The Day Trading Experiment: End of Day Journal (12-10-10)

Summary:

Live trading on 100 shares:

Pfft.

After a great week - one of the best ever - I finish off with the worst day ever as I doubled up the shares I was trading. A few thoughts - the commission per trade on 50 shares vs. 100 shares is about exactly the same. It is much more expensive to trade 50 shares. But... if I would of stuck with 50 shares for Friday, I would finished the week slightly positive at around +$100. Just to put things in perspective, if I had been trading 1000 shares (as I was when I started last spring) EOD Thursday profit was > +$8000 (and substantially so, due to the commission difference); by EOD Friday the account would of finished at > +$1000. I effectively loss something over $7000 on Friday.

Here are the IB summaries, For the week ending Thursday:

For the week ending Friday:

Well, well. After spending the weekend licking my wounds and thinking about what happened, here I be at the end of it and still not exactly sure what 'it' was. Or what to do about it.

A few things that I do know:

By EOD Thursday I was coming off of one of the best weeks ever. My confidence was at an all time high, I was thinking of myself as a trader and fully convinced that I could do this and make it work.
I bumped up the number of shares I was trading.
I could not short YOKU.
I had some very good entries.
I had some very poor entries.

Those are the facts. That - and price went up, price went down, price went sideways.

I am guessing that being able to short YOKU would of kept me out of a heap of trouble. I tried to short on the 11:00-ish new low and when I couldn't decided to try and time the bottom. The first entry would of been a champ and it is very likely that I would of stopped after that trade.

What about my emotional state? What were some of the thoughts that were running thru my head while I was trading?

This is the question that I have been concentrating on - and I am not really sure what to make of it; or perhaps better said, I am not sure how my mental state affected my trading and how I can recognize it and prevent it from happening in the future. Here are some of the thoughts that I believe might be helpful:

When I made the decision to bump up the size, questions came up - what if I completely blow it after I increase in size? What if I lose everything I made and then some? This is exactly what happened. I didn't for one second entertain these thoughts and pushed them out of my mind as they came in. As the day started, they were no where to be found - but after I hit the -$400 mark they popped up again: 'See? Watch, you are going to lose everything you made and then some.' I pushed them out again, but they rang with sarcasm and a sense of inevitability. I kept trading, knowing (or maybe it was more 'hoping') that a few good trades would take care of everything.
As I mentioned earlier, my first attempt on YOKU was a short on the 11:00 new low. IB didn't have any shares to short, so I said to myself, well - it has to find a bottom. I still stand by the first four entries (though the exits on 2 and 3 should not have gone to the stops). The rest of the entries were all bogus and more an attempt at what I 'wanted' to see, rather than what was actually happening with the price and volume. I think that by then YOKU had gone down so much and I was so 'desperate' for a big move that my perspective was biased and remarkably skewed.
I was up numerous times - too many times to count > +$0.50. I let all of them came back to stops. This is all too typical. Some days I let the stock 'speak' and some days it becomes about me hanging on and hoping. Friday late morning and afternoon were definitely about hoping. I think this problem tends to show up when I am down for the day. I know that one or two great trades will put things positive and I go into each trade thinking this is the one - I just need to be patient. My thinking goes along the lines of 'You never know what will happen... let it come back to the stop or shoot for the moon... just hold on...' That needs to be a heads up: time to take a break, re-asses, and perhaps get out of the trade.
On the opposite side of the reaction, I start chastising myself for not taking the easy profit and start taking money at the first sign of price hesitation, e.g., the HOD shorts on CYH and FSLR. This is just as damaging.
Last but not least: I recall thinking at about the 3 o'clock mark that I will have to make $5/share in order to break even for the day and thinking that there was no where near enough time for this to happen. But - a guy never knows - and under that pretense I traded what I wanted to see happen - YOKU was moving big for the day and it was bound to hit bottom... nad I kept seeing it. FFIV had a nice ATR and was bound to move big on the last hour... and I kept seeing it.

Several of the thoughts I mention are recurring themes of mine, they recall the initial attempts at momo trading. I have come a long ways since then. I think what I am still seeing now is about some of the core of my personality - who I am when not much else is left... I would characterize it as optimistic riskiness. 'You never know, I might get lucky. Just keep trading.'

The thing about this is, I am not entirely sure how to catch myself in these modes. I don't think it is a stretch to say that my chart reading skills are adequate for profit, that is, if I use them. I think there was an unconscious shift in focus that took place on Friday afternoon. I am going to make a bit of an assumption and say that the circumstances that lead to this type of trading are the same: I am negative for the day and I have several relatively small moves that come back to stops. So in an effort to remedy this I am going to mandate a break if I have 3 consecutive stops. Since I think the 'see a profit - come back to a stop' moves are more a signal that I am not reading price action correctly, and potentially more damaging, I am mandating a break if this happens once (>$0.50).

By break I mean getting up, walking away from the computer, and doing something entirely different for at least 10 minutes. And before I come back to trade, spending at least 5 minutes re-focusing on my objectives.

This might sound silly, but I know me - I can make excuses galore if I am not specific.

Another thing that has been troubling me is why I didn't stop trading on both Thursday and Friday morning. I think it has something to do with not being positive - which... when it comes down to it, is neither inherently good or bad. I thought I could get by with setting an arbitrary/intuitive 'time to stop' standard, but I just don't know. For now I will keep it this way.

Feedback, insight and advice all appreciated.

Trade well.