With Mark Moskowitz back in the office heading the Day Trade Well Channel I wanted to change my blog up a bit from the usual stock picks/thesis to a something more geared towards psychology and the mental battles we face daily while trading.
To fill everyone in, Mosk and I have both played competitive golf throughout our lives and when he first started training me we would relate every trading situation to golf, especially anything that related to mental strength. As most know golf is probably the most mentally taxing sport out there, lucky for me the most taxing job/game is trading. So from taking loses, to taking a breath, to leaving on a good note everything in trading relates to golf.
The one example I want to talk about today is knowing when to back off, Laying up instead of going for it. (If you have ever scene Tin Cup you know what I’m talking about)
This month hasn’t been the best for me. I was sloppy for the first week before tightening it up and putting together what I felt were my two best trading day’s of the year. Last Thursday and Friday were solid days, they weren’t the best as far as PNL but I traded well, I added alpha and I was up nicely. I wanted to point out that I was still up nicely because I’m not a believer in the I did everything right today it just didn’t go my way attitude, I know it works for some but for me it’s a way to meritocracy which can quickly turn into dismal performance. I tried it for two year’s playing College Golf, I was told to just go through your process and ever else will take care of itself”, maybe that work’s for others but it sucks for my personality, as I have to look at the bottom line. In golf it was the number on the card at the end of every round and in trading it’s the PNL.
So here’s my dilemma, the last few days I have been trading alright but I’ve been taking a bath in one position, Entropic (ENTR). If you have followed by blogs in the past, you know I blew out of ENTR at the lows, $7.75 to be exact right before it rallied to $14. ENTR is also the first position I put on at this firm so I have a little bit of history. Anyway, it cost me $1,200 the last few days and I’m starting to get antsy.
I started a small position in ENTR last week and on the open Thursday it showed weakness but rallied to close on the high’s putting in a hammer candle at an import support level on the $10.00, with that constructive action I doubled my position at the close from a measly 500 shares to 1000 shares. ENTR than again saw buying into the close Friday so I took my position up to 1500 shares. On the open Monday we saw substantial buying as the stock rallied 5% in the opening 20 minutes before topping out at $10.75. I sold into the move but was quick to buy the stock back and add into the position. ENTR pulled back 75 cent’s closing back at the figure. Clearly someone has been selling the stock and the odds of an up day tomorrow aren’t looking great.
When I think of the situation I’m in I think of the movie Tin Cup. This is a very cheesy comp but it will work. Every time Roy McAvoy (kevin Costner) get’s to the 18th hole he attempts to get home in two, 18 is of course a par 5. One day there’s wind other day’s there’s doubt and either was he has never successfully knocked it on in two yet he has witnessed the glory from a far. In Entropic I sat on the sidelines as my initial call rallied 100%, so I think I have a handle on the name. Unfortunately, there has been wind in my face as someone has been dumping this thing since Monday morning and unlike McAvoy I’m not going to blow the whole tournament because of my ego. I have the same 2500 shares on I had last night and I’ll take my shot tomorrow morning but if I start to see the same selling I’ll be quick to take the position down immediately and wait for ENTR to stabilise before getting in for the potential run up to $17.
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