One goal. One Step.: Mistakes and Moving Forward

I am a patient boy
I wait I wait I wait I wait
My time is like water down a drain
...
I'm planning a big surprise
I'm gonna fight for what I want to be
And I won't make the same mistake
Because I know how much time that wastes -Fugazi

Albert Einstein stated, “Insanity: doing the same thing over and over again and expecting different results.” However, another genius would beg to differ as the following quote (one of many variations) attributed to Thomas Edison regarding his invention of the light bulb shows, “I have not failed 10,000 times. I have not failed once. I have succeeded in proving that those 10,000 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.”

Notable trader and “Market Wizard” Linda Raschke has stated the following, “I only had to make the same mistake about 100 times before I learned (i.e. you can get overconfident, start trading too large, and make other mistakes). I didn't learn from making the same mistakes just twice. It can take repeated bashing of the head for something to sink into the skull.”

Today I felt like I needed a bit of catharsis and in the process share the frustration resulting from making the same mistake repeatedly as well as recovering and moving forward. I embody this Rashke quote in nearly all I do. I repeat the same mistakes, sometimes knowingly, and sometimes in the pursuit of a different answer (right or wrong) or a more elegant solution. I repeat the same mistakes because sometimes I don't learn the first time and sometimes I don't learn the tenth time and sometimes I may not learn at all; however, when I do learn it sticks and from that point forward the knowledge is mine.

I've been repeating a similar mistake for well over three years now. The main reason I still have skin in this game is because I have learned to keep my losses small --with the occasional hiccup --and I have been marginally profitable even though it seems I've tried everything in the book to assure antithesis of this order. I've maintained the stance that I am biding my time until my experience catches up with my knowledge and have done my best to assure this is the case by limiting draw downs to my capital and being in general a risk averse trader while progressing into a risk aware trader. In part I've succeeded in this by trading small and being scared shitless.

The second smart thing I did was try as best as possible to stick to one ideology and this was momentum. My tactics, entries, exits, holding periods, stop placement, position size etc... has been fiddled around with repeatedly and perhaps detrimentally, however my general approach has remained the same through out. My daily bread has been a focus on momentum stocks and range expansion but admittedly I've experimented around with these parameters which is a natural progression in trading because as experience and time in the market grows so does the understanding of the underlying mechanics and structure of the market. I don't begrudge myself for doing this at all.

The third smart thing I did was seek help which was one of the most difficult admittance in the world for me to do as I am prideful of figuring things out for myself and doing things on my own. For whatever reason, when I made a commitment to improving myself as a trader I realized I would do what ever it takes hubris be damned to progress down the path even if it meant asking for assistance, something that mortified me. It meant accepting that I was human and I couldn't do everything on my own and it isn't necessarily being a burden upon another in seeking guidance. And so one day after a horrific trade (one that was actually profitable by the way but didn't follow my rules) I threw myself into the pyre and sent a raw journal entry to a total stranger. That journal entry became a blog post on philpearlman.com

This was the beginning of the turning point for me. What was echoing within the confines of my mind was finally externalized and was a surprisingly uplifting experience. In the pursuit of my passion I exposed myself to another who didn't know me but merely accepted me based upon an imploring outreach to become better at what I wanted to do. For this I am eternally grateful and from this a new plot was being toiled.

So what does all this bloviating boil down to? I'm a phenomenal scanner. I can scan like nobodies business, but it's not about the scans. I've improved considerably at pulling the trigger on entries and taking my losses, so I'll give myself a pat on the back. I'm still pretty weak when it comes to filtering a lot of the trading data I follow into meaningful information and maintaining and tracking quality watch list. I still really, really, really, really suck at trade management. I suck so hard at this that I missed an opportunity to increase my account size by 20%.

How? I didn't follow the plan. Immediately after entry price continued in my direction for 2 more days --hooray --before it pulled back over the next 9 –Rut-Roh!-- and I sold when price returned to my entry point as I was unwilling to accept the possibility that this might turn into a loss after such a promising start. Of course the following day price put in a pivot low, above my stop level, and never looked back again. That trade was MAKO.

MAKO Entry

MAKO Trade Management

But wait, there's more. It wouldn't be much of a lesson if I was harboring feelings from a trade I exited August. How about a trade I exited last Friday under similar circumstances? Yeah, there's the rub.

Try, Try Again

So, I missed this because I repeated the same mistake that I have for over three years. But you know what: I went to the fridge, grabbed a carton of milk, poured some into a glass, returned the carton to the fridge, and then proceeded to tip over my own glass. I don't cry over this shit anymore because it's nothing new. As Beckett so cleanly started Murphy, "The sun shown having no alternative on the nothing new." I'm use to it by now. I'm not happy with it, but at least I know that even though I've suffered the same fate I no longer consider it neurosis because I'm in the company of Edison and Raschke, and more importantly I know that I'm capable of putting myself into these situations where luck can and will favor me because this time is different... at least in a few meaningful ways.

Through all the trial and error over the past few years there are a couple of things I know- I've persisted and I haven't blown up. Along the way I've learned a few other things, most importantly that I'm finally beginning to get a rhythm and style and cadence that suits me and I am understanding the market on my terms, which is invaluable. I've taken the pot holed road of many weary traders and I've come to where two roads divide and I'm choosing not to take either because I'm going to blaze my own right down the middle. It may take longer, and it may not be as scenic, it may be filled with hundreds of mistakes, but in the end it will be more satisfying because it will be my path.

So here's my deal to myself. I have three positions open that were taken with a similar set up and the exact same trading guidelines as the MAKO trade. I have not fucked these up. I do not have any false expectations that these will return 20% to my account, but I do feel like today's crack on the head was sufficiently skull numbing and the lump left behind will still be noticeably protruding for the duration of these trades that I will not make this same mistake. I have no delusions that I still won't make other mistakes and do so repeatedly because that's how I am, and even if that wasn't the case there are enough trader tombstones of those who didn't learn from theirs littering the landscape to keep things in perspective.

On a side note, oddly enough, today while I was beginning to journal my response to the MAKO news there was a related post to what I was undergoing by Darren Miller published on SeeItMarket.com/ that I think is well worth reading.