Friday, February 6, 2015

Idiotic Trades

There are trades where you lose.

And there are trades where you're just an idiot.

You know what I'm talking about.

I don't have any huge outlier losers to talk about outside of that FNMA trade, but I have a plethora of remarkably idiotic losses that are large within my normal mark-to-market PnL range. I made one today on YELP. I can't look at quotes right now without feeling like the biggest moron in the world so I shut everything off.

So let's talk idiotic trades. You've heard the expression that trading is more art than science--well, there's a special art to losing money in the dumbest way possible. You go into the market to discover a very creative solution to lose money and you achieve it with perfect execution. Congratulations--you just flushed your hard-earned money down the toilet.

Style points
not paying for this image so there's  a watermark. deal with it.
So what is it that can make a bad trade truly breathtaking?

Your ego should act as a feedback mechanism. The way it responds to your worst trades may resemble the way it responds to suddenly remembering a repressed high school memory. You're walking along, having a nice day eating your ice cream, and your stupid brain suddenly decides to remember one of the many awkward and embarrassing moments of your life, like the time you tried to talk to a pretty girl and failed abysmally to utter a single coherent thought. That's you today, after getting stopped out yet again.

Here's a loose set of guidelines to determine that cringe factor that makes me you question just how much you've failed.
  1. Top ticking and bottom ticking the wrong way (buy high, sell low). Uh oh, here comes the panic monster! He's looking for his bitch.
  2. Overreacting to level II due to too much size--a cousin of #1 but reacting to noise rather than larger swings. 
  3. Churn losses. Rotating your position for negative spreads. -.10, -.15, -.05, -.02! It's when you're scared you might accomplish task #1, so you have to get your position back so  you don't feel like a chump! Hey at least you're keeping your losses small, right? I'm sure your broker thinks you're a fantastic trader.
  4. Churn losses in a tight range. The stock is stuck in a 25c range but you're the genius who's managed to lose more than that, effectively bumping down your break even cost basis to a price well below the range. 
  5. Chasing. The higher that little execution buy arrow (your execution) is on the 1-min green candle, the better. Those are exuberance points. Don't worry about the drawdown, just hold it until price target (da moon) is achieved.
  6. Adding against a runaway trend. We've all been there.
  7. Jamming. The type of add where you scale in too tightly i.e. a stock with multi-point range and you're knocking the buy button every dime and quarter. It's usually a symptom of too much buying power for your own good and a good case of tunnel vision--it's like your subconscious is trying to block the move on the stock like a market maker with infinite funds. The delusion is that strong.
  8. Flipping. Losing money on long and short. Bonus points the more often you flip because now the market makers are just laughing at you.
    scumbag mm's
  9. Losing when the play actually worked in a reasonable timeframe--this is the stroke of a sheer genius because it demonstrates the ability to lose money even when you source good trading ideas. Might be the case of #9.
  10. Shakeouts. LOL nice try thinking you could trade for a living. They should call you Weakhand Joe!
    weakhand Joe talking to his wife, who will divorce him because he's barely a MAN
  11. Bagholding. It's a piece of shit and you have no idea what to do except wait (pray) for break even. You go on twitter to look up the symbol and all the evil shorts are holding their bash party and LOL-ing at you. Usually a signature of the blissfully unaware retail "investor" rather than degen scalp-happy day trader.
  12. Randomness factor. Somehow you got stuck with 10x your average position size on this random play that started off as a feeler. Thoughts after you stop out: Why? What was the point of that? I gave back my entire week on a that!? 

Contestant #1:

Lost $5,000 long and short ZQK as it traded in a 10c range. 

Style points: #2, #3, #4, #7, #10

I don't want to explain this one because I already feel overwhelmed with shame. Just click on the link and look at my executions. Then shake your head with disdain, take my blog out of the "trading" folder bookmarks and then re-label it under "comedy" or wherever you place funny links.

Because my trading is a joke.

I'll post a few more after I get my lunch.


  1. The worst part is when these mistakes get repeated.

  2. I have idea for your question in blog post "I'm Not Going to Tweet This New Blog Post" that my reader picked up. What consist for you as a huge loss? 5% 10% 25%? Well, take that amount and spend it right now. Make conscious decision and take that money from account. Missing it could reset you as a break that people suggest. On the plus side you will do with the money something real that you didn't plan that will also impact you. So it's win win situation.
    Now when I told you this and you know about it you have to do it because if you now have that big loss not only that you will be miserable because of a loss, in pain because you have to take break that you don't want to you will also have in mind thought "he told you so" :)