The tale of Trader Dale (for confidentiality, I've changed his name) discusses the real-life fears and difficulties of one trader who represents the experiences of many. As you may know, these can be an emotional roller coaster, so talking about it in abstract terms tends to fall short of showing just how important and real these lessons are.
So I've decided to show you a glimpse of the correspondence between Dale and myself, so you can hear in Dale's own words and responses to mine what he went through and see for yourself how it relates to your own trading situation. I'll begin with my letter to Dale well into our correspondence, and then show you his response.
Dear Trader Dale,
This is Dr. Janice, and I would appreciate a few minutes of your time today. I have a burning desire to speak with you about the risks you are taking in your trading. Despite the fact that I am not formally coaching you because you were absolutely convinced that you were ready to "go it alone," you have written to me on several occasions in the past two months. Also, you continue to send me your trading journal. For that reason, I have been watching rather closely for the past few weeks. As you are aware, I do to peek over your shoulder from time to time to ensure that you are trading in the realm of your risk tolerance and managing your risk according to your trading strategy and plan. You have recently begun telling me over and over again that your performance has been a bit disappointing. I have assured you—and continue to reassure you—that this does not really trouble me at this point. You have been through this before, and I am totally confident that you will pull out of this in the same manner that you have in the past.
That said, I won't ever lie to you. I know you well enough to sense that you have been increasingly anxious of late. I feel it, and so do those around you. It is this anxiety that concerns me. It is getting late in the year, and you have not met your monthly or quarterly goals since April. Your wife has phoned and written to me several times that you are not sleeping well and that you seem to be angry and irritated around the children. She tells me that you are isolating yourself more and more from your family and friends and that she can't get you away from the computer. She suspects that you are hiding something from her and maybe doing something sneaky on the computer, because you are staying up very late at night with the door to your study locked.
It is my opinion, after two years of coaching you, that your wife is correct about your doing something sneaky, but not in the specific context she described to me.
My concern is that you are fooling around with your trading strategy and plan in an attempt to figure out some way to increase your return quickly by taking bigger risks. I sense that you are studying the markets pretty much 24/7 to find some huge opportunity that you can pounce on to make enough money to bring you out of the red and into the black for the year. You want to do what in this business is called "taking a shot." You have asked yourself, "What could possibly go wrong?" You are in your study late at night studying every market and every possibility to find that one big trade that is going to take you sailing happily into December.
Please let me know where you are in your thinking right now, Dale, and please be radically honest with me, as it is the only way for us to move forward and get to the core of what's going on with you.
Thanks!
Doctor Janice
Dear Doctor Janice,
I have not been trading well for the past six months. Basically, I can't seem to do anything right in this market. I enter a position, it goes against me, and I don't follow my plan to let the stops take me out of the market. I am playing around with my stops, and I end up turning a trade into an investment. I am in hope-and-hold mode, and what is happening is that the losing positions are turning into larger and larger losses every day.
Someday I see a bounce in one or two of my losers, and that gives me hope that it is going to come back. It is the strangest thing, Dr. Janice. Just about the time I am ready to sell in desperation, the thing goes up and keeps me in the game. It's almost eerie and uncanny—sort of like it knows when I have just about had enough pain and can't take another sleepless night. The next day, I go in there all ready to sell and take my loss, and the darn thing closes up for the day. That keeps my hope going. Yes, I am still at a loss (and a pretty large one), but now I have a little hope. So, I don't sell, and the vicious cycle starts again. Finally, I decide enough is enough and I hit the sell button and take the loss. At first, it is a relief, and then the pain and questioning start all over again.
This has been going on for way too long. You already know how much money I have lost this year, and I am still in an unrealized loss situation. You have told me over and over again to stay with my plan and strategy, and I have heard you. The thing is that I have not listened, and I did it my way.
Here's the real deal about this: I am just plain sick and tired of this trading strategy. It absolutely is not working. The results speak for themselves, and you see it in my year-to-date profit/loss.
This strategy has me in the red now, and I have to do something about it. Basically, I have find a way to snatch victory out of the jaws of defeat. The only way I see to do that is to change my strategy and trade bigger. The reason I am losing is that my goals are not big enough, and I am trading chump change and being nickel-and-dimed to death.
O.K., Dr. Janice, before you say what I know you are going to say, I will say it for you: I am the one responsible for nickel-and-diming my bottom line to death. There—I said it. But it doesn't change the fact that I still think that the "big one" is out there for me and the only way I can ever win in these markets is by trading size.
That is what I have been doing late at night every night for months. I am looking for the big trade, the one where I can put on maximum leverage and make my year in one trade. This is the only way to do it. Why not? I heard one of the original Turtles say that he only traded one day a week and made millions every year. If he can do it, so can I! I am just as smart or even smarter than the next person. All I need is this big trade, and things can get back to normal again. I will follow my trading plan, take my stops, let my profits run and do everything that you tell me to do. But first, I am going to find that one big jackpot lottery trade.
That's about it for now. Please write back and tell me that I am doing what I should be doing now. By the way, I absolutely know that I am right about this, and all I need to hear from you is that you believe in me and know that I can do it.
Thank You,
Trader Dale
I will continue this tale and show you my response to Dale's letter in my next Trading Wisdom. In the meantime, please give some thought to Dale's story and consider how it relates to your own trading situation.
