Hello traders….I’ve gone through a lot over the past 6 months, highs and lows. Back in November 2019 I was riding a huge winning streak, my ego and buying power was at all time highs. Then NXTC came along and I thought, “here’s another sure winner, let me leverage into this and bank 10k”. Well we all know how that turned out, I quickly blew my 60k account in a few hours. The ironic thing was that I just removed my broker max loss the day before because it had cost me a winner, I thought I was better than that and took it off, big mistake…
After all the painful lessons I had in years past I thought I was done with blow ups and out of control trading. I thought my experience would guide me to a consistently profitable future… I clearly still had a lot to learn. Never again will I become complacent as a trader and just assume “I got this”. You are ALWAYS one mistake away from blowing up.
After that latest meltdown, I stepped aside for a bit and seriously considered quitting. I had lost tons of money up to that point and any winning streaks I had were quickly erased with a few reckless trading days, filled with all of the mistakes I had made in the past. Revenge trading, chasing entries, using leverage, exceeding max losses, emotional decision making, just poor execution overall. All of it was from the desire to get losses back quickly. I was so easily rattled by small drawdowns, I didn’t have faith in myself or my system to just let it work.
I realized all of my mistakes were from a lack of execution.
If I had just followed my system properly I would never had massive drawdowns, never had meltdown days and would be green month after month. I looked back at my history and realized my execution was only around 80%, just terrible.
What I was doing wasn’t working so I needed to do something drastic. I had to do something outside of the box in order to reach the next level as a trader.
I decided to visit with a gambling/addictions counselor to help identify my issues and give me practical tools to overcome them. His advice was to remove yourself when you become emotional, step away from the computer when you find yourself breaking rules and that primitive brain takes over. All of your plans and systems mean nothing when your rational, calm, controlled state of mind is hijacked by greed or fear. Learn to identify your triggers and walk away when you need to. Just take a 10 minute walk outside and clear your mind.
Another thing he recommended was to keep a journal. Writing things down helps trigger different parts of the brain and helps you commit to a system religiously. So everyday I would write in my journal, line after line, “Execution is Everything”, 26 lines per page. Everyday after the trading day was over I would write an entire page, and if I broke any rules, I would do 3 pages. I used this as a reminder to myself of what I had to do in order to be successful. This might sound stupid to you guys, but I swear by it. It helped keep me accountable day after day. In trading you have no boss, no accountability other than to yourself. So hold yourself accountable, when you put it in ink it makes it real. I seriously recommend this technique to all of you guys struggling with discipline and consistency. “Execution is Everything”, line after line, reads in my journal. I wanted that message permanently stamped in my brain, reinforced day after day, as the mantra of a professional trader.
I had quite a few DMs with topics to include in my blog, and I want to thank you guys for the input. A lot of these things I overlook or didn’t think to discuss. I will go over these first, then discuss my realizations that have taken me to professional trader status.
Do you pre locate hard to borrow stocks or locate when you want to enter? How do you get into positions so quickly?
As you guys know my main setup is shorting parabolics. I like shorting lower volume chat pump tickers that usually fade off and bank into backside dumps later in the day. I never know going into the day which tickers will trigger an entry for me. I just wait to see what is in play and starts moving. If it meets my criteria I quickly locate shares and set a limit order for a specific price I want. I never use market orders since you can get screwed badly on prices. I usually set limit orders above the current trading price and let the stock come to me. Sometimes I get partial fills and as I have sized up the probability of that happening increases. If it happens, tough luck. My edge is in my entries and I will not sacrifice my edge, ever. A lot of these chat pumps spike up and dump off a cliff with no real chance to enter, I just let them go and wait for the next one. Patience is huge, don’t let emotions get the best of you. Having a good broker that suits your trading style is critical. TradeZero is probably the best for small cap locates. I would say they have 95% of the tickers I want at somewhat reasonable locate costs. On average I pay 1.35% of the position dollar value in locate fees.
What criteria do you look for in stocks? What do you track?
This will depend on your strategy and what kind of trader you are. But for me, I want to avoid volume at all costs. Anything with over 10mils shares traded or projected shares traded that day I avoid completely. The reason is because the manipulation and algo presence in those tickers is huge. Algos and manipulators don’t target chat pumps because they don’t have the liquidity or volume to safely manipulate. The stocks I target are ones traded by chat room members, and none of them are holding long term on these tickers. Once momentum shifts they will all panic sell and the stock drops off a cliff, then I cover. Scaling your size on these tickers is limited since there is only so much liquidity you can get into them without seriously affecting the price action or trapping yourself into a position if you need to market out, which is why I usually cap my positions to 20-30k dollar value. Still plenty of money to be made when you can bank 20-30% routinely on these pump and dumps.
I have become very selective over the years about which tickers I will play and ones I avoid like the plague. Without giving away too much I would say in general I avoid low float/low market cap tickers since they have the most volatility on average and are incredibly easy to manipulate. Manipulation generally favors long traders FYI. I avoid high institutional owned tickers and higher short float% ones. Avoid those types of trappy tickers and you can save yourself many headaches and blown accounts. Only after tracking statistics over the years was I able to identify these red flag tickers and avoid them. Ive been burned so many times on these kinds of plays that I don’t even feel the slightest amount of FOMO when I see them, I just ignore it and wait for a better setup. In my earlier days I would feel tempted to play everything, get a little piece of the action, and before you know it im red on a ticker I never wanted to play and fighting it as it keeps ripping against me. Meanwhile a perfect setup hits my scans and I completely miss it because I’m too invested in this subpar setup to execute properly.
Opportunity costs are a killer. You make more by trading less!
As far as tracking, I use excel to track all my setups and hand log the data, day after day. Its a ton of work but I have a database of over 2000 tickers now and I can use that to anchor myself whenever I lose faith or start getting thoughts of deviating. Anytime I feel FOMO I just look at the stats for that B or C setup I want to take and the emotions are quickly killed. Anytime I lose faith in my system from a few loses or drawdowns I just look at the long term history of my system and confidence is quickly restored. Its easy to lose confidence in this game, you doubt yourself and your system after a few loses and its human nature to extrapolate that into the future. You need something to calm you and settle you down. For me, nothing does that better than having a massive database to look at and help you keep a long term focus.
“If I execute my system in the long term it is IMPOSSIBLE to fail”. Just keep repeating that to yourself and focus on the aggregate. Short term drawdowns don’t bother me anymore because I know my system will prevail, if I have the faith and discipline to follow it. That’s where most traders fail.
All of your problems as a trader can be traced back to this fundamental stat, EXECUTION %.
I started tracking execution on a daily basis so I could grade my trading regardless of the P/L that day. Its more art than science and requires some experience in order to critique yourself accurately. Every day starts at 100% and you can only lose points if you make conscious errors. Mistakes out of your control or due to luck I don’t deduct any points. For minor errors like over/under sizing slightly deduct up to 5%, for mistakes like taking non system entries or adding to losers/piking out deduct 5-10% and for even bigger mistakes like emotional decision making, reckless trading, deduct even more.
I’ve been trading for 3-4 years and cant seem to break through. What am I missing?
This is a problem we all face at some point. Every trader grows and learns at their own pace, but there will come a breaking point where you either make it into that elite 10% club or you quit forever. I feel pretty confident that I belong to that 10% group but only now do I truly believe it. Back in November when I blew up on NXTC, I felt like quitting. I felt like I would never be able to overcome my emotional demons. And who knows, maybe they will creep up again, but at least I know I have the practical tools to reset my mindset and get back into that “zone” that professional traders live in.
I started trading in 2017 and I can distinctly remember all of the phases I have gone through as a trader. Early on I had no clue what was going on, but I thought I did. If I looked back at those trades I would probably want to vomit…
I recommend that all new traders start SMALL. Assume you will lose every dollar in your account. Much better that amount is $1000 or less. Paper trading I never recommend because it doesn’t teach you how to control emotions. Use real money but trade small and let yourself make mistakes that wont be hard to recoup.
As you grow as a trader you will likely find a setup/style of trading that suits your personality and start tracking it. Get more comfortable with it, all the ins and outs. Focus your entirety on that one setup until you master it. I think alot of guys make the mistake of having multiple setups instead of focusing on a single one. All you need is one setup to make money consistently. Why not become a master of that setup? Nothing can increase your confidence more than having tons of experience on a setup and data to back it up.
After refining my system over the years there is nothing else I would rather trade. As I write this blog, TVIX ran from 40-1000, tons of FOMO to trade it when the entire world was making a killing on it. I never felt a single ounce of FOMO… I have taken so many trades on something I didn’t know about, something I didn’t have experience trading or data to guide my decisions that it always ended up in 1 of 2 possible outcomes.
Outcome 1 – I took a huge loss and felt stupid for taking a non system trade.
Outcome 2 – I would find myself in a green trade and not know what to do or when to close it, that I would just panic out and take any small profits I was lucky enough to get.
Basically I would NEVER capitalize on these setups properly, because I had no clue what I was involved in. It wasn’t my comfort zone, and it showed. So what’s the point of taking such setups if the only outcomes are a bad loss or a small win? No thanks…
Once you cut out all of these “outside” trades, you will start to see your equity curve get steeper and steeper. Not only are you reducing losses but you’re improving your ability to focus on quality setups and execute on those better. Don’t worry what other guys are trading. . Those guys have mastered setups that fit their style and personality and don’t venture outside of it, that’s what makes them professionals. If you want to reach pro status as a trader, start acting like one. You don’t see professional NHL players take up baseball all of a sudden, do you? They have spent years training and perfecting their craft, reaching the top of their game, and now want to do something totally different? Why make things hard on yourself?
Focus on your setup, focus on your execution and it will become impossible to fail. If you continue to struggle then you can likely pinpoint those struggles back to the fundamental stat of trading, execution.
Are you part of any chat rooms, do you think I should join one?
I’ve never been a part of chat rooms or trading groups so its hard for me to comment. My logic for avoiding them is basically “If you cant profit without the guidance of a GURU or chat room, what’s the point?”. I would rather learn how to trade by myself so I can bank independently, without having to rely on any outside source for guidance. I’ve seen a lot of chat rooms come and go and for the large part, I think they are scams.
I prefer to minimize outside noise when I’m trading, and that includes twitter. I don’t like anyone’s opinion on a stock influencing my decision making. Being part of a chat room can result in huge FOMO when everyone is banking or trading the same thing. Its tempting to trade something your not familiar with or goes against your strategy when everyone else is in on it.
If you need a group or mentor to help you when starting out then it makes some sense, but do your research before joining. These rooms aren’t cheap and a lot of them are just front running pump/dump scams. Don’t ever become reliant on a room or mentor to help you. You should use the information and knowledge they give you to create your own method. Become self sufficient, don’t get complacent and think as long as you’re a member, you will bank. That’s the opposite mindset of a professional.
As far as DVD trading guides, webinars, ebooks, etc. I have mixed opinions on them. I think its impossible to learn to be a profitable trader from reading books or watching videos alone. Trading is something learned from doing and there is no better teacher than the market itself. These guides may help reduce your learning curve and pinpoint weaknesses in your trading, but ultimately it comes down to experience and learning from your own mistakes. Don’t jump from guide to guide or chatroom to chatroom looking for that “holy grail” that will give you all the answers.
Profitable systems/setups are not hard to find. Learning how to control your emotions, manage your risk, and execute consistently should be your primary focus as a beginner. It doesn’t matter how good your system or strategy is, if you cant execute it properly.
How do you deal with heightened emotions as your account grows?
This is an issue I am currently dealing with. Executing your trading plan is much easier when the real world dollar amount is less, say under $1000. But when you are dealing with P/L swings of 5-10k its easy for emotions to get the better of you.
I recently tweeted that I was entering that stage and responded by withdrawing profits and reducing size. That’s because I had blown 2 accounts quickly when I started trading heavy size and I wasn’t about to make the same mistake. Before when I entered this “new territory” I was eager to keep pushing my limits. I didn’t know what lied ahead for me. A 20% gain was now upwards of 5k and I had a hard time holding my positions until EOD like my system suggests. The result was I was piking out more often just to lock in those gains out of fear of losing them. Meanwhile if I had followed my rules, I would have banked even more.
The opposite occurred when I was behind on a position. Percentage wise it wasn’t anything new, I was dealing with these volatility ranges for months, but now all I could focus on was the P/L. I was paralyzed by the size of the numbers, green or red, and it seriously affected my trading.
I was taking profits quickly and holding onto losers like a complete rookie. I failed to realize that I just wasn’t comfortable trading this kind of size. My emotions were heightened and that resulted in terrible decision making.
As traders we all dream of pushing huge size and banking massive green days. But getting there and actually doing it is another challenge. Once you start to sense your boundaries getting tested its time to size down and withdraw profits. Take your time in this stage, there’s no rush. The last thing you want to do is engage those primitive fight or flight responses and lose complete control.
This is a good time to put in a max loss with your broker, if you don’t have one already.
Think about what your goals are as a trader. Is making 1k a day for the rest of your career enough? Or do you want more?
Realize that trading with size comes with unexpected hurdles you haven’t had to deal with before.
Filling positions wont be a certainty, partial fills will become an issue. You may have to start scaling into your positions to avoid creating a “log jam” or seriously impact price action on a thinly traded ticker. Consider slippage and fees if you have to market out of a position. Will there be enough liquidity to exit safely?
As you size up all of your metrics will take a hit. Partial fills will only occur on winning trades, all losers will have full size. Slippage will increase. Execution will likely decrease as your emotions run higher. This is when you really have to be on point, you cant afford any lapses at this level of the game, because the drop will be much more painful if you slip.
Im currently in that stage but I have been here before, with poor results. At least this time I can recognize what is going on and take the appropriate action to allow myself to succeed. Greed no longer controls my bankroll at the moment. Im perfectly happy with 2-5k days and when put into perspective, can provide a very comfortable lifestyle. Is the added stress of making more worth it to me? Is it to you? That depends on your goals as a trader.
I would like to build up a substantial cushion and comfort level at this range before pushing the boundaries again. And If it doesn’t feel right, I know I can safely execute at this level for years to come.
How I was able to turn things around
After blowing up in November I decided to try again. But this time I started with a tiny 3k account. I decided to grow this account by executing my system perfectly and I didn’t care how long it would take. At this stage I didn’t deserve to trade with any size. I had to prove to myself that I was capable of executing for a long period of time. Not a few days or a few weeks. I looked back at my history and in 3 years I was never able to execute for more than 3 weeks and never put up 3 consecutive green months. Meanwhile my system was green month after month without much of any drawdowns.
This simple fact was all I needed to help me stay focused and execute properly. I realized that the ONLY way to profit is to execute, because any other action has got me where I am now, defeated, broken down and lacking any confidence. It all stemmed from lack of execution. So I decided I needed to focus everything on execution. Nothing else mattered to me, and I would prove that to myself by trading with a measly 3k account. It wasn’t about the P/L anymore. It wasn’t about the money. It was about proving to myself that I could even do this or if I should give up for good.
And so began my journey on Dec 1st, 2019:
The consistency and execution% I have shown over the past 4 months gives me the confidence I needed as a trader. I was able to navigate all of the emotional pitfalls that had plagued me in the past. Able to overcome any of my past demons with the practical tips my counselor gave me. The end result is 4 straight green months with execution over 95%.
I would like to think I have reached professional trader status, but I still tread with caution and always respect risk. My past failures and experiences is what guides me to the next stage of my trading career.
As always, hope all is well and best of luck to you guys.
Kris Verma