Avoidance, Position Size, Monthly Stats

This week I had 2 days where I had big costs, particularly Thursday. I'd really like to blame someone, but there is no one. Who has control over my trading? I do. The market can go up, down, or sideways. Though I have no influence or control on the market, I do have control over my trades (to a degree). If something catastrophic happens, and it could, barring those things.

But, for most traders or investors, we have a lot more control than we'd like to believe. You MUST have a plan to take profits, but also realize your position can turn against you and you MUST plan for that.

We don't want to be pessimistic or negative about attracting bad things to happen, but the fact is we live in a sinful world and bad things DO happen to both good and bad people. Why do you think we have insurance -- life, health, car, home, appliances, electronics, blah, blah. If a person is properly insured, insurance is a good portion of the budget. Why do we have insurance? For those things that happen that are not good. You basically want to be prepared.

Well, a trader/investor must think similarly. Yes, we all want to believe that we are attracting the best to us. However, it would be unrealistic to think you will not have costs in trading. Going back to 2005, where I was trading the QQQQs (options).

This was a tough lesson to learn when my account was much bigger. I had somewhere from 5-9 weeks of ALL profitable trades. I can't quite rememeber how many weeks in a row, but it was a lot. I was not daytrading, but holding overnight, basically doing overnight swing trades. It was probably 1-3 positions a day nearly daily. This was Darlene's $1 story.

At the time, I didn't have a good respect or humbleness towards the market. One of the things is if we do not learn the lesson, life has a way of repeating the lesson until we learn it by making adjustments and changes in our lives to show we've truly learned.

What is showing up in your life? Do you find yourself repeating mistakes over and over. Well, gosh darn it. Figure out what you're doing wrong and fix it, and if you cannot, seek professional help.

By the end of of those profitable weeks, I had gotten up to trading positions of 300 contracts. Mind you, I was buying options @ $1-1.50 each, so this position was over $30K. To take a position like this, I really should've had an account in the realm of over $500K, which I did not. This was a big portion of my account. It's embarrassing to say this, but it went against me and I did not get out and the options expired worthless. How devestating.

So, one of the things is that even if you have a small trading account and you can't do 2%, 5% of your trading account to minimize exposure in any one trade, do your best to keep it as small as possible. For example, if you have a $2000 account, and you're trading options, do your best to not exceed $200 for a position size. It's better to take a $100 position. You could do 1 contract of the Qs around $1, you'll make some money if you're getting in at the right time. The $100 is 5% of your account.

In the case of futures, it depends on your broker. For trading the ES, I've heard margins of $500-$6500 for 1 contract. It's probably a little less for trading the NQ (Nasdaq) or YM (Dow) with some brokers. So, you figure out what size account you need to do 5% or 10%. Dr. Alexander Elder and many other traders say to use 2%. If you can do this, even better.

Anyway, futures have particularly higher risk as you can stand to lose more than your investment, at times. Just take note.

To have 300 contracts of the Qs expire worthless was quite a shock. I think that was the only time I totally let that happen. I think my account was probably in the $100K range at the time. That's way too big of a position for that size account.

There is no get rich quick scheme, because the Bible states a fool and his money are soon departed. Are you doing foolish things?

There is a reason why professional traders who have been doing this for a long time tell us the things they do. It's not to waste their breath. It's live to trade another day, to truly grow your account, to minimize your risk, while steadily making gains in your accounts. It's taken me a long time to learn this lesson.

The past couple days, I really wanted to avoid meticulously going over my trades, especially since yesterday I nearly wiped out all my profits for July.

Some of the commitments I made to my trading were:

1. Trade every day Mon-Fri, unless there is a holiday or partial trading day.
2. Reconcile my trading platform, Excel spreadsheets, and broker statements every day.
3. Review what I did correct and incorrect in trading, as well as areas to improve on.

I already do stops and do my trading strategy, but the truth here is, I could MORE meticulously follow my trading strategy & do better.

The past 2 days, I really wanted to avoid reconciling things. But, I resisted the urge and did so, facing the cold hard truth. When you face the truth, make appropriate changes, learn, there is freedom and progress in the right direction.
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