Monthly Report for October -10.7% / -$18,190
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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Take your time. Come back in, the water's fine. I know it is just your toe (Roth) right now, but when you get back in, you have to forget the emotion and remember the lesson. This is no different than a great quarterback. Learn not to throw into coverage, but be confident of you ability to read the coverage.
Matt
I am also losing this month..
Penalize myself to stop trading for a while.
You are not alone, Mojo...
That's why all of us need to work and discuss together in here, this forum...
I'm sorry about your losses, but also I must say I am rather relieved to learn that you are not infallible. I have been watching your posts and saw you making money while I myself was trading like your prototype losing retail trader. I become discouraged and depressed by my losses over the last 45 days and finally gave up active trading a week ago. Similarly, I gave up posting here since I seemed to be out of step with you all who were doing so well, so that is why I felt relief upon seeing your post. I cannot seem to handle this market, but do have to manage my open positions and plan to look at the limited risk expiration plays next week.
It would be interesting to know more details of how you went wrong. Were you making strong directional bets that went against you? What kind of thinking were they based upon?
-aw
Amazing post-- I admire your honesty. Your month sounds like a slow motion version of this week for me... even the dollar figures... Here's to learning the tough ones (again).... and plenty of better times ahead!
Everyone has losses. Over time you will have a big enough portfolio that hedging is a lot easier. And with experience reactions become less counter-timed, helping avoiding increasing the losses. But everyone has losses if they are in the market. My investment portfolio is not up the past few months, but my trading is up a lot. There have been bad trading months as well, it is just that after a few years it is a lot easier to see things to avoid so the losses don't comes as often.
Please don't stop participating in the forum when times are tough, that is when we need each other most. That doesn't mean you have to be in the market, just that you are posting why you DON'T see a trade. Cash and bonds are positions too, and all good traders leverage them.
Matt
Some time ago i suggested that in this market you simply sell CALLS and buy PUTS.[mostly on stocks)
You ask on what?
short calls on casinos: wynn, mgm....builders TOL ,DHI,PHM.....oil USO fast food PNRA..Industrial goods CAT etc
these are some that i have. The NOV's are expiring and there are some nice credits for DEC take a look.I have'nt had to make any adjustments the last 2 months.i only do one if needed'
On most i just sell naked calls
on up days like yesterday i just increase calls.
I don't mean to soud flip about this but it works
I know a reversal is coming but i'll deal with it as i have in the past
its simple it works
DO you own DD
Cheers
john
I'm taking the Series 65 next week. It's not too bad, you can still do it!
Thanks for the encouragement. I hope experience gets me to the place where I can be less reactive.
-AW
Love your approach. I don't have the $$$ to do a lot of naked calls, but I think that's a smart bet if you have stops in place.
I've lost the most money attempting to go long on trades. I sat out for a few days several weeks back. Started day-trading the /ES in my paper account and plan to go live in week. It's been working.
A long time ago, I used to have a casual attitude about paper trading. Ironically, this past week, the intensity of trading paper was just as much as real trading. Maybe because I had specific goals for the week and stayed focused on achieving them. I like the fact that I'm in cash at the end of the day.
The heavy pressure is to the downside. One futures trader's site I check out is saying that we might have just formed the right shoulder of a very large H&S pattern. The head is coming. Looking for a possible shot at 668 on S&P. The long term trend line shows possible support at 650-700 area.
Stay short. Trade small.
Roger
AW - I'm *way* far from infallible. Really, I should so your post to my wife who would get a big kick out of anyone even thinking that!
Thanks to everyone for the supportive posts, emails, and PMs. I really appreciate it!
Mojo