and there wasn't enough interest to keep the class going, at least that's what they told me). So for a while I got by on credit cards and what income I could pull in from teaching private lessons. I was still very anxious and depressed and confused, but things were starting to trend upward.

I ground that out for a couple years until 2018. I had another job teaching at a school on top of my private lessons, I had met a girl and things were complicated at first but moving in the right direction. One night I saw an ad on youtube for Jason Bond Picks. (Do not buy this program. It is a terrible waste of money) I knew next to nothing about trading stocks or trading, and I didn't know if this would be a scam, but something clicked. I knew that if trading was a thing that could be learned, then I could learn it. So I paid a couple thousand dollars for his program and woke up at 6 am the next morning to start. This was huge as I would regularly sleep until 10 or 11 or later. Anyway, I started paper trading, trying to follow JBPicks as closely as possible, tried to digest his educational material (which was vague to the point of being nearly useless). I was very motivated and very dumb. I paper traded for about a year doing just penny stocks. Eventually I got frustrated with my lack of progress, though I was determined to continue. At some point I found Ricky Gutierrez's youtube channel and his program TechBud Solutions. His program wasn't a subscription and cost about 10% what I paid for Jason Bond's, so I bought in and started going through his material. It was much clearer and much better for a beginner, and gave me a new direction to move in. Ricky mainly traded natural gas, which was novel and scary to me because I'd never had any contact with commodities trading or traders.

Some point after that in mid 2019 I started trading a real portfolio. I had married my girlfriend, and my parents gave us a generous gift for the wedding, which we agreed would be ok for me to trade with. During paper trading I'd gone from "constantly losing money" to "constantly losing money, but less." I did that as long as I could but eventually lost interest, so I started trading a live portfolio, and the plan was if I went down more than 20%, I would go back to paper trading. I dropped about 18% before things started to turn around. 

Eventually, and this brings us more-or-less to the present, I graduated to "making money, then losing it," and I'm juuuuuuuuust starting to squeak past that into "making a little consistently." For the last year or so it hasn't been hard for me to make money, it's been hard for me to keep it. I have paid for a third education program through SMB Capital. I was extremely impressed with their free stuff on youtube and was willing to pay way more than they charged for their program.

Medium term, I'm hoping to transition into trading full time by the end of 2021. I think it's possible I could be there before the end of 2020 if I keep my head. I spend most of my daytime hours watching markets and doing research/education, and then teach in the afternoon/evening. I also, occasionally, play weddings or other random gigs, including an annual tour with Alpine Express (a polka band) during Oktoberfest season.

My most immediate goal is to reach 30k in my account by July 3. I have to make 1.2% a week for this to happen, which is extremely doable (again, if I keep my head). I want to hit 30k because once I do I can day trade without limitations and have a little breathing room. Any account under 25k is subject to the Pattern Day Trade Rule, which means you can't do more than three day trades--a buy and a sell of the same thing on the same day--in any 5 day period. Once I hit 30k I plan to day trade Natural Gas for a while for income (so any profit above 30k gets pulled out of the account as income), and then maybe after a few years pursue a growth strategy again until I hit 100k, and then either continue day trading at a higher volume, or sell options, depending on which makes more sense.

Thanks for reading!