Traffic Jams and trading psychology

I was driving in a lot of traffic today and it came into my head that traffic "jams" in particular are caused by the same emotional tendencies shared within the realm of trading. It became obvious as well, that traffic problems would never go away as long as current human psychology was controlling the vehicles behind them. My mind ran through a myriad of similarities, but to keep it short and focused here's a "not-insane" version of my thoughts.

On the road, every participant has a different destination in mind. Be they lengthy or relatively short distances, usually everyone is trying to get where they are going as fast as possible.

The ironic parallel I find in trading and Driving is that, both the people in the biggest hurries and those who are afraid to drive, tend to be the ones that cause the most problems.

As I was pondering the dynamics of a traffic jam I thought to myself...

"How many times have you been in a jam trying to keep a safe stopping distance from the person in front of you only to watch the hurried driver next to you see it as nothing but an opportunity to move  towards their destination even faster?" I see it constantly, as if it were the rule of the road rather than the insanity it is.

The thing I learned long ago, is that switching lanes in stop-and-go traffic rarely increases the speed at which you arrive, and "It" (The greed) is actually the cause of the traffic jam itself.

Every time a buffer zone is depleted by an encroaching hurried driver, it causes a tidal wave of braking by the cars behind them, thus depleting the buffer zones of everyone behind them as well. I believe that is the sole cause for stop and go traffic. If there ever was a human centipede, that's it.

The reason I abandoned lane switching for the most part is because I realized that every gap that showed up was quickly filled. From the vantage point of a Semi you can look far, far down the road and see it all equaling out for the most part. After I abandoned lane switching I would laugh as I came to pass a car that had earlier on switched lanes for the quick gain they assumed they were making. Nowadays I almost always crack up watching someone zoom in to the opening in front of me... Where are you going to go dude? What are you going to do, save 20 seconds if you're lucky?

At the heart of every traffic jam is the psychological fixation upon ones own need to arrive as quickly as possible to the destination. It is both the cause and the perpetuation. Yes there are certainly moments where this mentality is not demonstrated by every driver, but it is rampant enough to cause the jam every time. Even when the reason for the jam is some distraction on the other side of the road.

Few seem to see that it's literally the difference between everyone scrambling for the door during a fire, and everyone walking in a calm single file line to safety. The bottleneck is always caused by blinding focus on self needs, which ultimately cause a jam in the system. That desperation actually diminishes any additional returns sought out initially and often to the point of Negative returns.

How many times have you seen a merge warning well in advance of a closed construction lane, only to see drivers stay in that lane until the last possible moment? It causes every one who has already merged into that lane to slow down!

So what does this have to do with trading? As I said before, every participant has a destination in mind. I imagine that most have some lofty final destination of "millions of dollars" that guides a more immediate destination of "make X Dollars today", but regardless it's all about getting to the end.  And in trading the more rushed you are to get to the end the more likely you are to do yourself a disservice and unintentionally slow your own progress.

There are so many facets that align between driving and trading I could spend hours on it, but what I want to stress is the understanding that greed and impatience cause us the very "stop-and-go" performance we lament.

As much as I would love to see the roads run smoother due to emotionless, computer controlled cars, I have to say I am glad there are living breathing emotional people driving the motor of the markets. If it weren't for them I can't help but imagine us having very little opportunity to profit from.

So to tie it all up, What can be done to ease the traffic jam of our trading journey? First and foremost drill it into your head that hurrying will only cause problems. You have to believe that first. Without truly believing that, we will continually impede ourselves with detrimental practices.

With time and conscious experience along your journey, you will eventually come to discern when the opportunities to put the pedal down are present. You will see that they arrive in conjunction with the margin of safety that makes it productive to do so.

Sadly, as a truck driver I see the worst of the worst on the road. And because this world does not operate in a way that makes much sense, the barrier for entry on the roads is far too low, resulting in a lot of life changing events for people. As with driving, the barrier for entry into trading is very low and far too many people who should not be trading are.

I find myself asking if I am one of them at times. Thankfully, I also look back at all the growing I've done and realize that I know a lot of parents who ask themselves if they are doing the right thing with their children. I often find that the ones asking that question tend to be the only ones actually doing it fairly well.

-Francisco

...and how to subsequently lose $3,620

Yep, you read right haha. So here's some charts and my explanation!

Edit: I made a mistake. I would not have lost on the short, but been profitable. So a net profit of $380










So after all those charts I want to describe to you the thoughts in my head during all of this. For one, I have done a pretty good job reminding myself that even though this is not real money, that I should treat it as such so it might as well be. In that regard I failed miserably to cut that last loss quickly. I was also trading too large to begin with. And to say something that is easily seen as a means to rationalize this behavior away, I've been depressed the last few days. I have to say though, as tempting as it is to fall back on that, it's no excuse and professionals do not trade like this. Well... from time to time even the professional, seasoned veterans slip up like this, but it is still no excuse for me to do it.

There was a clear moment that I recall telling myself, "You should not be trying to go long this, just get out and reverse! Set up the robot, lower your size and calm down so you can either lose very small or win small."

As convincing as that downward wedge was, it was a violation of my own rules to hold a loser of that size for that long. The initial peak drawdown was slightly over 10%... And every time it came back down to that bottom and became only a 2.5% loss I kept feeling like it was inevitably going to break down and score me a profit.

The thing is, at that point, even it it tore past my profit target I knew I would have to report this shit behavior as a bad trade. I put my self at risk, I put my account at risk and that is something idiots do.

As time crept along like a snail it was really bothering me. I kept telling myself I knew I should just take the loss and get it over with, but I was stubborn. That stubbornness cost much more than I wanted to see. It made the $250 loss seem like an incredible bargain.. and the key point to ponder and drill into my skull, is that it was a bargain.

It's important to view every small loss as a bargain, not a wasted opportunity. Yes, there is such a thing as death by a thousand cuts where you are just taking loss after meaningless loss, but the key is to stop taking meaningless losses also,which ultimately gets back to another guideline I have not been following: Only trade the news and when the market is rocketing in a direction with momentum.

Because I am still not home everyday, it causes me to only be able to trade the market live on whatever day I happen to be home, which is almost never the really volatile days. One thing I do need to set forth now and make clear, is that besides my main goal of only trading the 2 or 3 largest events each month, there is price actions and chart setups that are worthy of trading.

The main issue with what happened here, is that because of the size I was trading I looked at the dollar amounts and was really reluctant to take the loss... Even though the reality is, that trading at $40 a pip, a $200 loss is only 5 measly pips.... I could totally get that back, but $200 seemed like a lot of work to get back because I was focused on the dollar amount, not the actual increment of market movement.

Had I actually been trading at the usual $1 per pip, I would have let that loser go very easily. The larger you trade, the more accurate you must be with your entries and exits. The quicker you must cut your losses, because if the market moves violently against you it is eating up your account far far quicker. In my case 40 times quicker than usual. The 36% loss I took would have been less than 1%... how crazy is that.

So, as the day went on I felt pretty damn stupid. Stupid because I did not do what I knew I should have done, but at the same time I was confident I would not have traded that large to begin with if it were real money let alone hold a loser like that. A large part of that stupid feeling I had, was knowing I had to report it here on this blog, even knowing that part of the reason I let it happen was out of this pure video game "nothings really at stake" mentality. It's honestly the first time since I've started this that I have let myself feel that way about any of this. The other crap results in the previous months were testing. This wasn't testing, it was not giving a fuck and walking away because I didn't want to take a loser and have to build that money back up again... (even though if I wanted to I could just click a few buttons and add it all back anyhow)

But the next day, after I had taken the loser and felt even stupider... I looked at the chart again and sure enough the market had made all the losses up and then surpassed the drawdown by a significant amount. For some reason, I smiled and the stupid feeling had left me. I felt renewed and somehow optimistic, but not because I was somehow proven right. In all honesty, I wasn't proven right... Being right is going short because you think the market is going to drop right then, and it drops right then. I was dead wrong, so why was I happy?

In totality I don't know. And in time with enough thought I will hopefully come to know. But I think part of it had to do with going through that trial and stress, and actually feeling like lessons were reinforced in a way I benefited from immensely. I think it is from admitting to myself and to you, that I fucked up. No secret shame to hide, just transparency. I think part of it is also from the gut that told me not to be trying to do the things I did after the market proved to me immediately that I was wrong. my gut was right, but I was stubborn and greedy.

So, I honestly look forward to the next time I trade, whether it be at the appropriate time or not. I want to do it right, whether I profit or not. This doesn't have to be the end of my confidence, especially because it was outside my rules to begin with and that is what I should expect to happen. that is the purpose behind the rules to begin with.

How to make $41 in 2 minutes

...while still accidentally losing $36 at the beginning.

I also made $120 Yesterday, but was too lazy to go through posting a chart. Anyways, I am supposed to be going out today so I am waiting for dispatch to text me load info. I don't have a lot of time to trade in theory so it's wisest to take the $41 and call it a day. 

The reason I made $3 and then lost $36 is because I enabled a feature called "One click trading" That gets rid of all the confirmations after the clicks and goes straight into the position. I did not know this. So after I clicked my initial short and it was immediately open I thought I understood. What I normally do is hit the close position button and hover my mouse cursor over the confirmation in the window that pops up. Well... no such window popped up it just took me out with $3 profit... which is nothing.

Then the $36 loss was due to me being short again and not even clicking the close position button, but simply hovering over it. There is some type of problem with my wireless keyboard, because certain gestures with the mouse pad close programs and Internet tabs all the time. I've learned to be very cautious but apparently I was not cautious enough... It though I clicked close position when I was simply hovering over the damn thing.... AHHH. So long story short, I would have been up over $80 in 2 minutes instead of just $41... 

oh well. 

Home again...

Had a really rough night of sleep the night before last. Too much thinking. Shit about life and all that. I recorded some of my thoughts, but I'd have to listen to it to write it all down.

I realized that day, that I don't think I would actually give someone like me a much of a chance if I knew all about my past and things I've done.. or even my present thoughts and judgments about things. I am realizing more and more that I have become an abrasive, negative person. I used to think I was an awesome person for the most part and now I just feel like a dick.

I witness my thoughts about people and most of them are so negative... Part of me says I shouldn't be that way and see the world the way I do, but I think in the end I can't avoid thinking and feeling the way I do. I just feel like the world is fucked. Because of people and no other reason. There are some truly amazing people and I have had the privilege of having some of them enter my life at one point or another... but I am feeling overwhelmed by the rest of humanity.

People and their beliefs make me sick at times. I was at a park yesterday and there were all these hippies. Some of them were beating on drums and playing guitar and there was the scent of Marijuana floating through the air occasionally. I love that smell.

I sat there watching all the people. Mostly young adults and teens, but a few seasoned gray beards. I couldn't help but notice how uncomfortable I felt. I saw these people doing things seeming to be so care free and I said to myself.. "It's the strangest and most ironic thing..." And it was so clear to me then, but it is unfortunately not at the moment... The basic Idea was that they have what I want...

Which I later came to understand that they are no freer or less defined than anyone else. They are simply in a place they feel comfortable so obviously they can behave as such. It just happens to be a mound of self identity bullshit which for the most part is the polar opposite of me. And even then, I consciously step into my identity when I do so, but what does it matter really.

Anyways it was really weird to witness the same shit now that I had seen in highschool... People dressing up and wearing accessories and makeup and all this intentionally weird shit... just to be an individual. They don't see how fucking similar they all are. I had to keep trying to remind myself that I was there at one point in my life as well even if it wasn't to this degree... Those people need to be lead, by other people who've been through shit and can make obvious things that they are currently blind to, obvious. (sorry, shitty structure)

But then again, it is what it is. Life was my teacher. The mistakes of others have been my teachers. A lot of the time, you will never learn the lesson without going through the lesson. Hearing the goal at the end doesn't change anyone usually because they aren't invested enough to take any of that shit to heart.

...Feeling uncomfortable is part of life, and so is wishing you didn't feel that way when you do sometimes.

I've spent a lot of time thinking about people lately. Missing them. Wondering what they are doing. Feeling wordless.

..Anyways, what really put me in a shit mood happened while watching two cops at the crowded park approach this man. They politely asked him to get up and they walked him to a quiet place to speak to him. Then one young kid in front of me cupped his hands over his mouth and shouted "BOOO!!" repeatedly at the officers. Then within literally 10 seconds the entire crowd of people were booing the officers, calling them pigs and telling them to fuck off...

And then I raised my voice and said "BOOO I'm a follower and I can't say boo until other people do it first!" I doubt anyone heard me, as I wasn't really trying to be heard, but I was so pissed off at that. An entire crowd of people can sheepishly come together negatively over something so fucking mundane... yet they can't do something equally positive... just a bunch of fucking ignorant people and I'm tired of hearing about it and seeing it everywhere I go. I literally felt like standing up in front of them and saying "You're screaming at two strangers you know nothing about because they came up to another stranger you know nothing about to talk to him! For all you know that guy is an escaped sex offender and you're booing police officers who never laid a fucking hand on him! You are ignorantly lashing out instead of being rational! If someone came here and started mowing you fucking losers down with a gun, every single one of you assholes would be more thankful to see a cop here than anything else, so fuck you!"

But, I just got up and walked away, feeling like shit over humanity in a deep way ever since... We just don't fucking know how to think about shit critically and the honest fact, is that there are loads of humans on this planet lacking enough intelligence to ever do so. And there are no laws that keep them from breeding and making more idiots. Not that I think a law like that should exist, but damn... I wouldn't mind if there were...

If there were a law the put sociopaths of a certain level to death, I would have been banished by that law as well, but the world would be better off being filled with a ton of people who can actually consider others as if it were themselves... I'd gladly trade my shitty existence in for a world like that. ...And here I sit, in the most blessed and spoiled nation in the world calling my life shitty. I mean it only in the sense that I think it's total bullshit that you can feel unbelievable, nearly unbearable pain so easily, yet the logical opposite of that doesn't seem to exist. Fall off your bike and see how amazing you feel. Entropy in our tiny slice of reality, is king and if there's one thing I hate, its that. Why the fuck is it always so goddamn easy to destroy what takes so fucking long to build?!?!    Trust, a relationship, a house, a bank account, any physical manifestation period. what the fuck man...

The world is simply fucked. So the best thing I can do is just try to focus on my own life and make it the best it can be right? No. Because that line of thinking... that kind of "ignoring the worlds problems" is exactly the mentality that keeps stupid idiots self centered and in their own bubble, unable to feel sympathy or empathy for others. It makes sure assholes stay assholes and I don't want to be any more of an asshole than I already am... The universe has taken billions of years of existence to bring us to this point: Where most would let any tragedy happen to another human (as long as it's not us) for gain.... If there is one evil, it is ignorance. Every other evil is possible because of that.

I don't know. But deep down my gut tells me that it just is what it is. As vague and pointless as that might sound, it really doesn't feel that vague and pointless to me anymore. It's part of accepting every facet of your existence, included that part of you that does not want to accept any single part of it. It will simply be what it will be. And you don't know what that is until it manifests.

How to lose $42 in 2 hours

Home today so I figured I'd check out the markets for a bit and give it a go. Decided to trade large today so as not to be around much, but because I couldn't leave a profit at a profit, I defeated my reasoning for larger size.

I must admit, the price action was pretty decent for the lack of news and although I ended the day at a small loss (pips) I certainly could have done a better job managing the profitable trades I was a part of. Here are the charts.

There was definitely a point where I was wanting to jus

t walk away for the day and be done with it, but I saw the chart setting up several times and stuck around. For my first day trading in a while, it was not too bad, but very stressful. I traded way too big for my comfort. I tried to stay objective to my position and look at the price action and what it was telling me regardless. If it was not moving in my favor I had to take that as a sign to get out and take a large loss (dollar wise). The last little bit was easier to stay in because the EURO has just been diving off a cliff lately. If this were a sideways market I'd have had a lot harder time staying short.

The good things I did was focus on shorting because of the overall trend. It took effort, but I did not try to hold on for unrealistic moves, which honestly hurt my ability to come back positive on the day as I left a ton on the table. Never the less, it was a learning exercise.

Here are some color concepts for the new bike. Just fooling around.

An example of an Earnings Winner *updated

Just stopped for the night and took a look at my scan of Percent winners on the day and Tim's Profitly web profile page. Appearing was this stock PEIX that was an earnings winner.

 As you can see in the report, they reported record earnings on the 4th just after market close, which led to a lot of after market buying, which led to a gap up this morning with follow through.

From the close yesterday @ $9.30 to a high of approximately $12.00 this afternoon, thats a possible gain of $2.70 per share.

If I had a $2,000 position (222 shares) and only caught $.50 of that move that would be $111 gain. The idea is to just capture the meat of the move over and over again, compounding your account along the way.

Seems simple enough, but there are lots of variables that one needs to pay attention to.

Tim's rules state that you should buy earnings winners the day of or the next day ideally, however sometimes it can take up to a week before the market digests this information and catches on, propelling the stock higher. What matters above all, is how the stock reacts to the news, not necessarily what the actual numbers are. Perception in the marketplace is everything.

As this chart shows, it broke above a key resistance level and held, so tomorrow could be a follow through day with the next point of resistance being the $13.00 mark.

Anyways, just thought that was cool so I'd share it.

I watched the movie Don Jon the other night and to be honest I can relate to that movie on many levels. It is quite funny, but pretty insightful and nostalgic for me :)


NEXT DAY:

Well bummer. Immediately down after the open today, but support is holding near the $11 mark. If the high can be broken perhaps some follow through can be seen, but looking at the past I don't see anything to provide me with real conviction on that. This is why it is so important to be there for the actual market action. You have to trade the moment as it happens. I guess we'll see monday what comes of PEIX. If that support breaks it looks like $9.30 is the lowest target.. that would be a nice gain on a short position. Have a great weekend!

How bad do you want that cheese?

I've mentioned that I need to work on turning my fear of living a mediocre life into a motivation that will never give up making my life what I want it to be.

I ran across this video just now and I wanted to share it.