My 6 biggest losses of 2009

Back in Nov 09, having lost huge sums on money on trading, i had all but given up. Deciding to stick to business, i ignored my charts for the whole month. It was when i was having a holiday in China with my in-laws that i thought back to trading and business, and the life that i had wanted to build for myself. I had always been obsessed with money-making ideas that only require an initial large effort and then minimal effort to maintain but with continuous or increasing income generating capabilities. I found business to be my calling, being born into a family of businessmen. In the 1st year of college, i started helping out in the family business and also had a few businesses of my own on the side. Both my grandparents own a range of different businesses and my uncles and aunts are also mostly running their businesses too. 2 years ago, I married an amazing lady with a similar background as me. We often share long talks about businesses and business ideas. I’m particularly obsessed with the idea of starting a business with as little capital as possible, basically keeping risk under control. My business partners would know that very well, especially the part when I keep refusing to expand the business because I feel that certain ideas were too risky.

Then I found out about stock trading and investing. At first, I found it to be fascinating. Imagine you could compound a small sum of money over time into a huge amount! And all you had to have was a laptop. The best part was I loved reading and analyzing things. So reading the news articles were not a problem. In fact, I had been doing all these before I started trading. However I totally underestimated the importance of psychology in trading. In business, if you had gotten some business concepts wrong, you could compensate for that by working extra hard. Hardwork can also eliminate almost all character flaws. NOT FOR TRADING. In trading, hardwork will only INCREASE the losses.

As I had posted in my previous blog post, i traded without any idea of a stop loss or time stop. I will hold a trade over a long period of time until I felt that the trade is no longer moving in my direction. There was a sub-conscious need for me to be right at least most of the time and often I felt it was important to find a set of indicators that will serve this purpose.

My trading went from small number of profits then one big loss. This occurred many times. Then, thinking that I should focus on home runs, I started looking for the one big trade that can score the biggest amount of money. Unfortunately, I found one. This initial big profit was followed by an even bigger loss and then another mother of all losses when I wanted to make it all back with one trade.

After these devastating trades, I felt very depressed and decided to focus on business. I did a few things half-heartedly that did not go anywhere. The pain of the loss is just too much. Then in order to allow myself to let go, I decided to go through all my trades for the year. Luckily TOS has a profit and loss statement that allows you to go back all the way to your very first trade.
After trading for so long and never looking back at my trades, I was totally surprised by the results. Of a total of a total of 223 trades that I made trading the stock market, 142 are profitable trades and 91 are losing trades. That means I’ve got a success rate of 63.6% and a failure rate of 36.3%. This is a good enough success-failure rate.

Out of the 91 losing trades, only 6 trades constitute almost 70% of my total losses, with only 1 trade making up 45% of my total losses. And the most irritating thing is that if I had placed a 10% capital stop loss to only these 6 trades, I would be UP USD 20K for the year. This proves that there is nothing wrong with my trading strategy and indicators; it is only my emotions and absence of a pre-defined stop loss that has killed my trading.

In order to categorize and remember these trades for all eternity, i've decided to put them on my blog. Btw, most of these trades had been executed without following any of my usual buy or sell signals (i look and look but just can't find any) and hence were mostly done out of over-confidence.

Also I found out that except for the last big loss, ALL these 6 trades were done after an exceptionally good winning streak that boosted my self-confidence and let the devils emerge from me. The last big losing trade was made out of desperation; wanting to make back the profits that i had lost, i practically did a showhand. Of course the last big losing trade for the year was also the mother of all my losses, and it alone accounted for 45% of my total losses for the year.

I also had no sense whatsoever of a stop loss or time stop, and let a number of my options expire worthless. Now looking back, i almost couldn't believe the number of warning signals that i had ignored when i allowed my options to depreciate and allowed my losses to accumulate to stratopheric levels.

My first big loss for the year 2009

Short Gold when it break 50 day moving average

As you can see, it never really break the 50 day moving average (red line) but instead gapped and rallied the very next day. I held on, believing it should come back down soon. And when it finally seemed to be coming back down, i added (twice) to my original position. Finally gave up after it gapped up again. Anyway gold is still above my original entry level as of today.

2nd big loss for the year 2009

Short GS for reasons i couldn't figure out


3rd big loss of the year 2009
This involved trading GS intraday. I allowed an intraday trade to turn into a day trade. I couldn’t reproduce the trades here as the intraday charts are not available anymore.

4th big loss for the year 2009

Short Gold-I think I used fibo but I did not wait for it to break OP before entering


5th big loss for the year 2009

Short Dow and S&P. I entered on a short trade because I believed very confidently that the Dow or S&P should not have enough momentum for a rally above their 200 day moving average. I exited all my positions just before the indexes made a dip

6th big loss for the year 2009

Short Dow and S&P. Thinking that I had missed out on a good tank, I entered on LEAP puts for the DIA and SPY. However the indexes never looked back and blasted through the roof. As of today, it is still above my entry levels. Again I exited my positions before a major dip.