End of Day Journal (1-22-2010)

Wow ... what a week. Who was asking for a reality check? Hmm?

Selling:
About an hour into the morning I liquidated everything, taking losses all around.

Buying:
The screener was full today and I took this as a positive sign for the overall day, especially as the DOW came back around, and by early afternoon I had initiated three new positions. The account value reflected positively  ($110, $180, $290) on all three positions before I walked away from the computer for the day. But by market close, the account saw a huge hit on all three, pushing the value down another ~$1200..

What-ifs:
I should have reduced my sell targets.

A few comments on the week:
The losses accumulated this week are definitely due to my in-experience. There has not been a week like this since I have been actively trading, and as naive as it sounds, I just did not think such a week was possible.
Though it is awfully tempting and might in some way make me feel better, I am refraining from beating myself up for the decisions made this past week - they were all made using the same approach I used the week prior which was pretty spectacular. Who could of predicted 3 down days in a 4 day trading week? No one. As much as it still exasperates the engineer/modeler in me, the stock market refuses to behave in well behaved, predictable manner.

So what about a stop loss? Would a stop loss have cut my losses last week? Maybe, but after last year I am reluctant to set one. I think every book that I have read regarding trading strongly recommends setting a stop loss, advice which I dutifully heeded as I started to actively trade again. In retrospect, I think a large part of my overall losses were the result of the stops... A typical trade would work into something like: buy on the upswing, optimism on the uptick, miss the sell, hit the stop loss, sell, and then watch the stock rise again.

I am coming to terms with the idea that trading is very personal and mostly about what goes on emotionally, psychologically, mentally. In the past, as much as I have tried to plan, test, and analyze, weird things would still happen in my head when I had money in the market, and even weirder things happened when I start winning or losing. At this point, I would say more than half the battle is knowing myself and how I react. I think it fits my personality better to buy with confidence, go with the flow, and let the daily/intra-weekly trend judge the buy decision. Hence the current strategy - a lot of confidence in the buy, ride out a loss, and sell on some gain. About as simple and non-technical as it gets - in fact it is almost too simple for the analytical side of me.

But the general market trend was just too much for the bulls this past week.

Rather than beat myself up for not just realizing the market was tanking this last week - or insisting on a stop loss, I think there are two things that I could have done. My biggest loss was $1900 realized on 3000 shares, a position that I had doubled up on, and then bought another 1000 shares on later. My original sell on this stock was at a $700 profit, and the first pre-market morning of ownership saw a $790 profit high on a news release and strong volume,  I got carried away and bumped the sell up. That decision alone would have grossed a ~$2600 positive difference for the end of this week. I got too carried away.

The second thing is along the same theme: nearly every new position this week realized something near a $200 profit at one point. Conservatively, I would say that at least half did. $200 was my sell point over December and the first part of this month. Given the success I had last week with bumping the sell points up, my initial exit this week was $400. But this week was different, and by the second down day, and despite my inexperience, I had some unease about what was happening in the market. If I would have paid attention to the sense of  unease and acted conservatively, I would have cut my losses substantially. Too greedy.

So here is what I am taking from last week: stick with the basic strategy, but try to pay attention to the general market. When I am buying a stock, I always take care not to be the one to start the trend reversal. I think I need to acknowledge the same thing for the broader market - I shouldn't try to be the one to start the uptrend for the whole market. Practically, this probably means sitting out a day or two sometimes.