"A man is not finished when he is defeated. He is finished when he quits."

Friday, April 24, 2009

Priorities & Balance

Since February 1st, I have been blogging about my progress trying to learn to trade the stock market through paper-trading. During this time, actually about two weeks prior in mid-January, I set my mind to give as much as possible to this endeavor. Nearly all my free day hours are spent in front of the computer, in the evenings I read blogs, work on this blog, and study resources related to the stock market.

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Last night, Mrs. Blue Collar and I attended a minor league hockey playoff game. During dinner out prior to the game, we discussed at length my frustrations at repeating the same mistakes, my inability to focus, and the inevitable discussion of when I might move to live trading. I feel I am not ready because I see in myself the lack of discipline and the aforementioned penchant for repeating the same mistakes over and over. I have shown some paper-trading gains since I started keeping track on March 1st. I've had 26 winning days out of the 31 that I've traded. Paper-gains (not counting my current open position) have been $23.41 per share over the same time frame. Yet, I don't feel I'm ready to risk real money. I haven't mastered my trading strategy. In fact, I haven't settled on a trading strategy as yet. I had some good results from fading high-volume, strong diversion-from-the-mean moves, and still that tactic seems to have validity. But as the volatility has shrunk, so has the force of those moves and it is not nearly as easy to quickly profit off them. As I have often blogged about this strategy, it is prone to big losses when a stock doesn't reverse as expected. My original intent has been to be a momentum trader. From my months following and participating in the outstanding old GOTS chat, I saw the importance of riding "momo"moves in garnering profit. Then in late January, I was referrred to Scott Farnham's Fear & Greed blog and it cemented the importance of joining momentum and the real power of harnessing this strategy of trading. More recently, I have decided to make my tactic of trading reversals a secondary one to learning to spot and ride intra-day trends. The past few days have been frustrating. I thought the transition would be a clean one; flick a switch in my head and voila'. AS most of you know, this is not a reasonable expectation. At times, I fell as though I am starting over... Do I think I'm back at square one? No, I don't. But, my goal of trading profitably with real money seems much farther away than it did a month ago.
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So, back to my dinner last night. Our discussion did turn to the finacial realities of life. I have devoted an inordinate amount of time to trading. So much so that my small business has suffered. It requires marketing, and administrative time. It deserves that since it is the primary vehicle by which we survive. I write this post because when I told Mrs. Blue Collar about my intent to postpone today's day-job appointment to close out my overnight position, I could tell by the look on her face that this was a mistake. The fact is, I have been giving my work-life short-shrift since February and it is starting to show in the bottom line. I have been lax in marketing and I have been filtering work projects out in favor of spending time in front of the computer. My administrative duties have been suffering some also as evenings formerly reserved for them have been taken up by stock market study. Needless to say, the soft economy has played a part as well.
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I love this stock market thing and I see it as my eventual career. I am approaching the point where I must decide on what my life priorities are and what balance I must strike between trading and my personal financial health. Clearly, if I am going to be switching trading strategies every month or two, I will slowly destroy my business. I have to focus and settle on one trading strategy, learn it, and apply it! My financial health depends on it. I also must not act as though paper-trading is supporting my household.
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How many of you have gone through this or a similar conflict? I'm curious...

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Addendum: I am holding my 9:00 am day-job appointment and not sticking around to trade my open position. For the record, I would trade it at the first opportunity after it goes positive gain. Right now, it appears to be holding at a loss because of the Ford earnings report. If the postition stays negative, I'm inclined to hold it until it does go positive.

2 comments:

  1. BC,

    Yeah, I struggle with similar tensions. I have only been trading or even watching the stock market for six months. I was in the woods during the dot.com years and didn't even read the IRA statements the last 8 or so years of being career oriented until recently.

    So I'm at the beginning of my trading education and it takes time to get good at it.

    However, I'm knocking on 40's door, have a wife and two young kids. My spouse works - while I make nearly twice as much as her in my small business, her employer provides health care insurance for the entire family. We have a small mortgage and my expertise is in demand/short supply, and my clients are very diversified. In my part of the country, the economy is worst than nearly anywhere else, so the economic environment makes things even more scary. So we are not at risk of homelessness, but we have quite a balancing act. If I could generate more money, my wife has interest in not working and being at home - but at this stage we can't pull it off, and given the tenuous economy it wouldn't seem like a prudent decision.

    OPPORTUNITY COSTS - I can totally relate to you. I estimate I have been spending about 30 hours a week on trading, with at least 15-20 hours during traditional work hours.

    I'm 95% certain if I put that energy into my business I could generate another $2K a month or $24K a year and there is no financial risk - its almost guaranteed (unlike trading, where losses are very possible and consistent profits unsure) - just have to put the hours in. In the last couple months, I have stopped accepting new clients and even let a couple go that were very sporadic and high-maintenance. I am now focused on my long-term core clients and practice day trading. So if you add up my losses in trading and the revenue I could of generated from taking on extra projects, in the last six months, I'm actually -$13K in the hole!

    But this money is extra money not what we are using to pay the bills but it could of been used to pay off a credit card or extra cushion in the savings. HOWEVER, I would of been miserable. I'm no longer really passionate about my day job as I was five years ago when I started working for myself.

    I LOVE trading. It doesn't feel like work. So at this stage, I'm actually feeling more fulfilled by that then expanding my business.

    However, here lies the tension. I believe I need to put in tons of hours to get good at trading. It's zero sum, those hours have to come from somewhere and I personally am not going to take them away from family time - so it's my business that is going to suffer.

    Right now, I'm walking a tight-rope. I'm relying on long term relationships for clients that three years ago, I used to give 150% to them, but am now only giving 75%. Whether this will come to hurt me, we will see if I lose some of this work because of my attention to trading.

    On switching strategies....I think it's ok to experiment. I tried a similar path as you, starting out with trying the Muddy method, and then some ETFs and now I'm onto a modified approach using the opening range...you just have to be honest with yourself on why you are switching? Are you trying to cut corners and skip a learning curve to get to making profits right away? Are you switching out of boredom? These types of things you can only answer.

    So to wrap this very LONG comment up, I probably have a couple year window where I can sustain this level of activity in mastering trading before I need to start seeing some RESULTS, both in real money and in progress in my discipline and knowledge.

    This is barring any major household economic changes - than the timeframe may be accelerated. I will not be any younger and will have to decide whether or no this is a pipe dream or not.

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  2. Thank you for your frank and thoughtful comment, Charlie. What you wrote is exactly what I was hoping to get. Your position is in many ways analogous to mine.
    If I make a change to minimize my time in the markets, it won't be by choice, it will be by necessity.

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