Profit/Loss:
Down $27.00 this week on 1 red trade
Thoughts:
Theme of the week: No borrows. My current broker as of the past couple weeks has been very scarce on available shares for shorting. This is by far the biggest downfall to shorting smallcaps. Shares that are available go quickly because this in between market we're in has fostered many new bears and every beginner short and their mother pile in on the frontside, get squeezed, and the shares are returned. Thinking about opening another account with a different broker but at the moment that is going to be really challenging. In the mean time Im developing some long setups that im actually happy with that i think are high probability. Ive managed to solve an issue ive had before which was giving up on a play after i get squeezed or shaken out on it. The problem is I can seldom re-short after i cut out because of share availability, if i could always re-short i'd be cash flow positive for sure. So the solution, which ive repeated many times is: risk management. Im always way too tight on my stops, and get shaken out before confirmation. I have this stupid idea in my head that my starter position has to be a minimum size, this leads me to never give myself enough wiggle room on entries. I need to lose this immediately. There is nothing wrong with scaling in 100 shares at a time, my commissions are fairly low so this shouldnt be a worry. This coming week maybe i will give myself a max order size, that way i only add when i see the right signs, and for every flag that goes up i can add some more. Most importantly giving that starter lots of room.
On the psychological side ive got 2 notes. Percent based thinking is highly problematic. I used to think this was all a game of percents. Percent wins, avg percent gains etc. That is a classic mistake. This is a game of money. $$ in $$ out. I dont need to make 10% on a trade for it to be decent, 3-5% is plenty with correct size. So ive been taking steps to eliminate this behaviour from my spreadsheets and trading platform. The other note is about a famine mindset, versus an abundance mindset. Ive got plenty more capital to lose, and i have currently set my life up to not have many financial obligations and responsibilities so i can maximize my focus on trading. But when you fear losing money, you are absolutely bound to lose money. I far too frequently trade fearing im going to lose money. Ofcourse, that is an assumed risk. I should rather be thinking objectively according to my data, and placing appropriate bets. Instead of thinking about the probabilities of the trade going in my favour or not, im thinking about how can i lose less money. This is what has led me on a spiral down the past 2 months. But the thing about thought prisons is that you have the key. But its still difficult to get out of.
Lessons:
- Size should be based on risk, and nothing else.
- There is nothing wrong with take small bites at a time when scaling in/out
- This is a game of $'s not %'s fundamentally
- Have an abundance mindset, not a famine mindset.
Join now or log in to leave a comment