Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Brutality, Emotion & The Trade 1.31.11

 The only way to improve on one’s own trading is to be brutaly honest with one’s self.  I can’t remember the last time I felt this bad about an enitre weeks worth of trading.   I am  probably up a few thousand dollars total week over week.  But that is not the indicator on how I traded. I traded like sh*t. So here are some of my assessments &  recounting so I can take the action I need to take in order to improve my trading.

Firstly, in this business, the trader is fully responsible for his trades.  He may mishear something, accept bad information or poor  research,  hit the wrong key etc. Whatever it is, its the trader who makes the decision, and he alone is the one held responsible.   When I traded this week it was with a heavy heart, which means I was in an emotional state.  My greatest attribute as a trader is that I (try) to be stone cold when I’m in the trenches, in the heart of combat.  Usually if I feel emotion creeping in I’m disciplined enough not to trade at all (best idea) or to trade lightly.  The reason I was so uncomfortable  to trade was because other partners on the desk were taking careless and unnecessary risk.  In fact one of our cardinal rules was broken, the really big one:  No one person can take us down.  Well we were in that position and I was raw about it.  Angry and frightful, and very burned by it.  So how did I think I should trade too?  I didn’t.  Or more correctly, I barely traded.  Just enough to risk 8k to make 16k,  But because i let the emotion in, i was doomed to screw that up.  I was small except for the outsized giant position in Haliburton that I was playing from the wrong side, and fighting the tape the entire time.  What a dope I am.  And I let myself stay in this position without making a hard exit point.  My thought was to massage the position over time til I can get it to work for me.  Again, brutaly, I f*cked this up. Instead of making another 10k or 20k, I’m looking to slay Moby Dick.  And these are things i never do. 

The thing about a trading desk is that its  a tight knit  community we all live in.  We all have our own lives, and ways we go about our business, but we do agree on being responsible for each other.  If any one of us gets reckless, they can destroy the community very quickly.  Its the rules we all agree on that bind us together on the desk.  If we adhere to the rules, the risk limits,  then we share in our successes and share in our (hopefuly few) failures.  We are a team, a family.  If  we are a bunch a mercenaries, trying to ensure a payout, not only can’t we be trusted when the money comes in, but expect ourt structure to crack and fail when it doesn’t.

I will take my portfolio completely flat at some point in time tomorrow.  Then I expect to have a conversation with  my fellow traders and bang out some hard rules to protect the firm at all times.  After that I’ll check my emotions to see if they’ve gone into the compartment I reserve for them during trading hours.  If I pass that test, then I’ll be jumping back in the pool.  If not, I’ll go find something else to do, like making a commercial with Monty.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.