The Story of a Trader
What originally got me interested in trading was a friend, or sadly rather, the death of a friend’s relative. They had inherited a few hundred thousand dollars as a result of this tragedy. Out of trust for my intelligence and our long-term friendship, they came to me and asked if I would be willing to invest a small amount on their behalf in the stock market.
At the time, I didn’t know much about the stock market, other than in movies I had seen like Trading Places, Boiler Room, and of course… Wall Street. Sure, I’d seen Jim Cramer before too. It didn’t matter what I did or didn’t know, I was determined to make something of this opportunity. I knew if I managed to get it right, the stock market could lead to huge money.
The friend gave me $50,000 to invest for him. Like an idiot that knew nothing about the market, I turned to who else… Jim Cramer. He was like a shepherd among sheep, showing the laymen the way. Cramer had a crystal ball, or so I thought. I bought his book, and watched his show every night thinking it was the golden ticket to success in the stock market. It didn’t occur to me that Cramer’s entire strategy is long term until it was too late. I wanted to day trade, but Cramer’s picks were all based on holding for months or even years. As a result, most of my buys would lose instead of win, and they were always long positions. No short sells, ever. It was the investor mentality, I needed to find the trader mentality.
Not far in, my friend pulled his cash out and moved about 1200 miles away. Overall, I had lost $6500 of his money in just 2 weeks. Like most oblivious to the market, he thought since he was investing 50 grand, that he would see these astronimical gains of hundreds of thousands just overnight. While he didn’t stick around long, he got my head inside the door and put the idea in my mind. I got a good look at what was going on and was instantly hooked. I wasn’t done. Not even close.
About 8 months later, I came in with little less than $20,000 of my own. I had sold a lot of stuff I owned. Sports memorabilia, music equipment, collectibles, and a few other personal items worth money at the time. Worth something and don’t need it? Ebay.
Again, I didn’t know much about the market, but I didn’t want to give up. I saw what guys were profiting. I started watching CNBC all of the time. I thought that the news moved everything. I thought analysts knew the market better then anyone, and that they were always right all of the time. Now, I consider it entertainment. Its actually funny at times, especially Cramer. But at that point, I was buying and selling everything they said, when they said it.
Ha. Looking back now I can laugh about it, but I lost about 90% of my account liquidity in just 2 months of trading. Look up a weekly chart of SPY and find September and October of 2008. That was the market I got into going long on every position. Genius, I know. Thank you.
A New Path
The “research” on the fundamentals I was doing all day and night got me nothing. It didn’t work. I thought to myself that penny stock traders are making hand over fist with some of their trades. Trading $100/share stocks wasn’t bringing any profits, and I couldn’t afford to buy any, so I figured the opposite end of the spectrum would bring some money. Ha. Just a word of advice, stay away from OTC stocks if you can help it. Every one of them is manipulated and you will likely lose a lot of your money VERY fast. I lost all of what I had left in a matter of days trading penny stocks. Twice now, I had the rug pulled out from under me, and fallen flat on my face. But it didn’t matter to me, I was not going to give up. After failing miserably with fundamentals, news, and penny stocks, I ventured into technical analysis – the final attempt, as I saw it.
I was broke, and very confused when it came to reading charts. I studied and refused to give up. I wanted to know what I was looking at on a chart at all times. I hated the idea of being confused. I wanted to know what the next candle would be on the chart before it formed. I told myself I was going to learn it and learn it well. I became a technical market knowledge junky. Feed me the info. “Hey man, you know where I can find some more of that technical knowledge man?” (in my best Tommy Chong voice)
I decided to put my ongoing studying to use, and paper traded for 6 months while I worked 2 jobs and saved what money I could. Eventually, I sold my car and combined with my savings came back into the ring with $15,000. It was completely different this time. I had paper traded for so long, reading charts and recognizing patterns was not so confusing. I had green day after green day. Red was rare at first. All of my studying and thirst for technical knowledge was paying off. I finally could understand what I was looking at. At this point, I’m thinking that I had a system down, and this was it. Just stick with it.
I had my trading account up to about $50,000 when I got overly emotional on a trade (failed pattern) and lost about half of my account. Don’t ever be too proud. Take the loss and move on. We all make bad trades. The best traders recognize it and get out. If it goes against you, don’t fight it. Get out and cut it while it’s still a small loss.
After my epic failure of a trade I regathered, and began playing safer trades only. Some of the lowest risk setups I could find. Trades I was fully comfortable with and in control of. I borrowed $25,000 from family and hit it hard. I repaid my debt to whom I borrowed from, and kept studying and working while I traded a few hrs a day for about another year. When I made it to $100,000, about 4 years or so after initially starting with my friend, I made the decision to quit my job and pursue trading full time. My confidence had grown, I had executed numerous trades like I wanted to, and had a system that was bringing in consistent profits.
The purpose of this post is both to help you learn from my mistakes, and to encourage you as a trader. Each of you need to understand that trading isn’t something that comes naturally. It’s hard work, and requires constant discipline, conviction, and lack of emotion. Training your mind is by far the most important element, and simply cannot be overlooked.
It took me years to find my niche/strategy. It may take you years to find yours. Every trader is different. Find what works well for you and make it your own. Add what you know works, and take away what you know doesn’t.
After years of asking successful traders for help and only getting a metaphoric finger, I finally had someone open up to me and help me. It helped me enormously. I was there once. Those who had the knowledge didn’t want to share it. It is for this reason that I am developing “Trader Mentality,” a site dedicated to helping traders everywhere.
You can reach out to me anytime on Twitter or Stocktwits, and I will help if I can or point you in a direction where you can find answers. My hope for you is that you are driven enough to obtain the knowledge necessary to succeed, and passionate enough about trading that you are able to stick with it and prevail, even in hard times. I hope that what I contribute may play a small role in your success as a trader.