I have been following your terrific blog for a few months and have just finished reading your book. The book was refreshingly different and very instructive -especially the chapter on reading the tape.And the questions you have recently answered in your blog about age[I’m 50 plus andwant to be a full time trader] and finding stocks in play [yesterday] were lurking in my mind for days. I even emailed [email protected] about a free 2week trial for your SMB AM meeting.
But i have another question about mental conflict while trading? How do I reconcile my emotions while trading my long term 401K account simultaneously with my daytrading account?
I trade in my 401K account [occasionally] and separately in my personal daytradingaccount [almost everyday]. In my 401K account I cannot short and can sell only covered calls. In my personal account ,I go short/long with stocks/futures/options depending on what ifeel the direction and risk/reward will be. On days that both account are being traded long, I am calm while trading. But on days when I am daytrading going short, I just cannot ignore the fact that my 401K account may be hurting. Even within a day when the direction changes to bullish, I try to find comfort that my 401K account would recoup any tardiness on my part in taking daytrading stoploss. But it is emotionally exhausting. To get rid of the conflict, I have gone to cash in my 401K .
Is there any other way? Can an individual invest with different biases in 2 differentinvesting accounts?
thanks and looking forward to hearing from you.
Very interesting question and this brings many of us back to 2001 and 2008. We were trading intraday but watching our long term investments significantly impacted. I wrote in One Good Trade that 2001 was a painful lesson year for my non intraday trading account.
It seems there are two ways to help with this mindset issue. What are your goals for your 401 (k)? I would assume you are making much longer term trades. If so, then your stops will be very different than your intraday trades. Create if/then statements for your 401 (k) trades. Stick to these stops. Judge these trades not based on your 1 minute or 5 minute intraday charts but a much longer timeframe. As long as these trades are acting well on your much longer time frame and have not hit your stops then hold them. I might also mention with these longer term trades you will walk into stocks having made significant gains overnight. You will not see these significant changes intraday. So that is a positive you may be undervaluing.
Steve, my partner at SMB, has been saying of late, “Trading is the new investing.” (there goes that slogan 🙂 ) And many now believe that Buy and Hold has been proven a failed investing strategy after 2008. So you might treat your 401 (k) differently than perhaps most would have ten years ago. But still these trades ought to have a longer time frame than your intraday trades. And again as long as they are dong well on this longer time frame a few bad days, a bad week, with a longer term trend still in place, is just part of investing.
One more thing…many intraday traders are trading day trading accounts AND swing accounts where they hold positions overnight. One excellent day trader shared that he was up just 40k in his day trading account but 300k in his swing account this year. This is our future. The best traders will trade multiple accounts on different time frames. The best firms will offer their best traders the opportunity to trade multiple accounts and not just a day trading account.
Author, One Good Trade