Who Wants To Be A Millionaire Trader
by TheKelster.
Phase One: In the beginning.
An "investor" comes to the market as an FA man. Perhaps he was a mutual fund holder who began to think he could do better. Perhaps he was a 401K roll-out. Perhaps he was a self directed IRA holder who finally reached critical mass. In any case, he likely made his first nervous choice by some form of due diligence. He tried to learn something about the market, about trading, about making good choices.
Beyond this he knew very little. He began in the midst of a long running bull market. Thus his first halting attempts were adequate, if not, wildly successful. He likely stayed in the stocks he picked for months, maybe longer than a year.
As the months rolled by, he kept an eye on the stock market and his stocks. He began to notice that stocks would often pull back substantially on their journey to the stars. He began to observe, and calculate, that he could become many times richer in a much shorter period of time. If he could only figure out how to sell at the top of a run. Then he could wait for the inevitable pull back to complete and jump back in. Great riches were tantalizingly close, right there in front of his eyes, just waiting to be picked.
Phase Two: Enter the TA man.
He now begins to watch on a daily, even intra-day, when possible. He begins to look closely at the charts. Details on the charts now seem to take on a life of their own. He begins to read some of the basics of trends, oscillators, signal generators, support and resistance levels.
In the slow manner of a buy and hold, he sees one of his stocks in the process of pulling back and sells out. With pleasure he watches the stock decline 7 days in a row. Seeing the stock approach an easily defined support level, he takes a day off work to watch. That day he buys back in.
The stock turns and moves up and up and up again. The thrill is undefinable. He feels an overwhelmingly powerful rush. Home, alone, in the middle of the day he cranks up the stereo and dances uncontrollably about the room. He has found the Holy Grail. He feels POWER coursing through his veins. He is unstoppable, maybe even genius.
Phase Three: Back to the womb.
Mr. genius has quit his job. He has been trading ever more viscously now for over a year. He had a great first year. He evolve from an investor to a day trader. Or perhaps, he was retired. He has undergone a personality change from the man in retirement, carefully managing his funds, to a full time swinger buying stock after stock.
Buying, Selling, buying, selling, buying, selling. Deep in the second year now, following a frenzied pattern that seems to be losing steam, the trader begins to worry. The market has changed. The days are turning into weeks and the weeks to months. It's been three months now since he has had a winning month. The losses are mounting. Capital is shrinking.
He is telling himself he only needs to slow down, trade smaller, get back in the groove. I just need to find my timing, he tells his wife. "You will", she says. She has seen him go through downturns and come back. This time she is silently worried.
Buy, Sell, buy, sell. The beat haunts him. He can't get control. He keeps plunging after great gains to make back the lost capital. Aaaaah, he slams his hands down on the desk. He knows he is out of control.
Coming back a few days later he makes a pact with himself. He will, he must, yes, he will go back to the way it was when he started. He will carefully research, he will do DD, he will find just one or two stocks and sink it all into those two stocks. He will give the stock time to grow. He will not trade in and out on a whim. He will grit his teeth and bear it when the stock goes down. He will not sell. He will not get whipped out only to watch his stock turn and reach for the heavens with out him. He will chain his hands to the chair.
He makes his first buy and hold in over two years.
The stock wobbles around in a range. He is confident this stock has bottomed on a pull back. He is not trading. For two weeks the stock works up and down in a large range. Still he sits. Joy fills him one day as the stock breaks out and moves above the long range. Despair crushes him the next day as the move proves to be a head fake and falls back into the range.
He has made a pact with himself. He stays the course. He does not sell. Another two weeks pass and the stock is slowly fading towards the bottom of the range. He has been around going on four years now. Two years he spent actively trading. He has seen many a stock fade away to nothing and never come back. He has taken that ride before. He does not want that fate for his capital.
Phase Four: Rebirth.
He decides to follow the one lesson he has heard over and over. A lesson he had been seriously guilty of ignoring. Set stops. He knows if he loses all his capital he is out of the game, maybe forever. He rationalizes: If I set a stop, I am not really trading, just protecting my capital. He sets the stops. Next week they are tripped and he is out. Now what?
He sits watching the screen without trading for weeks. He is overwhelmed with depression. He has not lost all his capital but he knows in his heart if he buys one more stock, any stock, it is going to move against him. He has lost all faith in his ability to correctly enter or exit any position. He spends his days thinking about where he went wrong.
Slowly he begins to realize he was guilty of overtrading. He flung caution to the wind. He believed he was so infallible that he could buy anything at anytime. His eyes were opened.
Phase Five: The Trader.
He sits still, quiet, hardly breathing. He is watching a stock on the screen.
He spent all last month hitting the books. Back to basic training. Reviewing trend indicators that he had thrown out before and reviewing the demands of emotional control and discipline, he prepares to make his very first trade. A returning, humbled, disciplined trader.
Watching, as the stock slowly approaches the buy point, he struggles to be ready to make the buy. His first in two months. One hundred shares, done. Mental stop loss already picked. Watching.
The stock moves. Reversal. Scarcely breathing, he watches as the stock begins to rise. It continues to slowly, raggedly, rise until it finds the target he previously picked. Click. Sold.
He watches quietly in his chair, waiting.
All rights reserved. :-D This story does not resemble anyone I know. All names have been changed to protect the guilty parties. lol |
