AT #27: $500 to $74,580 Challenge Week 11

Have you ever been in a situation where you’re heavy in a position, the trade goes wrong, you get pissed and you say, “f*** this, I don’t care if it goes to zero.”?

In todays email I want to share with you how I broke those bad emotional trading habits.

In this Email

• Stats for the week
• Paper trading
• Reflection is the way to success

Stats of the week

• Number of trades: 8
• Profit: -$338
• PnL %: -73.62%
• Account value: $121
• Position size per trade: $300
• Cash position: $2,611
• Tickers: $QQQ | $SPY | $TSLA

The bottom line is that in 3 trades I lost the majority of my money. $650 down to $121. That’s a -81% drawdown!

So where does that put me into the challenge? Is the game over? Not at all.

I still have $2,611 of cash reserves that was made from previous trades. I will dig $650 out of the cash reserves to replenish the account.

This means, next week I will only have $1,961 in my cash reserves.

I’ve really been liking this idea of only leaving 30% profits and extracting the extra out. I don’t know about you, but I’m a dreamer, and this can come at a cost if the emotions aren’t aligned properly.

Take a step back and paper trade

There are going to be times out of the year, where you’ll have a red month, or breakeven.

When that happens, I like to take a step-back for a couple weeks and gather data.

I need to analyze where the weak spots are in my trading plan.

You can do this by paper, excel sheet, or some software tool of your choice. I have a, Alfa Toro tool that I use, and will show you next week what the data looks like.

This way you can get an idea of how I like to analyze my data.

Reflecting saves lives

Like I said before, I’m a dreamer, and dreamers can do some irrational things at times.

For example, I’ve been in trades with peoples monthly salaries, and have let it ride to zero because I didn’t want to be wrong.

“F*** this trade, I don’t care if this goes to zero.”

Only to be weeping like a little b***, and asking myself, “why the heck did I let it go to zero.”

These kinds of bad behaviors need to get broken A-S-A-P.

Here’s how I broke these bad habits:

Step 1. Take the trade fully aware

When you’re taking a trade, say out-loud everything you’re doing.

“I’m going to take $SPX zero-day expiration with a position size of 50% of my portfolio, midday.”

By saying it out-loud, you’re fully aware. And by taking the risk trade fully aware, you will now be breaking bad trading habits.

Step 2: Become Hyperaware

Now, to take this to the next level and to expedite breaking a bad trading habit you should reflect.

Ask yourself a set of questions to become more aware of what your action does to you as a trader.

Here are a set of questions you can ask yourself:

• How do I feel about my trade?
• Was the position size worth it?
• Did I execute my trading plan to a tee?
• Did I FOMO into a trade?
• Do I trust myself with this trade?
• Did I enjoy this, and what happen after?

Along the way, you’re going to learn lessons about yourself and your trading habits that will make you hyperaware.

Breaking a bad trading habit doesn’t happen overnight, but what you do by doing this on a daily basis is chipping away at these bad habits until one day it requires little to no will power.