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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: Vicrobi who wrote (8041)	2/7/1999 7:50:00 PM
From: Trader J	Read Replies (2) \| Respond to of 56535

**All: The following is an email that was sent to TokyoJoe regarding one of his member's trading experience. It is important to realize that this fate could be realized by any one of us at any time if we allow it to. I felt it wise to post it here for all to see as I am sure the poster would not mind: ---------------------------------- The email you sent out last Friday was very entertaining. I would like to share with you and other SA members some of my trading experieces over the last few months. For almost a year now, daytrading has been mostly an exciting and sometimes painful part of my daily routine. I have experienced the typical ups and downs of most daytraders and the euphoric high of watching my portfolio grow from 10k to almost 200k in a matter of weeks. I felt on top of the world and intoxicated by new found wealth. All was short lived. Belwo is a summary of what has transpired over the duration of a few short weeks. Just before the new year, during the month of December, my portfolio value was around 10k. With this amount, I traded largely internet call options[amzn, cmgi, etc] and watched my portfolio grow to almost 100k just befor xmas. Much of this success can be attributed to the incredible run in the internet sector but also to some prudent decision making. During the month of December my gains were so large and consistent that money no longer had the same type of value it once had. My confidence was such that I couldn't lose and as my portfolio grew in value, it took on an abstract quality which is hard to describe. Trading became a game like seeing how many pieces of candy I could accumulate on Halloween as kid. After my porfolio broke 100k, I got into a state of mind where I was trading just to trade. Any gains that i had thoughout the day simply added to my collection. My only goal was to accumulate more 'candy'. I was doing very well at this time as my 100k quickly grew to almost 200k just after the new year. Thats wehn things went downhill. I became overly confident and sloppy in my trading. All the time, effort and methods I used to get to the 100k mileston were suddenly thrown out the window. Losses didn't seem to matter as i would make up for thm in the next trade. Losses quickly exceeded gains. I scaled too deeply into losing call options buying them cheaper and cheaper confident that they would rise again in value. Many of those options expired worthless. At the end of January, my portfolio had plummeted to less than 20k. The funny thing is, even as i'd lost over 80% of my previous gains, I still felt confident that I would come out ahead. In the end, I failed to recapture my gains and lost the remainder of my portfolio value. I realize that my experience, although painful, is part of the education process and more than likely, similar experieces may lay ahead as my trading progresses in the future. As someone once said, "..in life there are moments of joy obliterated by unbearable sorrow..." This was one of those moments. Fortunately, I got over it in a relatively short period of time and look forward to trding again. I am now starting back from square one, and hopefully, will have enough saved over the next few months to begin trading again. My goal for 1999 is to quit the 9-5 routine and devote all attention to becoming a successful daytrader. Following are some lessons that i've learned the hard way: --Don't take too many risks, especially those you cnat afford --Don't be afraid of taking losses but have a healthy sense of fear regarding your principal --Going for the big win is a quick way to lose it all--fast. Better to settle for small consistent wins --Scale in and out of positions. Whether your position rising or falling, selling portions of your position to lock in profits or cutting losses is safer than trying to predict the max high and low points. --If your brokerage[eg, eturd] is slow with executions/confirmations, slow down and play smaller positions. --Lastly, don't get coky, be humble. It is my hope that other SA members--especially those new to daytrading, will benefit from my experience. ------------------------------ A hard lesson to be learned and it is tough for me to read something like this. This is why I stress to remember where you came from. Establish a trading base of capital that you feel you need to do well with and then when you exceed that amount, pull money out of your account and put it into savings, the house, mutual funds or CDs....it is too easy to be blinded by $$ signs and risk more than is prudent. Trade well.....please. TJ