Greed

From top to bottom of the ladder, greed is aroused without knowing where to find ultimate foothold. Nothing can calm it, since its goal is far beyond all it can attain. Reality seems valueless by comparison with the dreams of fevered imaginations; reality is therefore abandoned. – Emile Durkheim

If we go on the way we have, the fault is our greed and if we are not willing to change, we will disappear from the face of the globe, to be replaced by the insect. – Jacques Cousteau

Anyways,

JASO is one of my favorite stocks. I have been observing it for so long now that I just have a “feel” for this stock. (Do you feel this for any particular stock? or two?) Usually, when I enter into a position, I immediately place a limit order to close the position. And I am usually looking to make around 2% on any trade.

Today I entered into a position in JASO with the same target of 2%. But between then and placing the close position order, something transpired between my mind and feelings and I found myself placing a close position that would give me 3% gains. I felt like a part of my mind couldn’t justify and was questioning this 1% increase and the sudden change of “plan”. But the other part was dominating at that time and I went with the 3%.

Once I enter an order, I usually set triggers at curcial price points that message my mobile phone. Within 20 minutes, JASO’s price was at a point where I could have made my 2% and exit. I was happy and thought 3% is just round the corner now. But it just went all downhill from there, I kept getting “bad news” sms’es through out the day and now I am around -2.22% in this position.

Lesson: Never give in to greed. STICK TO THE PLAN.

I didn’t close today’s position hoping for a better run tomorrow (again, against the plan). I just hope its not another mistake that I realize tomorrow.

Is it just me or do we all have our own greedy stories?

Can you read a candlestick?

Last night, I spent some time reading about candlesticks (in candlelight…haha..). Till then, I didn’t know what exactly this charting technique is about and what those shapes mean.
But I wanted to. Why? Because I am still trading based on my “feelings” and “observations” and though I don’t mean to discount these, I certainly want to add “Technical Analysis” to my trading repertoire. The first step (logically) in any technical analysis is to learn the language used to do the analysis. Charts in this case. Bar charts, candlestick charts, etc.

Anyways, here are some few useful resources if you want to get started with candlesticks
The Art of Candlestick Charting – Part 1
Swing Trading By Candlelight
Candlestick Q&A

Now that I understand what the candles mean, I am going to spend some time tonight trying to understand the various commonly used candlestick patterns.

Then lets see if it helps in real trading.

About E (expectancy) and R (R-Multiples)

I still don’t get it. I mean, conceptually, I do.

And it feels very logical and good. But practically, my problem is that I don’t really have hard “stops” or “risk amounts”. (I know this is not good)

I just enter a trade with my full buying power (yes, full, which is pretty small. only one trade at a time. no sizing yet), am willing to lose about 3% and I want to earn about 1.5%+ on each trade. I believe if I do these trades consistently, multiple times a day (at least once), I will be adding value to my initial investment amount pretty quickly. Off course, assuming that my hit ratio (W/L) is at least 3.

I know this high probability system is not the smart way to trade. In fact, I think its a dumb way to trade. But the good thing is that, I know its dumb. I know I would rather have a high expectancy than rely on high probability to make money.

I just don’t know how to get there yet and making some money is better than just sitting idle and reading about all this “ideal” stuff.

Daily Trade log

I downloaded Mike’s spreadsheet and modified it a little to suit my needs and added some conditional coloring to indicate the level of profit/loss, etc. (added coloring to make it more fun)

Also, I prefer having my documents online as much as possible so I converted this to a Google docs spreadsheet. You can view/copy this sheet with some sample data here

I see a lot of scope to improve this over time and make it more valuable by adding advanced charting, integrating it with Google Finance, etc. If you have any suggestions, do let me know at trader.jedi at the rate gmail dot com

To know more about the columns used, calculation, etc., read trader Mike’s original entry here

Lets get the party started

Desire is the starting point of all achievement, not a hope, not a wish, but a keen pulsating desire which transcends everything. – Napoleon Hill

Having invited myself to this party, I have started my “stock market journey” with three very simple things…

Follow smart people

By follow, I don’t mean blindly follow the trades or trade suggestions but rather, follow as in how a Padawan would follow a Master.

Listen, Learn and Enjoy.

Trader Mike is is the first trading related blog that I subscribed to. I am amazed at and grateful to the time and effort Mike has spent sharing his experiences.

Start trading

Yes, start trading from day 1. So today, I made two small trades.

In my case, no amount of reading and following smart people will compensate for that “moment of truth” experience that I get when I actually push those “Buy” and “Sell” buttons.

How about you? Do you feel the same? Oh, I made 1.54% and 2.00% off of these trades. Note that I am starting small. Less than 10K (Yes, that’s right. I don’t even qualify for regular day trading. Right now. And that is about to change very soon )

Have fun

Because if/the day I feel I am not enjoying this party, I will leave. The aim of this exercise is to learn something new, try to be good at it, build value and have fun along the way. Since I am not putting 100% of my savings into this (With a family to support and bills to pay, it would be stupid), I hope it would be easy for me to have fun.

So stay tuned and lets see where this thing goes…