My weakest link

Last night I listened to a podcast interview by @chatwithtraders about Nico (@inefficientmrkt).  You can listen to that pod cast here.  Nico’s story is one of determination.  It was inspiring to listen to, and probably even more so given my big loss yesterday.

Nico had seven straight years of losses but he did not give up.  When speaking about the changes he made that helped him turn into a consistently profitable trader he made a comment that really stood out to me.  He explained, “Find your weakest link and work on it!”  Using the analogy that a chain is only as strong as its weakest link, he explained how he would have runs of profitability, but inevitably those weak links in his chain would cause him to go right back in the red year after year.  Once he identified those links and worked on fixing them his trading started to really take off.

This quote has made me ponder about the weak links in my chain.  What is hindering my trading?  What link, if replaced, could make me a stronger more consistent trader?  I have two weak links I feel hurt me the most right now 1)  Stubbornness on taking losses, and 2)  Trying to force profits.  These weaknesses, if left unchecked can really do some damage to me.

Stubbornness on taking losses.  I am embarrassed to admit the countless times I have held a stock that hits my stop loss simply because I don’t want to take the loss.  The excuses as to why run the gamut from I was just up $X, or I have seen these things crash right after my stop loss X times, or my loss isn’t that big yet I have room to hold.  The negative effect a loss will cause on my P&L often influences me to get stubborn on loss taking.  The fact is they are all simply excuses to dig my heals in and fight.  My max stop loss targets are there to protect me.  They are there to prevent blowups or huge draw downs that are hard to come back from.  It’s much easier to come back from a $100, $300, $500, or even $1000 loss then it is to come back from a single huge loss caused by stubbornness.

Trying to force profits has many faces.  It results in taking less then ideal plays, chasing entries, a lack of patients when waiting for an ideal entry, or causing FOMO to take over .  It causes me to watch a stock that I was up big on walk up past my average and go red instead of taking it off.  It causes me to see $ signs on what could be if the stock hit X and not lock in profits when I should… ignoring price action for the hope of more gains.  There is a fine balance with when to lock in gains and when to hold more for further downside.  Every trade can’t be a +$1000 win.  I need to stop letting my desire to force a big win influence my exits and focuses solely on price action to determine my exit strategy.

Becoming a successful day trader is a journey, not an event!  If your looking to just hit it big or be an overnight success your going to be sorely disappointed.  Are there some that do, sure!  But those stories usually end with a blow up instead of a happily ever after.  Trading is an art of self mastery and discipline.  If your not willing to walk a path of constant self improvement then you can forget making a living from trading.  I have chosen to take this difficult journey and I am determined to succeed!