An infectious failure

For last week’s trading performance, I give myself a road-map scoring of just 1 out of 10 (this is as bad as it gets), because I jettisoned everything I had learned and adopted a new, reckless outlook.

My account was showing a modest profit from Monday through to Thursday (approx +2%), but I was tested by the market on the Friday and I was found wanting. Following a losing trade my account was showing a drawdown of around 2%; this was my first weekly loss since I started this blog and it would have been an honourable loss because I had not strayed from my trading plan. Losses, after all, are part of the process. Instead, I refused to accept the result and went back to the market, looking to make good. For several hours I chased my tail and got thrashed about by the intraday price action, until I was down a further 6%. My trade size grew as my losses increased. I even transferred more funds to my trading account so I could trade in large size with wider stops, giving little consideration to the total capital at risk. After much pain, a winning trade reduced the drawdown to around -4.0% and I decided to call an end to the week. It is a dishonourable, shameful loss.

The cause of this lapse of discipline is no mystery: it is the result of a laissez-faire attitude which in turn is the product of a reduced commitment to trading as a lifestyle. In recent weeks I have been coming to terms with the fact that my edge has eroded and that I most probably can’t make a living from trading. Because of this I have been dusting off my CV (resume) and investigating possible jobs to apply for. The side-effect was that my trading mindset changed for the worse and I reasoned that because I was so close to throwing in the towel, I may as well try to either hit a big score or exit the game in a blaze of glory. With hindsight, I realise that to fail in such a grand fashion would not be going out in a ‘blaze of glory’, as much as a being reduced to a heap of ash in a ‘blaze of foolishness’. The realisation owes less to potential financial losses incurred from such an approach, and more to the potential personal and psychological failure this would imply. Simply put, I believe I have become a better and more disciplined individual for having created and followed a road map, and to throw it all in would speak of a great failure. 

There is a positive that I can take away from this debacle. Even though Friday’s trading mirrored the disastrous behaviour that earlier decimated my account before I started writing this blog, I am sure that my actions were not the result of an old gremlin. Previously, I traded in this manner due to an addiction but this time around it just was a kind of stupidity, or conscious recklessness. I realise I failed myself last week in a big way, but I consider it a temporary deviation from my road-map, nothing more. Time will be the judge.

PS – I hold less store in the mystical than I used to – perhaps rationality is a function of age – but I find it interesting how luck can be eerily ‘lumpy’ at times. After this horrible Friday, for example, some friends and I went to a cinema and we were sorely disappointed by a film (it had very good reviews), we were caught up in a major traffic jam on the way to a restaurant, and when we got to the restaurant we had to wait ages for the food to arrive. And, we regretted it when it when the food did arrive because it tasted terrible. To top it off, this was the most expensive meal I have had in over a year.

Fortunately, I experienced a kind of ‘mean reversion’ in my luck on the following Monday and Tuesday. After a few profitable trades, I decided to risk a small portion of the excess profit in an experimental trading approach. I wanted to see what would happen if I just just watched the charts and traded without indicators and without fundamentals – price alone would be my guide. There are times when I perceive I have a greater ‘feel’ for the market, and this can seem a little mystical, but it is surely no more than the product of of those rare times when the market’s behaviour (patterns of intraday volatility and price action) marries with my perception of the state of market. This was one of those times of such synchronicity and over the two days I managed to string together 26 trades, 25 of which were profitable and 1 of which lost money (just £6). The trades were small but the two days have added a most welcome couple of percentage points to my account balance.

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2 responses to “An infectious failure

  1. I think most of us spend more time developing or improving trading strategies just so the game’s never over when existing system loses its edge.
    Oh and congrats on those intuition-based trades, :).

  2. It’s so true Rocko. Here I also went wrong. A while back I panicked when I realised I would likely one day lose my edge, and then I would have nothing. I devoted so much time and capital looking for new approaches, that I neglected my core approach. Poor results ensued. I still spend my life thinking about the market and possible new approaches, but it sometimes feels like a hopeless alchemy.

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