14 reasons to trade

 

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money”       -Ed Seykota

I’m a rules-based kinda guy. It’s both a blessing, and a curse. A few years back, I had a trade on that was too large, and when I woke up and watched the market open, it had started to seriously teeter in the wrong direction. D’oh! In one of those perverse moments of either self-flagellation or camel-like stubbornness, instead of closing the trade, I went for a long walk on our city’s seawall. I think I had a cookie, too.

My computer may have been closed, but the market certainly wasn’t. Three hours later, things had gone from crummy to crummier. I closed the position. Why hadn’t I closed it earlier? And for that matter, why had I even let a trade like that happen in the first place? That would be a longer post, or require a couch and mild hypnosis to fully answer. The short answer probably is a temporary combination of #4 and #6.

You would think the only reason to trade would be to make money. You would be wrong. Here are some of the more prevalent reasons traders hit the buy and sell buttons:

  1. For the adrenaline rush
  2. Out of boredom
  3. To feed a gambling addiction
  4. To punish themselves
  5. To punish others
  6. To feed an ego
  7. To feel better about themselves
  8. To feel worse about themselves
  9. Out of loneliness
  10. Out of greed
  11. Out of fear
  12. To numb pain
  13. To feel pain
  14. And finally, the few that remain, trade to be profitable.

Something to keep in mind the next time you either ask for someone’s advice, or they offer it to you unsolicited.

Last Summer I got into a bit of a twitter-scuffle with someone because I had mentioned that the only reason I trade was to make money. I summarily received a lecture on why that was a pitifully shallow reason. My clarifications that making money is most certainly not my sole reason to rise in the morning, just my sole reason to enter a trade – and that trading is a small part of my life – fell unheard.

As I said, people trade for lots of reasons.

Why are you trading? Drop me a line at tradervancouver@gmail.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Don’t wear someone else’s pants

 

Don’t wear someone else’s pants. It won’t end well.

You’re walking down the street, minding your own business, when you see them. Bright purple leather pants. You’ve been looking for a pair like this forever. Not exactly like this, maybe – just pants that would make you a rock god among mere mortals; pants that would command attention and admiration. These are the pants you seek.

There’s only one problem. Someone else is wearing them. But they’re not just “wearing” them, they’re rocking them. There’s an air of confidence, and a sense of purpose that seems to emanate from the pants. These pants mean business.

So you do what anyone would do in that situation – you stop the purple pant wearer.

“Those are amazing pants,” you blurt out.

“Uh, thanks,” replies the purple pant wearer, with a suspiciously geographically vague accent.

“Are they comfortable?” you press.

“Yeah, absolutely. I love ‘em, aren’t they fetch? Actually, they’re probably what got me into the sold-out Stones concert last month. Oh, and get this – at the concert, a director with United Artists came up to me. She thinks she may have a role for me in the upcoming Leaving Las Vegas sequel!”

“That’s amazing!”

“I know, right?” purple pant wearer says. “But get this – I met the love of my life, a model, when I wore these pants to a fundraiser for F.E.N.N.E.L.*

You want to be noticed, you want to be successful, you want to meet the guy/girl of your dreams…must. have. these. pants.

After further pestering, you somehow manage to convince this stranger to sell you the pants, right there on the spot. They rightfully think you’re somewhat crazy, but you threw money at them, and were very persistent. You gleefully race away, pants in hand, eager to change. Purple pant wearer walks away pantless and baffled, but with a fistful of your money.

You try the pants on at home, but there’s just one problem.

They don’t fit.

 

That’s because they aren’t the right pants for you.

And it’s the same thing with trading plans.

There are no shortage of subscription services out there, offering courses or programs that will show you how to trade. Some of these services are less than reputable, but there are those that are taught by real, successful traders. Some are day traders, some are swing traders. They have a system and a plan that they have painstakingly developed after countless hours. It works wonderfully for them.

The problem is, it probably won’t work for someone else. And that has nothing to do with the material, or how it was conveyed. Like the pants, it’s a process that they developed for themselves, and therefore it fits them, not you.

Developing a plan is hard work. It takes a ridiculous amount of time. And worse, there’s no one right answer. But in the end, the only plan you’re going to have any confidence following is the one you’ve built yourself, from scratch. Because it’s built by you, for you…and you alone.

Stumped on an aspect of your plan? Reach out to other traders, ask questions, and read…a lot.

Remember, you can either trade with a plan, or plan on giving your money to those that do. It’s your choice.

 

 (disclaimer: I am not a purple pant wearer.)

* F.E.N.N.E.L. Folks Encouraging New Nations to Endorse Lachanophobia**

** Lachanophobia: fear of vegetables.

Real fear, fake cause. But donations still gratefully accepted. Fight the Man!

victoria-beckham-david-beckham

Matching leather pants. Rarely a good idea…unless you’re David and Victoria Beckham.

 

 

 

 

Capitalism and Sesame Street

 

A few years ago, Sesame Street “adjusted” Cookie Monster’s message in an effort to address rampant childhood obesity. The premise was that too much of a good thing makes it, well, no longer a good thing. Apparently, the nation needed to be told that eating cookies every day is a bad idea.

 

Capitalism is a good thing.

Sure, it’s not perfect, but it’s arguably the best working model of an economic system that’s out there. But much like taking a cookie diet too far, taking Capitalism too far has it’s own set of disadvantages. I posted this clip a while back; for those that haven’t seen it, it’s worth a watch.

Trade Updates

 

I went through a “lazy posting” period from June of this year, to around September. I fell off the wagon and neglected to post a number of entries, as Life had other priorities. It’s too bad really – not only from a public accountability standpoint, but also from a personal routine habit, as well.

Fortunately, I didn’t fall completely off the wagon – I still kept detailed records of each trade I made on a spreadsheet, which is a habit I don’t think I’ll ever drop. In fact, I’m required to make those entries as it’s the only way I have of knowing when to raise my stops, add to trades, etc. Without that spreadsheet, I’d be a rudderless ship.

Many of the trades I put on in those ‘missing months’ have now been stopped out anyway, as you can see here. The first few weeks of October saw the closure of a number of positions, but several still remain. I’m loathe to be “one of those guys” that posts trade updates without having clearly posted the original entries. In an effort to get back on track, and as I have no idea how long these trades could continue to run, I figure it’s better a little late than never. This is the internet, so I completely understand any skepticism, which is why I’ll leave out my original entry price and date, and just post my stop updates.

Hopefully my past diligently posted trades carry some forgiveness weight, and some credibility.

Anyway.

$AVNR

Raising my stop here from a close under $9 to a hard stop of $10.61, and adding to the trade. The chart says all you need to know. An easy to see case of ‘ride the trend, until it stops’…AND have the patience to sit through the dull bits. Hand sitting, the most important skill a trader can have.

weekly chart

AVNR Nov 1

 

$TUES

I mentioned earlier in the week that I had moved my stop up to a close under $18 – I’ve actually got a hard stop in at $17.47, just to be clear.

weekly chart

TUES Nov 1

 

$TUBE

My stop is a close on the daily below $12. A good trade I can take absolutely no credit for – just riding the Howard Lindzon coat-tails here. It’s working quite well, and despite the lack of data, has a solid daily chart.

daily chart

TUBE Nov 1

 

$NOK

I charted my trade thoughts on this one at the time, and I’m still waiting patiently to see if I was right or wrong. More hand sitting. Stop remains at $7.55 – it came within 3 cents of that a few weeks ago…but didn’t hit it.

weekly chart

NOK Nov 1

 

$AAPL

Current stop is $95.18 . It’s a great looking chart, and if you can’t see the trend, then I don’t know what to say. And no, trends don’t last forever. That’s why I use a trailing stop.

weekly chart

AAPL Nov 1

 

$BRK.B

This is the black sheep. I’ve had these shares forever (in certificate form, no less), and they’re really more than a mere investment for me, so I don’t really count this as an active postion. If you’ve been to the Omaha love-in, you’ll understand. I rode these shares from the highs in ’08 to the Supercuts haircut they received in ’09, so that should say something about my dedication to Warren Buffett.

weekly chart

BRK Nov 1

 

 

Baxter the rapist

 

I share custody of a ten year old Basset hound with my ex-wife.

Truthfully, I’m more of a part-time dad, as I only take him about one week-end a month. Despite that, I try to be a good parent, and a good influence on him. He’s sociable, and has always enjoyed outings of all descriptions. My ex and I used to joke that it took him five minutes to walk to the dog park…and thirty minutes to walk back home. Despite his naturally low altitude, he is long and strong, which has served him well, whether playing with Chihuahuas, or Boxers. I am finding though, that as time marches on, he’s become more ornery, and less willing to listen. Haven’t we all.

It was my turn at parenthood one particularly hot Vancouver summer week-end. I thought he might enjoy a change of pace, and took him to the off-leash dog park at the beach. While he’s not a swimmer, he will happily wade into the water up to his armpits; a fun summer-time activity. Shortly after we arrived, he had set his sights on a young pug; male or female, it doesn’t generally matter, but this pug had a bright pink collar. Baxter was chasing her relentlessly, his skin folds and over-sized ears tossing about with abandon and glee, as he barked and pursued her affections.

Everyone was laughing, until the rape began.

Then it got quiet and awkward.

Baxter had caught up to the poor girl-pug. She soon found herself pinned down by the old smelly man, who was laboring away on top of her with his wet belly smacking against her shoulders. For Baxter, sex is more about going through the motions, rather than achieving accuracy. All he needed was an old stained Haynes wife-beater and the picture would have been complete.

I pulled him off, and we made a hasty retreat, before the crowd could turn on us. In his usual self-centered way, Baxter felt no guilt or shame for the events of the day (that was my department). But the looks from the other dog owners made it clear we weren’t welcome to return. Above all, a traumatized pug puppy was left to process her day at the dog park.

Baxter1

The mug shot. Note the drooping jowls (which smell like old cheese), standoff-ish posture, unremorseful eyes, and overall smug expression.

Baxter2

“Who, me?”

 

 

 

Book Review – The Perfect Speculator

(This post will be duplicated on the Reading Room page)

The perfect Speculator, by Brad Koteshwar

I can’t for the life of me remember where I came across this book suggestion, so forgive me if I don’t give you a shout-out for the recommendation. I had actually forgotten I had even ordered it until it showed up in my mailbox a week ago.

The Perfect Speculator isn’t some weighty tome that you will be laboring through – it’s 140 small pages, including illustrations. I will offer one warning, and that is this: it’s badly written. No really, it is. To be fair, the writer acknowledges this early on. The word construction is dreadful, the book has numerous typos that somehow made it through to the final printing, and the decision to write this around a fictional conversation between two traders doesn’t really work as a result (I’m not Hemingway, but I’m also not selling a printed book, either).

That’s the bad news.

The good news is that beyond all that stuff, it contains invaluable and worthwhile advice that would serve most traders well to read. What I think the book conveys extremely well is that trading doesn’t need to be, nor should it be, complicated. It stresses simplicity….but simplicity with discipline.

Buy this book if you struggle with areas such as:

  • where to place an initial stop loss
  • how, when, and where to raise a stop
  • how to add to a trade
  • how to narrow down a watch-list
  • how to develop useable trading rules

I have read dozens of books on trading, and while each successful trader has their own personal methodology, and many will not agree on some of the mechanics of what gets them into a trade, those same traders do share commonalities. Those are the points I look for, and focus on. One of those commonalities is risk management. Almost to a fault, professional traders religiously practice it. They do so because they understand Risk of Ruin. They understand that if you lose 10% of your account, you only need to make 11% to get back to square one. If you lose 70% of your account, you need to make 233% to get back to even.

One final note – the author makes a point of relying heavily on weekly charts. As he succinctly puts it:

I make it a point to keep everything as simple as possible. In reading charts, I get confused when I look at daily charts. Daily charts are noisy. They show way too much volatility and add to the mixed messages. I rely solely on weekly charts. There is much more smoothness to weekly charts.

Despite the writing style, this is one of the best self-help books on trading I’ve come across to date.

Five out of five for content.

THe perfect speculator