David’s Trading Trials And Tribulations

This is the second contribution in a new Evil Speculator category we titled ‘Retail Trader Tales’. Writing down your personal experience forces you to relive them and perhaps come to terms with some of the demons that may still plague your subconscious. If nothing else others may realize that they are not alone and that many retail traders out there have been taken advantage of by shysters, false gurus, lousy brokers, the list is long. If you feel like sharing your own (sad or success) story please send us an email to admin@ – of course your full name will not be mentioned and your dirty secrets are safe with us 

I’m a full time commercial attorney practicing in New England, with a wife, two kids and 1-2 cats. I’m responsible for litigating a number of complex cases, and consider myself reasonably intelligent. But I am constantly amazed at how difficult it is to make myself abide by any set of trading rules for a consistent period of time. What is not surprising is that this inability has resulted in trading losses, although thankfully not so great that I’ve had to retire to the sidelines.

I’ve been fascinated by the markets since I was a kid, poring over stock tables in the newspaper since I was 11. I almost took a job with Dow Jones in their news division just to be closer to the news pace of the markets, but elected to go to law school instead. The pull of the markets returned with the dawn of the internet and online trading, but my minor forays into options trading resulted in losses (theta really bites you in the ass), and so I’d settle for holding a few stocks, which really was the only way I made any consistent gains (a boring buy-and-hold strategy).

In 2008, I became fascinated once again watching the markets collapse. Maybe it was the former journalist in me, excited to see how a big story was unfolding and being covered, but I couldn’t look away. At the same time, watching real-time charts on a trading website intrigued me to learn more about technical analysis, and the focus on the current market and technical analysis led me to Mole and the Evil Speculator site. (It helped that Mole referred to his subscribers as “rats,” a term my dad always used for me and my brothers). [Mole’s comment: some people actually left the blog because they were insulted – fragile egos indeed!]

What I especially liked about his site (back then) was that although Mole’s personal views and opinions about the economy and the wisdom of our elected (and unelected) officials was at times pessimistic and critical, he took pains to differentiate those views from what his technical analysis indicated was a proper trading plan. If the technical indicators showed a probability of an up market, then the way to trade successfully was to trade in that direction, even if you privately thought that whatever was driving the markets higher was a bunch of horseshit. To me, that gave the site credibility. And that differentiated it from just about any other trading site I had (or have) visited.

So I subscribed to Geronimo, and tried to trade the /ES. To do it properly given the subscription fee, you would want to trade multiple contracts on each signal. But clearly I wasn’t ready for the variance that produced, and I found myself, almost immediately, changing the rules, exiting trades early, not entering the trades, trying to second-guess the program. In other words, someone had given me a plan on how to trade, and I almost immediately had to deviate from it.

That, of course, produced losses. So I had to take stock of myself. The three things that jumped out at me were: (1) I had trouble following rules; (2) I had trouble catching all the trade signals when work/life/etc. interfered, which would make me anxious and left me on an emotional roller coaster; and (3) both (1) and (2) above were exponentially worse if the amount I had at risk was higher than was “comfortable” for me. And by “comfortable,” I mean emotionally comfortable. The loss of $500 on a trade, even if I could easily afford it (meaning, it wouldn’t impact my lifestyle or family’s security, or even my ability to continue trading), would have me high-strung and upset, which had to make me unpleasant to be around.

I often read (but probably not every day) Mole’s trading ideas and suggestions, but have found it difficult to translate those into any kind of a consistent trading plan. I have trouble figuring out how to enter a trade, or when to re-enter a trade after I get stopped out. How many times should I get stopped out before I should just quit and move on to the next trade? I’ve never been able to work that out. And so, naturally, if I can’t figure it out and it looks like it will get too expensive to figure it out, I move on to something else.

Last summer, I became intrigued by Crazy Ivan. I had used forex (and the ability to trade relatively small lot sizes) as a way to test or try out some of Mole’s trading ideas, but Crazy Ivan offered another chance to try something like Geronimo. I tried both the hourly and the 8-hourly version, but the hourly version did not “fit” my life — a meeting, a trial, a kid’s soccer game or my mother-in-law would distract me and I’d miss entries and exits, which would make me frustrated and unhappy (my mother-in-law in particular has particularly impeccable bad timing).

Crazy Ivan 480, however, does seem to “fit” me, although nothing is perfect. Living on the east coast of the US, I need to type in conditional trade orders 3 times a day: at 7 am, 3 pm and 11 pm, so I can sort of “plan” when to trade (or pay attention to my trading) My results? Slightly better than break even, but that does take into account the drawdown that occurred over the fall until Mole revised some of the filters on the system. HOWEVER, I’m still not trading Crazy Ivan the way it was meant to be traded. Why not? Several reasons — some valid, and some just a sign of my trading weaknesses.

First, I’m a skeptical guy. I don’t trust anything, and I am only slowly beginning to trust Crazy Ivan. So my positions are small (often just a 10,000 lot per trade). My position-sizing is, therefore, off, and on trades with small levels of pip risk I am frequently not leveraged up appropriately. But the sizes of my trade wins and losses are small enough that I am not emotionally bothered by the results, so I have no real aversion to entering another trade after experiencing a run of losing ones. That’s a reasonably valid reason (to me, anyway) for my deviations, at least for the short-term.

Second, life still gets in the way. My wife will want to have a serious conversation at exactly 10:59 pm, and I know that leaving that conversation to do some trading will “cost” me more than missing a few pips. [Mole’s comment: I’m going to send him a pair of pants…] I may be stuck in court at 3 pm. These things are unavoidable, so the deviations they cause me to make from Crazy Ivan’s rules are reasonably valid (again, to me anyway). This has also forced me to realize that my life structure may simply not permit me to try some systems or trade strategies — I don’t have the time to work them correctly and consistently so that they produce a profitable yield.

Third, I can still stray from the rules designed to protect me, sometimes out of sheer laziness. Example: using thinkorswim’s platform, I can enter a potential trade (via a stop-entry order), and set it up so that if the trade is filled during the 8-hour period, my stop will automatically be placed at the same time. So I should, theoretically, never have a trade entry without the stop immediately being put in place. But I can only do this from a computer terminal/laptop, and it’s not always convenient to use one of those. So, I fell into the habit of placing stop-entry trades on my iPhone, but on the mobile platform, my stop isn’t automatically set if the stop is hit. Instead, I have to notice that the trade was entered, and then go and manually enter my stop. This works fine maybe 98% of the time, but on one day that stands out in my mind, there was surprise Fed news, and boom, within a minute or two, a trade had entered and then moved well beyond where its stop should have been, to the tune of -10R. That’s 1-2 months of work wiped out in a minute, all due to laziness. Being lazy is just not a valid reason to stray from a trading “rule” — although I need to recognize and accept that I’m capable of being lazy, and take steps to minimize this risk caused by me being me. [Mole’s comment: Perhaps we should turn our systems off on FOMC days – but it is sometimes difficult to do as the campaigns can last half a day or more.]

Notwithstanding the fall drawdown and my wonderful -10R mistake, my Crazy Ivan account has worked its way back to green. I still have only allocated $15k of capital to it. But, in the past month, I’ve begun to gently raise the lot sizes I’m trading with Crazy Ivan — testing myself to see if the increased risk sizes cause me to alter how consistently I can follow the Crazy Ivan rules. Amazingly, I’m not sure how my self-experiment will turn out. (I know when I play poker at a table with limits higher than I’m comfortable with, my game goes to hell — the same is kind of true for trading for me). I’m hopeful that I’ve improved my discipline, but I’ll only know if that’s true down the line. I’ve learned that if I can’t get to a terminal to enter a trade, I need to enhance my risk awareness, and decide if I need to just stay on the sideline until I can trade with the proper parachutes in place later on. One thing is certainly true: there will always be another trade. The markets aren’t going away anytime soon.

My subscription fees to Evil Speculator? I consider them to be tuition checks — not just about trading, but about me. Because I’ve learned a lot about myself, my habits, and what makes me tick over the last several years. It’s been fun, and I still love tapping in a bunch of trades and then peeking back later to see how my little friends are doing. And I consistently love reading Mole’s take on what’s going on in the markets or the trading world — I haven’t found a better place to go for unbiased trading discussion, ideas or commentary.