Emotions of A High Risk Trader

It was Closing time in the Markets of April 5th 2016. This was my first time in my Trading career to experience a 7 Digit Loss in a Day. Lucky me right? 

"How do you feel? Are you okay?" 

People ask.

I'm fine. It's weird I know. I should be feeling something. Pain. Depression. Sadness. But none of these emotions are present. 

"Eh ganyan ka naman talaga noong simula pa! Manhid!"

*Plays Pusong Bato In Background*

It wasn't always like this. And like everyone else who learned this craft, I also had my fair share of emotions - Happily jumping off my chair when I see huge gains in my port from super stocks. Then cry and sleep in heartache after a few trading days, as those gains get eaten up by a series of losses. Believe me, It's normal. 

Learning is a process. It takes time. And the stock market isn't something easily mastered. Don't believe people in social media who tell you trading is easy money, people who tell you all the good things about the markets without disclosing the risks. And especially people who don't talk about managing losses and emotions. 

These people who seem to be always right about everything and give you this illusion that everyone is profiting from the market but you, is a lie. Because no one is immune from the Markets.

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I look at the Stock Market as a game - the gains and losses in my account are just numbers. There are good days and there are bad days. Today was a bad day. 

And that's all there is to it. Moping around and giving in to negativity wouldn't help bring back what I've lost now would it? This experience just means I need to refine my system so this kind of damage would less likely to occur in the future.

It's simple discipline of the trade.

So how do I manage to kill my emotions in Trading aside from re aligning my perspective? 

Simple. 

"Study and Practice." 

Here's a link that could emphasize on that.

(Click Here)

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In ZFT, we have a ritual called "The Purge" where we rid ourselves of all noise that could affect our trading decisions. This noise could be in the form of trading buddies, stock groups, gurus, subscriptions, disclosures, news, rumors, etc.. The process helps us re align our focus and better ourselves. If you are having trouble with noise, Try purging.

Many people fail fast in trading because of ignorance or lack of a better system. Selling plays a bigger part in trading than buying. And cutting losses is the first system every aspiring trader should master.

For everyone can buy with confidence.

But only few can sell with dignity.

Bodega and The Law of Equivalent Exchange

Post Finished : 2:00AM 3.17.2016

Scheduled Post to Avoid Hype : 4.01.2016

"Bodega"

Also known as "Warehousing." This is quite a popular term in FB and other social media. And I have taken a liking to it. The popular belief on this system goes like this : "If you believe in the company, Buy it. Buy it slowly until you have amassed a lovely position that will bear you good gains somewhere in the future." 

I believe this method can be effective if used in the right way, by the right person - Be it a fundamentalist or a technician. But one should also be aware of the element of time when warehousing. You wouldn't want to be accumulating something while losing golden opportunities right? So today, we are going to talk about two groups of fictional characters, The Technicians and the Funnymentalists, for us to visualize and understand more about the bodega system. 

(The things you are about to see are of pure fiction)

Let's start with the Funnymentalist. These group of people believe in many truths, which oftentimes results to a non-truth. The most common practice they employ is the combining of the three Truths in the markets : Fundamentals, Technicals, and Speculation.

Observe.

This is an example of a funnymentalist's port snapshot with a little taste of his wisdom. There has been no full disclosure of where he made his bodegas but we can only assume the following :

"Why don't they buy when the uptrend is confirmed? Isn't it easier that way?" 

Good question. I'm confused as well. But the thing is, Funnymentalists have Vision like no other. They see things in different dimensions and will buy in every season. They see the market's downtrend as golden opportunities to add to their positions. But why not? They are Millionaires! If not Billionaires!

They could have bought on the shifting of the trend. But no. They like to have an underdog's story of breaking even while others are profiting. Who knows how their minds operate? Sometimes they practice cutting their losses and sometimes they don't. Sometimes they have legal wives and sometimes they don't. 

Funnymentalists don't mind holding for a long time because eventually, the universe will align to their favor. This is their truth and their minds will forever remain a mystery.

"A 6-8 Figure Loss? That's nothing to me. BACAT (Buy Cut) 'Till you get it right! Do not think! Be one with the Market."

How about the Technicians? 

They are people bound by strict rules and discipline. Raw data is their Truth. Trends are what they follow. And if a trade goes against them, they immediately cut their losses.

Observe.

When the market shows signs of a favorable trend, Technicians do not hesitate to execute the bodega system. For why fear a trend that is for you? I made a post before on Trend following and Money Management, You might want to read it by Clicking Here. 

Now to understand these signs, one must look for several ingredients :

(1.) A clear continuous and brutal downtrend for at least 6 months - the longer the downtrend, the better. (2.) Next is a rally, a mini ZS or a ZS, that breaks the downtrend with considerable volume. (Click here to know more about the ZS) And (3.)  A time of consolidation from the initial rally, followed by a sequence of breakouts that confirms the shift in trend.

Below is an example of how a Technican would probably do things if given similar amount of money as the Funnymentalist.

Before I proceed, I'd like to make a shameless plug.

"Humankind cannot gain anything without first giving something in return. To obtain, something of equal value must be lost. That is Alchemy's First Law of Equivalent Exchange."

"Alchemy: the science of understanding the structure of matter, breaking it down, then reconstructing it as something else. It can even make gold from lead. But alchemy is a science so it must follow the natural laws: to create, something of equal value must be lost. This is the principal of equivalent exchange. But I learned that night that some things cannot be measured on a simple scale. My brother and I knew the laws of science, of equivalent exchange. The game required sacrifice, that something had to be taken from us, but we thought there was nothing more we could loose....We were wrong."

~Edward Elric (Fullmetal Alchemist)

It's one of the best Animes out there. 

You should watch it if you still haven't.

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Now, where was I?

When we tread the markets, it is of utmost importance that we understand our place. While we are part of the market, we are not the market. If the market decides you are wrong, then you are wrong! Your opinion and positions worth millions or billions are irrelevant. For what we speak and what we have is not necessarily truth. Only the Market speaks truth. And when the Market speaks, we listen. 

(Snapshot as of 3.16.2016)

By the time this is published, either BHI is no more or probably still there. Who knows? Oh what a lovely case of Schrodinger's Cat.