Posted on November 19th, 2008 by
Mojo
A new member of our forum posted a great question:
“If I had to learn options all over again what would I do differently?”
Boy, that’s the million dollar question isn’t it? Here are my thoughts:
First off, I would have to say that I should have been more patient. In my life I’ve done well being aggressive, tenacious and smart. In trading, those very traits that have made me successful conspire against me. Being aggressive got me real money trading *way* too soon. Being tenacious meant I hung onto my losers long after I should have closed them. Being smart gave me too much confidence, I traded too large and I lost hundreds of thousands of dollars. So, yeah… I should have been more patient. Becoming a great trader is the hardest thing I’ve ever done (and continue to do). Learning the mechanics of options, my broker, and the market is just the beginning. Even with a great mentor (::cough::cough:: MOJO <smile>) I would still plan on it taking two to four years of insanely hard work before it just becomes normal hard work. 
Second, I wished I had listened more and followed more closely the advice of my teachers, partners, and other great traders. Specifically I wished I had stayed in paper trading for at least 6 months of profitable results. I wished I had journaled every trade much sooner than my two year anniversary. I wished I had gotten a single mentor or two, paid my 20K to 30K and really learned the craft. That would have been a bargain compared to the money and time I’ve wasted.
Third, I would have master one or two strategies first and only added additional strategies after I was consistently profitable.
Fourth, I would have been more open to different styles and backgrounds instead of assuming that I was given some sort of “secret” formula that would always work (NOT).
Fifth, I would have asked more questions, paused more presentations, and been more willing to embarrass myself in front of others so that I understood completely what was being said.Sixth, I would have taken advantage of all of the free content that exists on the internet. Not the “come to my 30 minute sales pitch”, but the really great, open, and honest conversations between traders that you can find here and in some of the earlier Yahoo groups.
Seventh, I would have started my public blog and our forum a long time ago. The different styles, open exchanges, mixed experiences, world class caliber traders, and accountability of this community are really fantastic!
I hope this helps and I would love to hear everyone’s comments.
Mojo
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Posted on November 17th, 2008 by
Mojo
We are really at a very important time in the market…. truly a make it or break it moment. Looking at the weekly chart on the DOW you can see that we are in a bear flag pattern with the pole forming from 11500 to 8000 and our flag sitting at 9500 to 8000.
This is a very normal and consistent pattern. This provides a potential (although not likely) support and reversal area for the bulls. If they are going to make a stand it will need to be this week. If they aren’t able to rally and we break below 8000 then I would expect to see us continue to sell down to 5000. It won’t be lightning fast but we will get there.
Are there any asset classes out there that aren’t declining? OK, other than ammo?
Mojo
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Posted on November 14th, 2008 by
Mojo
I’m having to rebuild my computer so I’ve lost my access to email, capture programs, logs, links, etc. I’m retrieving and re-installing but its going to take another day or so.
I finally got my link and login for this blog so at least I can fix all of the errors on my monthly report. I’m bad, but not that bad!
Thanks for your patience,
Mojo
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Posted on November 12th, 2008 by
Mojo
Man O’ Man did I shoot myself in the foot this month! On the second day of trading for October I was up 10% for the month. I made the right choice and went ahead and exited all of my positions. Historically, October isn’t a great month for me (with last year being the exception) so I thought it was prudent to close out at +10%. I concentrated on working on the site, doing my taxes, finishing some paperwork from closing a business etc. Of course I’m still watching the market during all of this and guess what!?! I was 100% in sync with the market; calling tops and bottoms at will.
So what did I do???? Yep, I went back into the market. I did very well for the next week and reached +20% for the month. So I’m thinking SWEET!!! I start spending way too much time talking about the market, sharing my euphoria and specifically bragging about what a great trader I am. Can you guess what happened next? You got it. WHAM! BAM! NO THANK YOU MAM! I got zapped by the 12% one day up move in the market. What makes it even worse was that I called the reversal (albeit not that large) and should have been prepared. DOH!!
So from here on in, I begin a vicious emotional spiral. I make two adjustments at exactly the wrong times and blow away all of my gains. So now I’m really mad at myself and continue to trade until I’m down 10% for the month. CRAP!
I exited in a pissy huff and penalize myself 30 days - no trading. I’ve only got a week and half left and feel much better.
I’ve continued to trade in my smaller Roth accounts but I have suspended my income account for now. I’ve really struggled with forgiving myself for being such a bonehead and I know that until I do I won’t be the best trader I can be.
Trade Record
15 trades, 10 wins, 5 losses = 2-to-1 win / loss ratio
avg $ per win: +1,907.63 avg $ per loss: -9,011.13
avg % per win: +24.1% avg % per loss: -22.7%
Notice how many more dollars I lost on the losing trades than I won on the winning trades! These numbers seem worst than what it was but the portfolio loss and percentages are on target. Either way, I shot myself by going from being up $20K to down $20K. That is not a 20K loss that’s a 40K loss which is a HUGE loss.
Update on Goals for 2008
Health- My radial tunnel is better (mostly because I’ve been away from the keyboard, on the phone, and working on Halloween) and I’m starting to feel a little better. Mentally I’m a wreck (with the self loathing) so I need to find someway to get over that or at least shut up about it. 
Give $25,000 to charity - We have given away $11,000 given so far this year.
Produce $250,000 in personal income (outside of my business and retirement) - I have taken on a consulting gig to provide my income and to use my trading income as “extra”. Since I have some pretty scary views of what’s going to happen to the world and US economies in the next few years I am building a war chest as well as positioning myself in one of the few industries that will do well (medical, gov’t, military). This should also release some of the psychological pressure I’m putting on myself.
Pay off $125,000 of personal debt - So far I’ve have paid down $44,000 in personal debt this year. I would like to finish off my second mortgage and then start working on my first mortgage. That’s the only debt I have. Once that’s done there are a couple of rental properties that I would like to pay off next.
Study for and receive my Series 65 (Investment Advisor) license - Fail. I’m going to shelf this effort for awhile (not that anyone would notice). I want to concentrate on my consulting work and get that rockin!
Insanemoney.com - Things are going ok. I’ve done a poor job updating this blog but the forums and trade team are doing well. I plan on updating the blog side to include a welcome video, a highlight tab showing some of the favorite posts, and will add some of the trade entries I’m doing without updates.
Raise $1,000,000 of investor funds - Haven’t started yet. I need to complete my license first.
Make 3% a month in options - Fail. Lost 10.7% this month.
Teaching - I’ve mostly finished my search of opportunities to teach options. Almost every one requires enormous travel and usually puts you on the road 3 weeks a month. Not a good deal for my family. Several companies I talked to were NOT interested in my trading results at all. They wanted headshots, video tapes of my sales seminars, and conversion rates. Sad really.
On the community college level I’m only allowed to teach in the area of my specific degree (which happens to be computer science) regardless of life experience. On the local teaching level I have a good friend who teaches Civics in middle school and loves it! He’s an ex-finance guy, very good, very smart who has chosen a non-commuting, support the community and his family, career. I applaud him for it! Once I get my mortgages down this is a more likely choice for me.
I’m still trying to figure out the best way for me to teach through InsaneMoney. Webinars look good if you can get a large enough group. They are cheap, no travel, and recordable. Personal one-on-one mentoring and a “trade along with Mojo” option are also possibilities. Feel free to email me and tell me your thoughts.
Lessons learned:
1) I should have scaled out when I hit 10% for the month. That’s a fantastic return and I should have been happier with it. (**** This is actually a repeat from Sept. I guess I need to follow my own advice.)
2) I allowed my emotions to get the better of me here. I did a good job of closing out and shutting down but it was difficult to do.
3) I should have just paid off my house two years ago when I had the chance. The whole “Why am I paying off a 5% debt when I can make real money with that” is an arrogant and flawed argument from the beginning.
4) I really turned my part time hobby of option trading into a full time job. No kidding, I was working 50 to 60 hours a week on this stuff and exhausting myself. If done correctly it shouldn’t take that kind of time. More like 20 hours (since I’m not a fundamentalist).
Plans for November
Stay in cash, keep trades small, focus on the craft. Make sure to stay on top of daily blog posts. My discretionary futures and automated futures trading are getting better and better. Tightly focusing on a few of these strategies will help to reduce the time and increase the results. Do myself proud on my consulting work.
All the best,
Mojo
PS - Sorry for the poor first draft. With my notebook down I didn’t get a chance to clean it up before it was sent out to everyone.
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Posted on November 6th, 2008 by
Mojo
Man, did I miss that one or what!?! I was completely expecting a pretty good post election rally and we’ve gotten less than nothing. Down almost 1,000 points in a couple of days. I’m not they are even going to be able to compute my 401K soon.
On the good side, if we can continue to sell off that’s actually the best thing for the overall market. It will spur the new government into action and we won’t be leaving a bunch of stop losses in place (from new long positions) to fan the flames of the next major move down. Thank God I’m an option trader!!!
Mojo
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Posted on October 30th, 2008 by
Mojo
Have you noticed recently all of these afternoon sell offs? Like yesterday (Wed) we were up into the close and in the last 10 minutes managed to drop 300 points. Take a look at the 10 minute chart from yesterday:
Why is this happening? A few reasons really:
- Mutual funds, hedge funds, and institutional investors have been collecting ‘redemption requests’ all day from their investors and must sell off stocks (since most of their positions are long) to raise cash by 4pm. The easiest place for them to raise cash from is from highly stocks such at the DOW components and S&P 100 companies.
- Each time we are able to make some progress in the upward direction everyone rushing in to pick up their small gains and lock in their profits.
- No one wants to hold positions overnight because of the huge “news event” risk government intervention in this country and others.
- Since this pattern starting appearing a couple of weeks ago other traders are looking for it and will drop to the downside at the first sign of weakness.
How long will it last? Not very long. Once most patterns like this become obvious they will self extinguish shortly thereafter. I think everyone is going to be pretty hesistant to establish any new positions for the next few days. You have Halloween coming up on Friday and the election on Tuesday so look for some light volume crazy movements between now and Wednesday.
Mojo
- No one wants to hold overnight.
- Liquidation requests. Which stocks are harmed the most? Liquid stocks. Big names.
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Posted on October 24th, 2008 by
Mojo
Frankly, I’m running out of scary words to use to describe the mess of the global economy. I still believe that we will have a nice post election bounce (or maybe a bit pre-election if the outcome becomes obvious) that could run as long as a few months. And then, the real selling will start. DOW 5,000 in short order.
Are you prepared?
Mojo
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