What a crazy and insane and tragic and awesome year all rolled into one.
Since early March 2020, I haven’t been on an airplane when my oldest son and I went to LA to see the Lakers vs. Clippers game. It turned out to be their last game before the NBA shut down. Since that trip, I’ve stayed home and embraced Zoom. I’m no longer traveling to a constant stream of conferences, masterminds, and events. Although April and May turned stressful with food and toilet paper shortages and wondering what the lockdown held in store for the future of humanity, it was about that time I started to adapt my trading mindset to this new life.
And what does that mean, exactly?
That anything can happen. That no amount of anxiety or stress is going to change the outcome. I stopped trying to impose my will on the environment and looked at this new global situation as a trader. Instead of focusing on what the world was doing to me, I started to view it from its perspective. What was it offering? A chance to rethink living?
So… I moved our family to the country, turned off the news, bought some zebras, and settled in for the ride. Never mind that the internet sucked. Just do it and assume the universe is rigged in your favor and see what happens.
My goal with this article is to summarize my 2020 trading journey against the backdrop of an unpredictable and historic year. I’m not going to focus on specific setups but instead on my overall P&L fluctuations, managing my ego, and what I learned. I spend more time on the losses since that is where the most learning takes place.
What was going on in my account, and what was going on in my brain during this time?
I had some great trades. And I had some horrible trades. I made a few brutal mistakes. I made money 10 months out of 12, but it wasn’t smooth, and those two down months were doozies. You would think March would have been one of those nasty down months, but it wasn’t. My first losing month visited me in May. A nice little wake-up call. If I could summarize my year as a one-liner for each quarter…
- Q1: Started normal and quickly turned into 2008. Volatility!
- Q2: Lockdown? Close the office. There are no eggs? Are we safe? WTF?
- Q3: Wow. Big Wow. Turn that money into tangible assets and get it out of the markets.
- Q4: Fell off the bike, got back on, reached the top of the hill.
Sometimes I was in the zone. Other times everything I touched turned to shit. With the year over, I can count on one hand the number of trades I did that were perfect. But when the dust settled, my three shorter-term trading accounts ended at their highs, and I had a record trading year. This is a lesson I’ve had to relearn many times: You can make a lot of money in the markets not being perfect.
There is only one goal on which a trader should apply their focus: An upward sloping equity curve. Start the year at the lower left of the screen, and end the year at the upper right.
Notice I didn’t say focus on being right or focus on trying to understand why something is happening. Or using this journey to really dig in and prove to your parents once and for all that you do have value. None of that will help you in your quest to generate an income from trading. There is nothing to prove—just opportunities to flow into and out of.
Are you tuned into those outward-lying opportunities?
Or are you so tuned into your own inner bullshit you don’t even see them?
In my shorter-term trading accounts, I’m not looking to trade a particular stock. I’m looking for high-probability moments in time. I take advantage of those moments with the right options strategy for that particular instance.
I’ve been doing this for nearly 30 years now, and I’ve learned that more knowledge is not more power when it comes to trading. It’s all about probabilities and risk control. And if you are wrong, be wrong fast. Keep it simple and lay down those bricks in the right spot, as if you were building a house or a wall . . . always remembering that stocks rise slowly and fall fast.
A large part of successful trading is learning when to do nothing. Learning to let go of the need to hop on the day’s hot stock. Hopping on that hot ticker is not a plan. That’s a well-laid path to eventual destruction as we become addicted to the dopamine rush. Then we start to chase the rush, not the stock. And like every dog that chases cars, eventually, we will get run over.
Screw the rush.
Making money is easy. Keeping it is the game.
And, as my yoga instructor has told me more than a few times, “Relax your face, John. And your expectations.”
A Year In Review
I spent New Year’s Day, 2021, looking over some of my journal entries from January of 2020. A few things stand out:
It’s great having Brittany Burns on as CEO of Simpler Trading. She has a unique set of skills and can lead effectively, with compassion. It’s taken me a little while to get into this new groove. Simpler is my baby, after all, started in a ground floor apartment in the middle of a Boston winter. Part of me still feels angst about being away from the office, but I’m truly not needed there, and it has grown beyond my skill set. I’m good at discovering and trying things with a small team. I’m not good at effectively managing a larger and growing organization. I’m excited by the prospect of having more time to focus on trading.
I’m incredibly passionate about alleviating the pain and suffering of traders. I know this journey. And believe me, I’ve suffered. But running a company, even though it is amazing, takes a lot of work. And, it can be a distraction from . . . actually trading. The irony of running a trading company and not having enough time to actively trade every day is not lost on me. Simpler grew to a point where it needed adult help. As the saying goes, the skills that get you out of Egypt aren’t the same skills that will get you to the promised land. The current team in place is amazing—a mix of new talent with part of the original crew that kicked off this adventure. An extended family in every sense of the word, in great hands with a new leader driving the bus. I am so incredibly grateful. And in 2020, in the midst of a huge amount of global layoffs, we hired 27 people.
For trading goals, I wrote: “In 2020, I’m going to start with about a $1.4 million short-term trading account. This is for swing trades and the creation of income. My goal with this account at the end of the year is to have wired out 2.5% of my total balance per week, or about $1.7 million. And to end up with, after the wires, a $2 million account (or more) to trade for 2021.” As a side note, I buy and hold things for my long-term and retirement accounts, and I am not looking to wire money out each week from those accounts.
So, once the dust settled in 2020, how did my accounts look?
Note: My TastyWorks account started with 60K that was lying idle most of the year. I transferred 200K in profits from my TOS account in August so that I could trade with portfolio margin. I started trading it actively then.
In terms of wire-outs, I ended up wiring out $12.5 million, which I put into tangible assets, experiences, and charity, and applied the rest toward taxes on the gains.
For 2021 I’m starting my short-term trading accounts at $6 million with the same goals as 2020 in terms of being able to generate and wire out 2.5% per week “or more.” I could sum up my trading goals for profits as follows:
- ⅓ for taxes
- ⅓ for tangible assets, experiences, tithing/charity
- ⅓ held back for trading a larger account next year
As a note, I always like to add “or more” after any goal that involves a number. This opens the possibility of exceeding expectations. There is no reason to impose limits on ourselves. As the saying goes, “When you fight for your limits, you get to keep them.”
In terms of my trading style for my shorter term, aggressive accounts, I trade mostly options, both long and short (i.e., I might buy a call or sell a put credit spread). I also trade some futures, both long and short. My average holding time is two to five days, and I generally have three to seven positions on at any given time. More than that and I lose my effectiveness and focus. I’m an aggressive trader. I’m not looking to make 5% a year. I’m looking to make 5% a week. That means taking some risk and training my intestinal fortitude to handle the swings.
Many people can’t handle this type of volatility, which is why I politely refuse to manage money. One of the few guarantees in life is that everyone with a managed account can handle the gains, but they all whine like a 5-year-old who lost a toy during the inevitable down month. There’s no crying in baseball… or trading. And I don’t have the time or the desire to hand out tissues and words of reassurance. Instead, I’m happy to share what I do with anyone who catches the trading bug. It truly is a journey.
Lastly, I’ve found that the biggest gift I can give myself is to go to a 100% cash position from time to time, especially over long weekends. As a trader, that is when your mind is truly free. It’s like getting a spa treatment.
So, let’s clear the air. Am I implying that you can have a 1,200% year, too? I’ll be frank.
The odds are not in your favor. Hell, I don’t know if I’ll ever have a year like this again, but that’s not going to stop me from seeing what I can do in 2021. Trading is a journey about learning to get out of your own way while getting comfortable with larger and larger sums of money. As long as the journey continues, so does the opportunity for mental growth.
Why Not More?
I have a friend who trades enormous sums of money for his own account. When we talk, he always asks me, “When are you going to trade bigger? It’s just another zero.” Money is what messes up people in trading. The getting of it, the losing of it, and the brutal, unspoken words, playing in the background, “Am I worth it?” It’s fun watching him trade as he doesn’t have any hang-ups around money. He inspires me to expand the boundaries of my own self-image. Why not more?
The key with “more” is to be conscious of it being a growth decision and not a destination where, once you get there, then and only then will you be happy. Be happy today. Be grateful today. The getting of more things won’t fix your anxiety. (I’ll talk more about this).
This is a path that, for many people, never really gets going, as they remain stuck in ego-based low awareness, repeating the same mistakes over and over, trapped in the hamster wheel mental constructs of their own self-image. I see it all the time. I’m conscious of it in my own life.
Expand your mental limitations, and you expand your life.
Mark Douglas, the author of Trading in the Zone, laid it out like this:
“Making mistakes is a natural function of living and will continue to be until we reach a point at which:
- All of our beliefs are in absolute harmony with our desires.
- All our beliefs are structured in such a way that they are completely consistent with what works from the environment’s perspective.”
There are a lot of deep thoughts in those two statements. People push back on this and say, “Making mistakes is a normal part of being human.” I get it. I make mistakes every day. But in trading, when we repeat the same emotional cycle over and over, it generates the same results over and over. Not being aware of this cycle and breaking free from it is a mistake. In fact, it’s the only mistake.
That’s what Mark is talking about. Get off the hamster wheel in your mind, which clouds your perspective, and put yourself in the market’s shoes. Start trading from its perspective just as you would surf a wave from its perspective and not from your own emotional prison’s perspective. Imposing our will works when training a dog or a horse. They will respond to us, no matter what our flaws. But the market is not a dog or a horse. It will not respond to us, no matter how hard we try. It’s not even aware of our existence.
Ed Seykota from the Market Wizards books said, “Everyone gets exactly what they want from the markets.” For people who are hemorrhaging money, this is a brutal truth to confront. What do you get from losing money? What is the payoff? What is your hidden agenda? This is where you have to kick the ego to the curb, or you’ll never learn the truth. And if you never learn the truth, you’ll keep losing money. Forever financing your own destruction.
An example of a hidden agenda? I worked with Mark Douglas, author of Trading In The Zone, for many years. One of the things we worked on was any hidden agendas I had that crept up while trading in front of a large audience in our trading room. One of my hidden agendas was the desire to be the hero, where everyone gets to participate in a big trade and is happy afterward, giving me the virtual “high five.”
But if a person’s hidden desire is to be the hero, they unconsciously create disasters where they can step in and save the day.
How messed up is that?
The person who is constantly putting out fires is also the arsonist.
The person who is always experiencing problems is the problem.
The person who keeps running into assholes is the asshole.
The person who thinks they are special because of their trauma . . . can’t let go of their trauma because they think they are special.
Deep stuff to be sure. Our outer life is merely a reflection of our conscious and unconscious belief systems. This is why I love trading so much. In trading, there is nowhere to hide. There is just your P&L. Your equity curve is a direct reflection of how much you are trapped in your own horse shit vs. how much you are free of said horse shit and are fully present and tapped into the market and what it is offering you right now.
We can fool ourselves. But we can’t fool the market. It will call us out.
For those who recognize that they are the problem, this is a journey that never ends, leading to many positive developments as a human. Those who think the world is out to get them will continually devise situations repeatedly to prove that the world is out to get them.
The only person that can save you is yourself.
To change your life, you first have to change your mind.
I made huge strides in 2018, 2019, and 2020 learning about why I behave the way I do. Hard-wired defense mechanisms from childhood and all that. It’s terrifying and enlightening and uplifting all at the same time. And worth every shovel full of dirt that gets dug up, whether in therapy or a plant-based journey of altered consciousness — which is sometimes the only way to dissolve the ego and see things as they really are.
The market is the best psychologist you will ever have and the best gauge of how you are doing mentally. When you can flow in and out of positions and take losses without a second thought, you are clean and in the zone. If you aren’t mentally clean and in the zone and find yourself stressed and hesitating — get flat and clear your head before the market rips your heart out. You’ve bumped up against an unresolved trigger, and you need to identify the emotion behind it and let it go before it destroys you through your trading decisions.
This is your ego’s way of showing you that you can’t live without it. Its only goal is to control you. It is easiest to do that when you are feeling pain and self-loathing.
The answer? Clear your head and get “present.” Anger over the past and anxiety about the future is the ego’s way of keeping us in check. When you are “present,” and you are “here and now,” then your ego dissolves and has no control.
It can be as simple as meditating for 5 minutes to flush your mind and get back to the present moment. Drop the past, drop the future, and focus on the present from the market’s perspective on what it is offering up today.
I personally find listening to music keeps my mind very calm and clear throughout the trading day. Specific types of music shut down the reptile portion of your brain and quiet your mind. I like the “Mind Amend” channel on YouTube for this. “Focus at Will” and “BrainFM” are also solid.
Ok, that’s a lot of information, more than I originally intended. It’s time to talk about trading. Let’s dive in and take a closer look at what happened in 2020.
- Starting balance: $1,373,456.00
- Ending balance: $2,000,369.09
- Money wired out: $207,425.00
- Balance if no money wired out: $2,207,794.09
- Monthly return: 60.75%
January was a strong month right out of the gate. I didn’t have any losing weeks. Out of 21 trading days, I had 14 winning days and 7 losing days.
Of course, the longer a person trades, the more they realize how unimportant the win ratio is. The only thing that matters is what your average losing trade vs. your average winning trade was? In this case, my average winning day was $73,504.50, and my average losing day was -$27,796.28. I personally find tracking by each day instead of each position is much cleaner. It also makes cutting losing trades super easy. “Screw this trade; it is hurting my day.” With a ratio like this, I could have lost money 14 days and made money only 7 days, and still been up for the month.
In fact, the higher the win ratio, the worse the risk to reward. Selling a 2 standard deviation iron condor works 94% of the time. But that 1 time it doesn’t work wipes out the previous 19 trades. No thanks. Anyone focusing on high win ratios ignores the fact that they are merely avoiding stored trauma related to losing.
Get comfortable being uncomfortable. Get clean about taking losses. It’s your job, after all… taking losses. It’s your only job. You might as well do it with a smile.
“Take the risk. If you win, you will be happy. If you lose, you will be wise.”
Below is the main tool I use to track my daily account progress in my short-term trading accounts. I use Google Sheets to log in from anywhere and enter my daily ending balance and see my net dollar and percent gain or loss on the day, week, month, and quarter. I’ll add a few notes to recap what I was trading, what happened, and note what was going on that day. Was I able to focus on the markets? Was I teaching a class? Were there leaf blowers outside my home office window all day?
Here is an example from the week of January 13:
For this particular week, I started up nicely. We had added calls on BYND and held them over the weekend, and they raced higher that Monday. A 12.32% day to start the week! After a big day, I generally trade the next day very light, as I know if I let Euphoria take over, I’m dead.
Euphoria gives us false confidence that everything we touch will turn to gold, so it causes us to take bigger, sometimes deadly, risks.
On Wednesday the 15th, I had a lot of trades on and a packed teaching schedule, with the options room at the open and a three-hour Small Account Mastery live-trading class starting at noon.
Although I very much appreciate the opportunity to get on the mic and share trading setups and knowledge when I can, this particular day ripped me out of my trading zone, and I lost focus on my own positions. From my perspective, I couldn’t stop talking on the mic and focus on managing my own trades. I committed to serve everyone who showed up in the room and the class, and they had to come first. Unfortunately for me, it was near impossible to manage my trades while also fielding questions in the room and looking for opportunities there. So… I did nothing and just let my positions play out. Had I been focused on my trades, I would have cut them loose early. I gave back $56K that day, or -3.37%.
Lesson learned: You have to get a handle on this, as it is not an issue that will magically go away. On Small Account Mastery live-trading days, you can’t be in the Options Gold room as well. You have to manage your time so you can be effective in trading your own account and be effective in helping traders in the trading rooms. How to best balance this dynamic?
Consider going flat in your personal accounts during these times? Construct your portfolio more conservatively during these times, maybe with hedges in place as well? Remember, anything can happen, and it always happens when you least expect it. At the very least, you can’t be maxed out on large directional plays during a class.
The rest of this week, I just slowly bled lower. I hit my trailing Net Liquidating Value (NLV) P&L stop and closed all of my positions that weren’t working.
Note, a trailing NLV P&L stop works as follows. If you have a $100K account, and you are willing to risk $5K for the week, that means your stop-loss is triggered when your balance falls to $95K. From this starting point, the NLV stop is trailed up if your portfolio gains value.
If you are up $10K on the week by Thursday, your stop-loss is trailed to $110K — $5K = $105K. If your positions sell-off on Friday and your balance falls to that $105K stop loss level, it is your job to go flat or lock that level in with a hedge.
This strategy helps a trader lock in gains for the week, so they don’t give it all back. As a wise man once said, “Don’t lose your ass on a Friday.”
To clarify, this is the strategy I use for shorter-term accounts where my main objective is to wire out profits each week. I don’t utilize this strategy in longer-term accounts where I’m looking to have exposure to various asset classes such as bitcoin and gold.
Although I met my goal this particular week of being able to wire out money and grow my account, I really gave away a lot of profits from being frazzled on Wednesday and never recovering from that. Going forward, continue to find ways where you can trade effectively and continue to moderate the trading rooms. You have to find a way to make this work.
I have found that tracking my daily account balance changes has been, by far, the most effective means for me to focus on producing results and avoid the nonsense of getting caught up in the external and internal noise. Why a stock is moving is irrelevant. What I’m feeling is irrelevant. The chart pattern is even irrelevant. Yes, it may work 75% of the time, but it ain’t working this time. Don’t waste time trying to find out why it’s not doing what you thought it would do. Don’t waste time getting wrapped up in your feelings. Just let them go and stay present.
Focus instead on what the market or your position is actually doing. Period. Not on what you want it to do or what it should be doing. Simply what it “is” doing.
From the market’s perspective, not yours.
The market has nothing against you. It’s just doing what it’s doing.
If a position is not working, don’t get wrapped up in the inevitable fears and anxiety around losing. Just cut it loose and move on. So this one’s not working. What’s the big deal? Fire it and find a stock that wants the job of making you money.
Think about it. If you owned a car wash and had 10 employees, and eight were working hard while the other two were hiding in the bathroom hitting their THC vape pen and never getting anything done while stealing cash from the register, how would you handle it?
Would you give them a raise and pay them more than the other employees who are actually doing their jobs? Do you think this will encourage them to finally work for you? Would you pat them on the back and give them more refills for their vape? (I mean, if they were doing a great job, yes, of course, LOL). At some point, you’d free up their future (i.e., fire their ass) and find two people who wanted to do the job.
The quicker you can learn to adopt this same attitude toward your positions, the better.
Trading is no different. If you have 10 positions, and two of them aren’t doing what you thought and keep losing money — fire their ass and find someone else who wants the job. Your losing positions are stealing from you. They aren’t doing their job. Get rid of them without a second thought. It’s as simple as that. “But what if they come back?” It doesn’t matter. We avoid the big loss by being strict about taking the small loss.
Your ego wants to be right. But your ego is a narcissistic and fragile manifestation of your childhood trauma. It’s a master program trying to control you and run things from its perspective. You think it’s protecting you — when in reality, it is shoving you in the corner and telling you to shut your mouth. To let its built-in automated responses run your life in the protective manner it was designed for. “Leave me alone,” it says. “I got this. I’m doing this for you.”
Never mind you are no longer a child and no longer need those survival skills. Never mind there’s actually nothing wrong with you. Never mind you are no longer in need of its protection.
Never mind that your ego has become your jailer.
And it has no intention of setting you free.
You have to kill it.
Take a deep breath, become present, and take control of the situation.
When you are living in the moment, your ego dies. Oh, it will resurrect itself when you slip and fall into the anxiety of the future or the anger of the past. But when you become aware that you are in “moist robot” mode, just get back to mindfulness and being present.
Moist robots get triggered and do stupid things. Mindful humans do not.
Trading is very simple. If your position is losing money, it’s not doing the job it was hired to do. If it’s making money, it is doing the job it was hired to do. Know this . . . you are the manager with the power to hire and fire.
If the position is losing money, it’s the same as having an employee who is stealing from you. It’s not your fault. You didn’t know what this person was like when you hired them. You gave them a shot. But now that you see the evidence before you, their true colors, smile and act without hesitation. There is no shame in being wrong or taking a loss.
The only shame is in not taking action when you know you should.
In fact, cutting trades loose that aren’t working is your only real job as a trader—glory in it.
Brush aside the triggers that pop up, as they pop up. Watch them with amusement as your ego throws them at you from all directions.
“Not this time, buddy. Go get stuffed.”
This goes back to the only thing that matters in trading: creating an equity curve that goes from the lower left of my screen to the upper right.
I’ve also found that wiring out money each week automatically dials a human brain into the proper trading mindset. It makes it real instead of a video game. It turns it into a business. I like to keep a few $100 bills on my desk to remind me that my job is to produce a tangible outcome — not to prove to the world that I’m right. It also makes me quick to cut those losing trades without mercy if they violate their job description.
“Hey, AAPL calls, our objective is to make 2.5% this week, and you aren’t doing your job. You are interfering with that goal. You’re fired!”
It makes taking losses feel good. Like you are doing the job for which you were hired. The hardest thing in trading is keeping this mindset front and center all of the time. When you lose focus, your ego grins ruefully and steps back in to take over. At that point, you are screwed until you become mindful of the present once again.
For my daily trading spreadsheet, I’ll also add a few notes to describe what was going on in that trading session and note my equity high and low for the week. This gives me an idea of how much I left on the table and how far against me my account went during the week.
I also like to grab screenshots of the trades that I take so I can review them later. Taking screenshots and making notes is also important as it sears the setup into my memory and trains my intuition to remember what works and what doesn’t work. This is how you train your mind to recognize patterns.
The next week I was up 14%. The week after that 20%. I had a big position in PTON and a few smaller positions in TSLA and AMZN.
My note from that week: Trading has been really good the last two weeks, but if you push it too hard, your own psychology can turn on you. Relax. Remember, your goal is to wire out that 2.5% per week and make a little more than that in order to continue growing your account equity, even after the wire out. You don’t need to go crazy.
All in all, a great first month out of the gate. Now that we’ve laid out a lot of groundwork, we can start to speed through the rest of the year.
- Starting balance: $2,000,369.09
- Ending balance: $2,029,378.20
- Money wired out: $302,660.00
- Balance if no money wired out: $2,332,038.00
- Monthly return: 16.60%
- 19 trading days: 9 winning days, 10 losing days
- Avg winning day: $90,017.38
- Avg losing day: -$47,848.73
- Biggest Daily Loss: -$237,870,66 (ROKU Impulse Trade)
- Biggest Daily Win: $289,980.91
My first trading week in February was great. I ended up with a 13% return. Mostly due to TSLA and PTON. I made a GOOGL earnings trade, and that was a bust. On February 7, I put on some bearish positions, got on a plane with my wife, Maria, and headed to India for two weeks.
We went to a place called Vedanta World with a group called YPO for a one-week crash course in the Bhagavad Gita. It was a profound experience for me. A one-line summary of what I learned? Attachment is the true virus of humanity.
The week of February 10 was my worst week of trading thus far for 2020. Each day I lost money on my bearish positions, down about 1.5% each day. Mind you; I wasn’t trading. I was just checking in on my positions from the other side of the world, and they were sucking wind every day. Why didn’t I just stay in cash for this trip? When will I learn to take a break?
While Maria and I were going through the airport in Mumbai to return home, I felt a need to put on a trade to offset my losses for the week. I noticed that ROKU had earnings that day and was up big. On impulse, I bought 300 calls on the mobile platform. You can see where this is going.
From my iPhone, I watched ROKU start to slide and then really puke it up. I lost $220,000 on that trade in a few hours and ended the week down 15.67%. The shame was real. My one saving grace? This is not a trade I posted in the room since I did it from my phone while going through security. Only I had to suffer. It was my own damn fault.
This was just an incredibly stupid trade. What to do? Get out. Relax and take the next setup. I felt 100% better immediately after exiting the trade. I was free again from my mental programs.
I told myself: “Remember, your goal is to wire out 2.5%, there is no need to do what you did on ROKU, trading from your iPhone while going through security in Mumbai. This week is a big loss, so I’m not wiring any money out. Do I need to make new account highs each week in order to wire money out? My intuition says NO. That will be a distraction and cause you to take stupid risks to get that new high. Just proceed as normal, and wire out as you go, and focus on minimizing the downside. Every week, win or lose, wire out that 2.5%. That is your job — to make that weekly payment. If you don’t make the payment, Vinny is going to break your legs. (Metaphorically speaking).”
For the week of February 17, I’m back home, and I am severely jet-lagged. However, the break away from the markets was good for me, and I was in the zone, cranking out a 20% week on GOOGL, AMZN, TSLA, BYND, and SPCE, as well as some long bond futures. And I sold NDX call credit spreads as a hedge. The markets caved on Friday, and my bonds went up, and the NDX call credit spreads hit max profit of $100K.
The following week, Feb 24–28, the markets really puked it up on Monday. I had some light bearish positions on, and that’s it, so my account was up 1.88% in the room. I’ve been telling people about the 10-day moving average of the put-call ratio and to be really careful on the long side here. Some listen. Some don’t. I’m like, “Guys, I’ve seen this movie before, and it always ends the same way. Know when to be cautious. Know when to be aggressive.” I ended the week up 1.71% and overall up 16.60% for February. Oh, and had I not lost $200K on that one ROKU trade? I’d be up 27% for the month. That’s fine; I’ll take the lessons learned and continue moving forward. Remember, fire those employees (your losing positions) that aren’t doing their job, or they will take every last penny you have.
- Starting balance: $2,029,378.00
- Ending balance: $2,070,884.00
- Money wired out: $173,775.00
- Balance if no money wired out: $2,244,659.00
- Monthly return: 10.6%
- 22 trading days. 14 winning days, 8 losing days
- Avg winning day: $120,131.06
- Avg losing day: -$183,319.29
- Biggest Daily Loss: -$581,317.04 (NQ Error)
- Biggest Daily Win: $323,418.60
Ah, March. I was bearish at the end of February and going into March. When the SKEW is over 135, and the 10-day moving average of the put-call ratio falls to the lower end of its range, bad things don’t always happen, but . . . bad things have always started with that setup. It just shows a market that is extremely long, with the more sophisticated participants starting to hedge. I like to think about it as follows: If everyone on the planet who wants AAPL owns AAPL, how is it going to keep going higher? The answer is, “It’s not.” You need more buyers to propel a stock price higher. Once the buyers run out, stocks start to fall on their own weight as they trigger stop-loss orders from nervous traders. Throw in some margin calls from overleveraged traders, and this can quickly turn into an avalanche of selling.
I had no idea what was about to be unleashed, but I knew there was no reason to be long. The short side of the market is fun, but it is hard. The volatility explodes, and overnight moves can kill you. As a general rule, when the VIX goes above 30, I’m very light to flat overnight and just focus on day trades. As we headed into March, I told everyone it looked exactly like 2008. I’ve seen this before. Don’t stress; we got this. Cut your position size by ⅔ and triple your stops.
Take the loss when it’s not working. Re-entry is only a commission away.
There are two schools of thought to “re-entry is only a commission away.” In an uptrend, the argument against it is that stocks can gap up huge, and if you aren’t in it, you won’t be able to get in once it takes off. That’s a good point, and it’s true. For me, it’s all about protecting the downside. I don’t care if I miss a move. But I will berate myself if I get caught in an avalanche of selling that wipes out months of hard work. As a trader, my view is I should profit from an avalanche of selling — not get killed by it. Hence I’m willing to short my darlings at the drop of a hat.
If a market truly starts to sell off, averaging down and ignoring reality will get you killed. How do you know if it is a mere pullback to sit through or the start of something bigger? There’s never 100% certainty, of course. For me, on a daily chart, if the S&P 500 closes below its daily 21 EMA, then I am very quick to cut losing trades. Yes, it may pop back up above. And it may be the start of a 10% correction. I err on the side of, “When in doubt, get out.” I’d rather get back in on the long side when the market structure is cleaner. After all, it just costs me the commission, and there will always, always, always be another setup.
Back to trading . . .
I was up 13.76% for the first week and 8.77% in the second week. So far, the month was going well. I’m not holding onto longs. I’m actively trading, long and short. Why long? In big down moves, you also get the best retracement rallies. Go both ways!
Then, on a Friday morning, I wake up, check the quotes, and see the NQ limit up! Yes! I’m going to kill it today, and everyone who followed my trades will have a great morning. What a great way to end the week!
Wait… what? Why am I down like $400k? Obviously, there is an error here somewhere?
Oh. My. God.
On Thursday, I was long the NQ, and I had a GTC (good till cancel) sell order at a particular target. I ended up just closing my long NQ at the market, and… I FORGOT TO CANCEL MY GTC SELL ORDER.
This would have been great had the markets popped overnight, filled me, and then puked.
But, no, that’s not what happened.
What happened is that the markets rallied, hit my order to “SELL” my NQ long futures, and filled. Since I didn’t have long futures contracts, there was nothing to offset. So this got me short 30 contracts. Overnight the NQ proceeded to move limit-up. That’s what I woke up to… a $400,000 loss because I didn’t remember to cancel my GTC sell order.
I was shaken up, and it got worse from here. The cash session opened and, after a small pullback, I decided to buy AMZN calls that expired that day for a quick move to ease the pain of my NQ loss. Of course, what does AMZN do on a Friday? It falls. After looking great, it rolled over and died, and I watched it die, and my P&L die with it.
My account lost 22.72% that day. So brutal. I couldn’t recover from my mistake.
I ended the week down 17.41%.
My one saving grace? The NQ trade was an error and not a posted trade, so nobody had to share that pain but me.
(On a positive note, this is when I started to study AMZN’s behavior on a Friday and have since made a lot of money on that Friday puke pattern).
The last week in March, I played it more cautiously and ended the week up 3.08%, and I was still up on the month, cranking out 10.6%.
While Q1 was a great quarter, two trades ended up costing me a lot of money. The first was based on impulsive stupidity, ROKU. The second was due to not canceling a GTC order in the NQ. These were two VERY PREVENTABLE mistakes. You can do better than this, Carter. Without the NQ day, I would be up 35% this month instead of 10%. Never forget that anything can happen in the markets, including the markets taking away every dollar in your account in a very rapid fashion. The market doesn’t know you exist, so it’s nothing personal. You just need to make sure you are tuned into the market and what it is prepared to offer you that day.
- Starting balance: $2,070,884.00
- Ending balance: $2,144,190.00
- Money wired out: $118,825.00
- Balance if no money wired out: $2,263,015
- Monthly return: 9.3%
- Winning days vs. losing days: unknown
- Avg winning day: unknown
- Avg losing day: unknown
- Biggest Daily Loss: -$249,913.74
- Biggest Daily Win: $611,531.32 (AMZN)
For April, it was mostly a quiet month as I didn’t push it too hard. I did have a nice trade in AMZN, but otherwise, it was quiet in terms of trading. This is a journal entry from April 4:
“What a whirlwind. I feel exhausted. Maybe it was the hard workout yesterday? I think, though, I may have absorbed a lot of scared energy. There is a lot of panic out there with Covid-19. School is shut down. Businesses are closed. There are food shortages, and people are fighting over toilet paper. I read a few things where this is going to turn into the next Great Depression. I don’t believe that, but still, you read that shit, and part of it sinks in. My oldest son asked me if we would be ok and I said, ‘Don’t worry, we are going to be fine.’ I caught myself. Was I taunting the universe to challenge me? I mean, I think it is just an upper limit problem. (An upper limit problem is what happens when things are going ok, but your mind starts inventing things to worry about to keep you from advancing further). So, anyway, how about just act like the universe is rigged in your favor, enjoy the ride, let go of the outcome and enjoy this time on earth while you have it?”
What’s fascinating here is that on April 24, I added my usual daily balance entry to the spreadsheet. After this date, I just stopped tracking it for six weeks. I don’t really remember why. I didn’t resume tracking it again until June 15, so I have to rely on my monthly statements and my journal to see what was going on here. In April, it was sinking in that the world was changing, and I was more focused on the outer world and what was going on. The markets were volatile. I was frequently up late and up early and in front of my computers a lot. I posted constant updates in the room as people were looking for guidance. I’ve seen this movie before; there is no reason to panic. It will all work out. But it was exhausting, and I think I reached my limit. I needed some recharge time at the beach, but we were on lockdown and couldn’t travel anywhere.
I ended up with a gain in April. May? Not so much. May turned into my first losing month of the year.
First, if we look at May, it is apparent that May was not a fun month to trade, at least for me.
- Starting balance: $2,144,190.81
- Ending balance: $1,646,436.20
- Money wired out: $0.00
- Balance if no money wired out: $1,646,436.20
- Monthly return: -23.21%
- No additional stats as I didn’t track the daily changes.
I remember May was generally a stressful month of, “What the hell is going to happen to the economy with all this lockdown stuff?” I was spending a lot of time researching whatever I could, while also trying to get effective internet going in Wimberley. Up to this time, I was still driving into the office or our “old” city house in Austin as much as possible so that I could use fast internet. The commute is about an hour each way from Wimberley, and it was getting tiring. In Wimberley, I had a point-to-point connection that was about 2.5MB up and down on a good day. My trading platform would often freeze during this incredible volatility, and some of my losses can be attributed to having tech issues. There were days where I was stuck in positions and couldn’t get out in a timely manner. Fun times, indeed. (But — I do take full responsibility as it was me who chose to trade on a slow connection).
From my journal entry, it looks like my first week in May, I was down about 15%, and from there, I just got really cautious, not wanting to dig a bigger hole. I also found out that my stepbrother, who is a year younger than me, passed away suddenly due to his organs shutting down from drinking too much alcohol. It really hit me hard, and I broke down crying a few times. It was like we were hanging out in 9th grade, and the next thing you know, this? How did our paths from that point in our lives lead to this for him? WTF?
From here, I started writing out things on how to make my life more simple. “Get rid of anything annoying. Let’s cut down the daily activity and focus on generating positive cash flow from trading, with minimal expenses. That’s not a bad way to spend the rest of your life.
“This gives you the chance to relax and start structuring your trades in a more relaxed way. You can trade small and still wire out 25K a week. Do spreads. Capisce? You can relax and trade with your kids. Take this as the gift that it is; set aside your ego. Morph into a trading life of ease, which can be accomplished with the right setups and option structure if you are patient. The day trading you did in March has negatively impacted your trading, as you are still focused on quick day trades. What are you, 12 years old? There is no need for you to be as mentally tired as you are right now.”
After this journal entry on May 27, I started doing an “auto wire” of $25,000 each Thursday morning. This would happen automatically whether I made money or not. I also started a 72-hour fast. I have little recollection of my trading in May.
- Starting balance: $1,646,436.00
- Ending balance: $3,155,005.00
- Money wired out: $200,000.00
- Balance if no money wired out: $3,355,005.00
- Monthly return: 103.78%
- No additional stats
The biggest change in June? I got a fast internet connection out in the country. Instead of trading off 2.5MB spotty service, we finished construction on an 80-foot tower, and I now had 50MB up/down internet—huge, huge difference. Getting fast internet out in the country was a two-year project. We are starting to offer the service to our neighbors as well.
With the faster internet, my trading started to improve. Then, on June 13, after grinding it out for six weeks, TSLA teed up for the first million-dollar trade of the year. At that point, I also changed my auto-wire from $25,000 to $62,500 per week. This wire would go out every Thursday morning, automatically, whether I made money or not. I also decided to start resuming my daily spreadsheet entries on June 15. On June 18, we had a nice gap up in SPOT, and we closed that and headed to Colorado for a family road trip.
While traveling, I put on some trades and the markets suddenly went extremely negative, as they often seem to do when I travel. I ended up down 2% on the week but only because I had a great recovery day on Friday. Once again, why couldn’t I just take the week off? I mean, I get it, I like to trade but…!
All in all, June was a great month. Let’s get back in the game. Turn off the news and get back to work.
- Starting balance: $3,155,005.00
- Ending balance: $3,376,688.00
- Money wired out: $1,187,500
- Balance if no money wired out: $4,564,188
- Monthly return: 44.67%
- Trading Days: 22
- Winning days vs. losing days: 15 winning days, 7 losing days
- Avg winning day: $233,151.50
- Avg losing day: $298,298.42
- Biggest Daily Loss: -$732,308.75 (Overnight move in AMZN long calls destruction)
- Biggest Daily Win: $1,325,736.45 (TSLA)
For the week starting with July 6, I started off bearish with puts on SPY and lost $100K right off the bat. Later in the day, I bought 100 calls on TSLA, and it exploded into the close. I sold half and kept half. I had up days every day this week and was really in the zone. On Thursday night, I noted that I had “A lot of AMZN and TSLA exposure going into Friday the 10th.”
On Friday the 10th, I was initially down over $200K with TSLA gapping down. AMZN was doing well, and I closed out that position. I had some small NQ and ES futures that I closed out at the lows of the day like a noob. But I held onto TSLA and added to it, and it recovered, broke out, and went up to new all-time highs. Best trading week of the year and another million-dollar TSLA trade.
On July 13, my portfolio was up about 10%, and I decided to buy 4,000 shares of TSLA and then went to look for the zebras, which I had purchased the month before.
When I came back from the hike, TSLA was down $150 a share from my entry. This is not something I thought would happen, and I have no excuse for not having a stop loss in place. Lost 12% that day. I never recovered from that and ended the week down 15%.
The week of July 20 started great, up nearly 10% on Monday. From there, I had a decent position in AMZN that tanked, giving me my biggest loss of the month, and I ended the week down 9%. The next week was steady, up 15%.
I ended up wiring out a lot of money this month. This was for taxes as well as a downpayment on a new house we committed to in February before all the Covid-19 went down. We could walk away from it and lose our 10% deposit. But I wanted to go ahead and get the house. If we ever go back to Austin, it’s a great house in a perfect central location on a 5-acre lot with trees all over the place.
- Starting balance: $3,376,688.00
- Ending balance: $11,360,342.20
- Money wired out: $650,000.00
- Balance if no money wired out: $12,010,342.20
- Monthly return: 255.68%
- Trading Days: 21
- Winning days vs. losing days: 16 winning days, 5 losing days
- Avg winning day: $624,860.70
- Avg losing day: -$272,823.53
- Biggest Daily Loss: -$362,520.07
- Biggest Daily Win: $2,466,165.08 (TSLA)
- Starting balance: $260,315.30
- Ending balance: $1,073,646.02
- Money wired out: $0.00
- Balance if no money wired out: N/A
- Monthly return: 312.44%
- Trading Days: 11 (Started trading in this account on Aug 17)
- Winning days vs. losing days: 9 winning days, 2 losing days
- Avg winning day: $95,742.62
- Avg losing day: -$24,176.44
- Biggest Daily Loss: -$38,290.00 (CRM, TSLA, manageable positions, though)
- Biggest Daily Win: $221,108.49 (TSLA)
August was quite the month. For the first week of August, basically, everything I touched turned to shit, and I lost 8.03%.
For the week of August 10, I had some back-and-forth and ended the week up 15.08%. I lost money on AAPL and made it on TSLA. This started a streak where I made money each week for the next 2 ½ months.
Note, on August 10, I also wired over $200K to tastyworks (TW). I had $60K sitting there doing nothing. I wanted to get a portfolio margin on that account, so I sent over more funds. I started tracking my daily account balances in TW this week as well, starting on August 17.
On Thursday, August 13, in thinkorswim® (TOS), I placed a 500-contract call debit spread on TSLA and posted it in the trading room as a 15% position. I also bought 1,000 shares of the stock, which is like 10 in-the-money call options. On Friday the 14th, it disappointed, gapping up and selling off, then finally rallying a bit into the close. I held on for the weekend. Below is what the 30-minute chart looked like, which is about damn near perfect. I did a similar, smaller position in my TW account. I think it was a 100-contract call debit spread.
Although it was extended on the daily charts, the 30M chart was a textbook bullish setup, and this is what I was trading:
- Moving averages stacked positive.
- Squeeze early warning buy signal arrows
- Ready. Aim. Fire!® buy signals
- Momentum turning back to cyan on the 30M squeeze, indicating the slight positive shift in momentum
- Cup and handle pattern
- It doesn’t get any better than this on the long side.
On Monday, Aug 17, TSLA gapped up, and . . . kept on going. AND TOS WAS DOWN ALL DAY! TSLA closed at $1,835 (up $186 a share on the day). It blew through my short strike, which is a great thing with a call debit spread. Now I could just hold on and collect premium decay. I decided to hold it overnight.
It wasn’t lost on me that, had I just bought calls, I would be up like $6 million on this trade since a call debit spread caps gains. But it begs the question, “Would I have been able to hold onto it that long?”
If I’m honest with myself, probably not.
On Tuesday, Aug 18, TSLA kept going. I was quickly at 85% of the max profit on my call debit spread and realized it didn’t make any sense holding onto it any longer. This turned into my biggest trade ever, right around $3.75 million. Since my trading platform was down, I had to close it on my iPhone, which was a first. For the week, I was up 156%, just over $5 million.
The next week I made 21.67% to end August on a high note.
My $260K tastyworks account was also off to a good start, ending this same week at $460K, and ended the month up over 300%. I’m sure everyone at Tasty thought I was insane, LOL.
This was all a bit overwhelming and surreal, and I needed to process what happened.
I packed up my family, and we headed to South Padre Island. I knew I couldn’t let the euphoria get to me. It was just time to catch my breath and get ready to go back to work. After a winning streak, it doesn’t suddenly mean you are special or that you’ve finally mastered the elements. It just means you caught a nice wave. Catch your breath, and go back to following your damn plan.
South Padre Island was amazing. I only remember it vaguely from Spring Break in college. When it’s not Spring Break, it’s a sleepy little beach town and is the best stretch of beach in Texas. I get it — that’s not saying much — — but we were in lockdown, and you do what you can. Before this, we would schedule regular recharge trips to the Cayman Islands, where we have a condo on 7-mile beach. We love these trips and really missed our family beach time. This got me thinking about getting a beach house in South Padre. At least we could drive there without having to take a Covid-19 test.
At this point, I had a large amount of cash. Should I YOLO (You Only Live Once) it and try to double it again? Or take some money out and put it into tangible assets that the markets couldn’t take away from me? Namely, real estate, gold, silver, and crypto? Having done this for a long time, I had no illusions that I was now a “trading master of the universe.” I was dialed into the markets, and I followed my plan. That’s it. Will I be as dialed in next week? Will I be able to perceive what the market is willing to offer me next month? I didn’t know, and I don’t know, and I never will know. Trading is a daily psychological session to see if you are living in the present or not. Needless to say, I decided to start taking out larger sums of money.
Writing this in January 2021, and being a genius in hindsight, I would have put it all into bitcoin and GME. As it stands, I put most of it into real estate and some of it into gold and bitcoin. In trading, I’ve talked about how we need to let go of anxiety and fear and anger in real-time, as it comes up. I’ve also learned that we have to let go of any fantasies we entertain of having the perfect genius in hindsight trade. “If only I had bought 10,000 bitcoin when it was at $1.00! If only I had bought 1,000 GME calls when it was at $20!” These kinds of fantasies also destroy our ability to act in the present moment and must be eliminated (i.e., let them go) as soon as they come up.
At this time, I also decided that I would use $10 million as my new “baseline” in my TOS account, and I would wire out anything above that. Makes sense, right?
This was a huge mistake.
As you’ll see, that idea didn’t last long and eventually backfired. Looking back, I realize what a huge mental shift that caused. Now I was unconsciously trading “not to go below $10M” instead of making myself available to the market opportunities. I was trading from a subtle fear of losing. And what you think about eventually comes about.
- Starting balance: $11,360,342.20
- Ending balance: $12,155,542.03
- Money wired out: $3,050,000.00
- Balance if no money wired out: $15,205,542.03
- Monthly return: 33.85%
- Trading Days: 21
- Winning days vs. losing days: 16 winning days, 5 losing days
- Avg winning day: $312,727.69
- Avg losing day: -$214,356.26
- Biggest Daily Loss: -$664,712.67 (Teaching a class while ignoring my positions. Trend?)
- Biggest Daily Win: $844,057.03 (SHOP, indexes)
- Starting balance: $1,073,646.02
- Ending balance: $1,181,744.10
- Money wired out: $0.00
- Balance if no money wired out: N/A
- Monthly return: 10.07%
- Trading Days: 21
- Winning days vs. losing days: 9 winning, 7 losing, 5 days 100% cash, no trades
- Avg winning day: $55,949.96
- Avg losing day: -$56,493.09
- Biggest Daily Loss: -$179,020.00 (Lost focus due to class. Haven’t I written about this?)
- Biggest Daily Win: $152,864.34 (long index plays)
Now I’m trading two large accounts. TW is a bit of an afterthought, with TOS as my main focus.
For TW, it started strong, up 6% in week 1 and 7% in week 2.
For week 3, Wed the 23rd, I lost 15%. “Total crap day. AMZN, DKNG, NVDA, SPOT. I didn’t even look at this account once today as I was focused on my class. Worst day of the year for this account.” I lost 14% that week and then another 14% the following week. On September 28, I had a strong day, up 14% being long the indexes. This last trading day of the month, I had a great day, and this, and only this, turned this account positive for September.
I gained 7.30% the first week from the market puke and shorting NFLX, FB, and NQ. The second week, my gains exceeded 15%, again on bearish trades in NQ, AMZN, and NFLX.
For week 3, it was volatile yet ended up 1.36% on the week.
Overall, a solid month in my TOS account. I did end up wiring out a lot of money to start putting it into tangibles. My goal heading into October was to keep my TOS balance at $10 million and wiring out funds above that amount for tangibles. This includes real estate deals I’ve committed to and would be closing in October.
- Starting balance: $12,155,542.03
- Ending balance: $4,002,990.42
- Money wired out: $4,162,500
- Balance if no money wired out: $8,165,490.42
- Monthly return: -32.83%
- Trading Days: 22
- Winning days vs. losing days: 10 winning days, 12 losing days
- Avg winning day: $219,802.29
- Avg losing day: -$515,672.88
- Biggest Daily Loss: -$1,656,777.26 (I made big bets bulls would prevail. They didn’t)
- Biggest Daily Win: $447,492.75 (AMZN, CMG, CRM)
- Starting balance: $1,181,744.10
- Ending balance: $915,852.40
- Money wired out: $0.00
- Balance if no money wired out: N/A
- Monthly return: -22.50%
- Trading Days: 22
- Winning days vs. losing days: 7 winning days, 9 losing days, 6 flat days
- Avg winning day: $50,449.56
- Avg losing day: -$68,782.07
- Biggest Daily Loss: -$133,375.47 (RH destroyed)
- Biggest Daily Win: $73,010.02 (Closed ZM on gap up)
Oh, October. October was a mental game fail. First week? Up 3.13%. Second week? Up 2.97%. Third week? Down 2.07%. This was my first down week in my larger TOS account in 2 ½ months, since the week of August 3.
Not bad, right? Very manageable swings. So, what happened?
In October, you’ll notice I wired out $4 million. As I’ve stated, my grand plan for October was to keep my balance above $10 million and wire out any excess profits, and put them into tangible assets. This would be my nice, easy plan for the rest of the year.
This came to a head on October 15. On this day, I was due to wire out seven figures to buy a beach house we had found in South Padre. I started the day at $10.2 million and had sizable positions on TSLA and RH. Both positions sucked wind, and I lost $700K that day, with my account dropping to $9.5 million. I then had to wire out $2 million, mostly for the beach house, and now my balance was at $7.5 million. This messed me up mentally as I hung onto the narrative of having a $10 million account.
The next week I lost $500K. I loaded up on SNOW and RH and a few other names for the weekend. That Monday turned into my worst trading day ever, and I was down $1.65 million on the day. I made $400K the next day, and then the rest of the week was a continued shit show. Up to the last week in October, I was flat on the month. The last week of October, the markets reared back and punched me in the face. But… it didn’t really do that, of course. I simply was wrapped up in my own inner perception of the world, and I had forgotten to view the market from its perspective. I was trying to impose my will on the markets. I forgot the most important trading lesson: When dancing with the markets, it’s best to let it lead.
Why all the real estate? I like to find properties we would like to visit and turn them into short term Airbnb rentals. This is a good family activity. There are tax benefits to having an “active” real estate status, where if you have real estate losses due to depreciation, this can be deducted against your trading gains.
By chance, we had many “tangible asset closings” all lining up in October, so suddenly, the pressure was on to generate real cash to cover these deals.
So, October was a shit trading month. In retrospect, had I not put this pressure on myself, would it have turned out better? You never know, but that was the outstanding mental factor I had to manage into the end of the month. The pressure to make money trading generally causes the most trading errors. My narrative of “keeping it at $10M” was a hidden agenda that conflicted with my ability to relax and view the markets from its perspective.
Lesson learned. Again. Next.
- Starting balance: $4,002,990.42
- Ending balance: $5,744,439.79
- Money wired out: $1,050,000
- Balance if no money wired out: $6,794,439.79
- Monthly return: 69.73%
- Trading Days: 20
- Winning days vs. losing days: 12 winning days, 7 losing days, 1 flat day
- Avg winning day: $311,924.42
- Avg losing day: -$135,936.23
- Biggest Daily Loss: -$390,750.00 (the week before Thanksgiving was meh)
- Biggest Daily Win: $1,299,940.53 (TSLA)
- Starting balance: $915,852.40
- Ending balance: $1,556,197.63
- Money wired out: $0.00
- Balance if no money wired out: N/A
- Monthly return: 69.92%
- Trading Days: 20
- Winning days vs. losing days: 7 winning days, 1 losing days, 12 flat days
- Avg winning day: $119,186.89
- Avg losing day: -$193,963.00
- Biggest Daily Loss: -$193,963.00 (Open loss in TSLA that I held, and then it rallied)
- Biggest Daily Win: $447,492.75 (TSLA)
To start November, I was trading slow and steady. I went into the month 100% cash and didn’t do anything on the first trading day. My main goal at this point was to clear my head, forget about October, and go back to trading and taking opportunities from the market’s perspective of what it was willing to offer vs. my perspective of trying to maintain a certain balance or make a specific amount of money for a piece of real estate.
For week 1, I was up an auspicious 8.88% in thinkorswim. Week 2, down 3.53%. The week of November 16 was crap. Down 19.72%. My notes just say, “Meh. Crap.” On each day. That said, some of this loss was due to hanging onto a large TSLA position that I did not close out, and it popped on Monday the 23rd. This turned into a big trade, up over $2.5 million. In tastyworks, I didn’t have the same fluctuations as I mostly stayed flat, adding the TSLA trades towards the end of the month.
In hindsight, I put a lot of pressure on myself to generate cash for the pending real estate deals. It should have been the other way around: first, wire out the money, then find the property. That said, I’m still a huge fan of wiring out money, and it will continue to be a regular account management strategy in my trading. What if I had a 30% down month without having wired any money out? That would have been super ugly. But losing 30% on remaining money after wiring out a lot of cash already? Not as big of a deal. Protect your cash.
- Starting balance: $5,744,439.79
- Ending balance: $4,850,538.86
- Money wired out: $1,712,500.00
- Balance if no money wired out: $6,563,038.06
- Monthly return: 14.25%
- Trading Days: 22
- Winning days vs. losing days: 11 winning days, 10 losing days, 1 flat day
- Avg winning day: $329,884.60
- Avg losing day: -$281,013.15
- Biggest Daily Loss: -$391,202.89 (TSLA flush)
- Biggest Daily Win: $541,002.27 (AMZN call credit spreads, calls on TSLA)
- Starting balance: $1,556,197.63
- Ending balance: $1,705,082.54
- Money wired out: $0.00
- Balance if no money wired out: N/A
- Monthly return: 9.57%
- Trading Days: 22
- Winning days vs. losing days: 13 winning days, 4 losing days, 5 flat days
- Avg winning day: $66,145.15
- Avg losing day: -$177,750.51
- Biggest Daily Loss: -$338,390.00 (Open losses in TSLA on a flush day, large spreads)
- Biggest Daily Win: $249,180.00 (TSLA bounce the next day from above open loss)
Although October was terrible, November and December were solid and took me to new account highs on the year. It basically took me two months to recover from that last week in October. That’s what I mean when I say, “Re-entry is only a commission away.” Missing a move is fine. Recovering from a big drawdown takes a lot of time and effort. What if I had just gone flat that last week in October and waited until things looked cleaner?
December was fairly chill. Nothing too bad, nothing too great. There was one TSLA trade that I took a lot of heat on but held on, and it worked fine. It upset me that I let it go that far against me, and I count myself lucky that I recovered.
My notes from that week:
“Although this week was manageable in the end, from a risk to reward standpoint, I think this was my worst week all year. Yes, it recovered, and it was down 8% on the week, but at one point with TSLA, you were down nearly 30% in open losses. That is a huge intraweek drawdown, and frankly, it was inexcusable, and you got lucky. You could have easily been annihilated on this trade.
“What gives? I got complacent. I made huge bets that I assumed would work, and I didn’t fully accept that they might not work.
“I was ready with the TIMING for a market pullback, and I IGNORED IT COMPLETELY. This is what I mean by complacency. Why hedge when it “never” works? With timing in place, you don’t have to go short, but if you are locked and loaded long, and you ignore that signal, then you deserve whatever beating the market is dishing out that day. You are literally begging to have the shit kicked out of you. Is that a subconscious thing where you are seeking punishment? Or just complacency? Both are inexcusable.
“There is no excuse to get complacent. Yes, your focus is on big trades and big gains, so don’t let this turn you into a coward. But you know how to hedge, so at the very least, WHY NOT DO THAT? You got lucky this week. Next time you ignore that, your luck may run out.
“As PUNISHMENT, I’m going to wire out $1M and put it into bullion where it will at least be safe. Earn back your right to trade large.
“Last, APPRECIATE the reminder the markets have given you this week in terms of what they are capable of doing. You have no idea what is going to happen next. Anything can happen.”
For the next week of December 14, I was up 16.80% with no big swings and up 6.01% the following week, making money every day. And the last week of the year ended up 7.77% (a great number), starting off in the hole on Monday but working my way back to green.
My tastyworks account was fairly smooth all month. I’ve been trading less in this account. There is something to be said for trading less. You end up just taking the trades that are too good to pass up!
Annual Stats Recap
John’s 2020 Account Summary
All in all? A great trading year.
From reading through this, you would think it was a horrible year as it seems like I spent most of my time on the losses and managing my ego. But, I’ve found this is where constant learning comes into play, and I really enjoy the self-improvement aspect of trading. I mean, it is hard to explain to people how much I love trading. I love the challenge, the element of the unknown, the risk of ruin, and the joy in catching a nice wave. No two days are alike. I wake up excited to see what is going to happen next.
You have to be ruthless with yourself. It’s a form of self-love. By being brutally honest, you are also being incredibly kind. You are saving yourself from yourself, as quickly as you can. It can definitely be a love/hate struggle. But remember, the opposite of love isn’t hate. It’s indifference.
Show yourself that you care about you — the real you — by being brutally honest, yet at the same time forgiving yourself each and every day.
Here’s to a great 2021.
For anyone interested: Trading Room And Alerts Trial