So many things are happening around my new identify as a Professional Trader are some of them to get the 'what actually happened' straight.
Over the three month period November 2020 - January 2021, I increased my investment accounts by $67,000. To put that in perspective, the median American income in 2020 was $61,000.
Breaking into Being a Professional Trader
Based on my own definition of how a Professional Trader is defined, I declared that I had achieved that goal in November 2020.
During that three months I had a 'winning streak' of 46 profitable closed, many with gains of over $1000 and overall profit of $47,000.
At the start of February, I had $11,000 profit in the first week. But by the end of February, my portfolio was down for the month of February by $20,000, an overall drop of $31,000 from it's peak in the first week in February, to be a total of $42,655 of losing positions, which represents a 20.7% average loss. As of Feb 26, every open position in my portfolio is at a loss, with the except of one that I brought on the last day of February.
Key Questions to Answer
Why didn't I set stop losses for these positions?
In 2020, I followed the traditional tactic of setting stop losses on most positions. I was stopped out on almost every trade, frequently to see the price turn around just under my stops loss and recover to new highs or go on to dramatic trends.Clearly, I was setting my stops in such a way that more experienced traders would sense where my stops were. Also when I had a profitable trade, I often did not have enough profit to set a stop bigger than the trading range for the stock without sacrificing all the profit when being stopped out trying to protect relatively small profits.
Eventually, I stopped using stops at all, and reframed myself as a trader to be willing to hold positions through a dip and wait for it to recover. I did this because I had identified that one of the mistakes I consistently made was being too pessimistic about stocks recovering. Many were dropping and then immediately recovering, with the overall positive market trend supporting those recoveries.
How did I end up with so many losing positions?
The end of February was a very sharp correction after huge jump in January in February. Some of the current losing positions were in profit until just a day ago, and could quickly turn around if this correction reverses.
What are some of the emotional lessons?
It's still really only just sinking in that I've not had a full time job for over 18 months, yet my net worth has still increased during that time.
One of the hardest things about the last months was actually imagining accurately what it would feel like to be more successful as a trader. Now I've learnt that the feeling I missed was a determination to keep profits from a successful few months, and to be more cautious that I would have to change my strategy if the market shifted.
In a way I needed this big drop in my portfolio to provide a new emotional experience that both extended my previous tolerance for losses, and motivates me to work harder to become a consistently profitable trader.
Its hard to mentally grasp what it feels like to make increasingly large amounts of money, and just as difficult to grasp what it is like to lose it quickly. Until both happens. I had identified that it was the complex mixture of feelings around what being a successful trader might make me into, that perhaps that led me to play small and be scared of losing the profits I already had. I estimate I missed out on another $50,000 of profits in the last months because I sold much too early in many trades.
The amount of daily variation in my portfolio had increased as it got bigger, to the point where just a few days of gains or losses would be enough to either cover my living expenses for a whole month, or wipe them out for a month too. Paying the bills becomes less consequential when a single successful trade over 2-3 days can net $1000, enough to pay electricity, gas, water and phone for a whole month.
