Folks, it’s pretty simple - I got my rear-end handed to me this year. Q4 was ESPECIALLY BRUTAL.
I made ALL the classic mistakes... cutting winners short, letting losers run, doubling down on bad plays, trading WAY too big, and playing for rent money!
Cutting winners short... I had 77 winners in 2014, but that wasn’t near enough to overcome my 42 losers. That’s a problem people. I cut MANY of those winning trades short, leaving literally THOUSANDS of dollars on the table.
My average winner in 2014 was $113.39.
My average loser - $448.86.
Do the math... it would’ve taken 170 winners to offset my losses!
And that leads me to letting losers run... my 42 stinkers in 2014 cost me BIG. Thirty percent of my losing trades cost me 60% of my losses. Even more staggering... two, that’s it people TWO of my 42 losers cost me nearly 30% of my overall realized losses. Two trades cost me $5,445! Simply eliminate those two losers and I would’ve finished the year in the GREEN! Albeit not by much, but profitable nonetheless.
Trying to make up losses... which leads me to those 2 DEVASTATING losers. They BOTH originated with me trying to double down and make up for losses. For more on those specific trades, check out losers #34 and #39.
In an effort to dig myself out of the hole, I put on trades TWO and even FOUR times bigger than I normally play. So position sizing KILLED ME! Normally I play 10 contracts, but in $AFL I played 15 and $ESV I played 40 - 40 people! What the heck was I thinking?!?!
And lastly... I was playing for rent money. Say what?! This incredible post by StockTwits’ own ChicagoSean describes it best! Let me summarize, basically Sean talks about the pitfalls of trading for profits to be used in everyday life. I’m here to tell you - that’s a BAD idea!
Back story... In 2013 I took my $4,000 in profits and dumped it into my checking account. Some went to my Roth IRA, some more went to charity, and some more just went into my rainy day fund. So as 2014 started up I decided to take my gains monthly.
Next thing you know I’m saying things like, “hey we got a beach trip coming up boy I’d love to generate some gains and use a little of that money to fund the trip.” Well let me tell you folks, when you start thinking like that, you might as well set your money ON FIRE! Seriously, that type of thinking will cause you to FORCE trades... it’ll cause you take take profits prematurely simply so you can access them monthly... it’ll cause you to double down to make up for losses... it’ll basically cause you to do everything I did this year. Trust me - you don’t want that.
So there you have it. Nothing overly complicated... just poor decisions. I take full responsibility - no excuses. My goal now is to take these real-life experiences and learn from them.
I’ve got plenty work to do. I need to re-tool my strategies, re-set my goals and renew my mind. But I'm excited for the challenge, and I hope you guys follow my journey in 2015.
I’m just a regular guy who loves the markets and has a great desire to get better each day. I welcome any and all thoughts, feedback or suggestions. Hit me up at email@example.com.