This trader wants it all and wants it now

Hi Mike,

I hope you are doing well. I am reaching out to you because I am struggling a bit, having kind of a rough month so far. After having brought my monthly p/l back to break-even on good momentum the day before yesterday, I had a ytd top 3 loss yesterday: 1.5% of my trading equity or ~23k €. While 1.5% doesn´t seem to be much of a deal, the way this drawdown happened sure is. I violated pretty much every rule in my rulebook which is why I decided to take today off and rather spend some time analyzing the situation and maybe come up with a solution.  

This month I have incurred a unusual high number of big / bigger losers. The theme I recognized is instead of taking only my A+ setups and playing those to perfection, I impulsively make outsized bets in stocks and situations where I have absolutely no edge. I say ‘bets’ instead of ‘trades’ because when analyzing those ‘bets’, it feels more like gambling than trading. This is a sharp contrast to my usual numbers (high hit rate, low drawdowns). The question is: why?

After having read The Playbook I started with the professionalization and expansion of my trading business. Since then I was and still am highly productive: on top of the points from my last email, I added a personalized tagging routine for Tradervue, optimized my Bloomberg layouts, wrote some new filters to find stocks in play more easily, fine-tuned news filters, educated myself with SMB videos, the DNA program, some other Youtubers and so on. Looking at the date from my last email to you makes me realize that I started this process only 6 weeks ago which is insane considering how much I already achieved.

But this also depicts one of my weaknesses: impatience. I want it all and I want it now. That way I am putting a lot of pressure on myself which is totally unnecessary, because I started this whole process out of a position of strength – I am still making enough money in my current trading, so ‘time’ is not a critical factor right now.

I started out as an arb trader, morphed into a statistical / international arb trader and finally added news trading on top of that. It was an organic growth process and evolved over time. The way I am trying to grow right now doesn´t feel organic at all. It is more like taking over every little company I can find at inflated prices, desperately trying to integrate them all at once. This leads to missed opportunities in my A+ setups because I have way too much other stuff to worry about. In the end this leads me to impulsively make outsized bets without any edge to – hopefully – make up for these missed opportunities in my A+ setups. Hit & Hope.

Re-reading this, the solution seems to be pretty simple:

  • -I need to stop putting too much pressure on myself and make that growth process a process that evolves over time (organically with patience). Only then I will be able to trade new setups naturally with bigger size. It is nothing that can be forced overnight. No matter how much youtube videos I watch or books I read.
  • -As long as I haven´t finished my foundation (Playbook / TradeReview / Gülden Book of Rules) to an extend where I am 100% comfortable with, I shouldn´t take on more challenges and not even think about trying to trade the US markets on top of all of that. Keep the pressure level as low as possible.
  • I will implement the Daily Report Card. With a monthly goal it will be a great tool to slow me down and take away some of the self-inflicted pressure to do it all at once. It also let´s me focus on one specific area for a long enough period of time. It will be a challenge though not to jump between 2 or 3 goals doing all at the same time again. First goal will be to expand / finish my Playbook with A+ setups and define specific variables for each setup in depth.

This got a bit longer than I originally had thought, but writing it down made me really think about everything in depth which helped me a lot to get a better understanding of my situation and what direction I should take. I knew from the start that this change would not come overnight and I would hit roadblocks at some point. But I am still convinced that this is the right way and that I will benefit from it in the future. Your comments / thoughts / questions are well appreciated.  

Have a nice weekend and thanks for all the good things you are putting out!

@MikeBellafiore

I appreciate you sharing your trading story.  I have made bold the points I will focus on in my response.

1. I decided to take today off and rather spend some time analyzing the situation and maybe come up with a solution.

This is a terrific response by you.  Figure out how to make things better before risking money in markets again.

2. I impulsively make outsized bets in stocks and situations where I have absolutely no edge.

You will face drawdown if you do not stick to setups with edge.

3.  I want it all and I want it now.

You have not made progress this way in the past and will not going forward.  Some of the best traders in our space did not become 7-figure traders until Year3.  Focus on improving daily and then you just may become better than you ever imagined.

I had a terrific chat with a trader who made his mark as a foreign market scalper.  To get to the next level, 7-figure trader, he is working on expanding his time frame.  His mentor offered spot on advice for him to reach that next level.  Keep doing what you do well, while holding only A+ Trades2Hold.  Slowly build your PlayBook for Trades2Hold, as opposed to switching all of your trading to Trades2Hold.  Even for this successful trader, there will be a process to adding Trades2Hold to his PlayBook.

4. I will implement the Daily Report Card.

Focusing on taking only A+ setups this months strikes me as a *very* promising goal to track in your Daily Report Card.  Next, focus on taking trades only in your PlayBook.  And then expand from there.

You have had success in your trading career.  You strike me as a trader who will continue to win.

*no relevant positions