Death Spiral Beginnings

For a few weeks now, I’ve meant to get around to writing about the extreme importance of having balance in my life in order to be successful. This is still not that post, but such thoughts will be forthcoming.

I’m pretty embarrassed at my conduct today, market-wise, and I blame the stupidity of my actions on the recent self-inflicted imbalance my routine has taken. I’ll work my way backwards, here and now discussing and addressing the stupidly made errors.

I say stupidly made, because a few of them are repeats. An error is acceptable, providing that I learn something from it. A second time, means I didn’t take the time to view that error as a lesson carrying the seeds of success, rather than an affliction, driving me toward failure.

Briefly, here’s the time-line of events:

1. I cashed out of my stock positions yesterday with the rationale that I had made some good trades, but did not have conviction to hold them beyond a “lucky” day. The stock market was showing mixed signals–breakouts in small stocks, on one hand, but possible reversal signals in the broader market. I figured that I didn’t really have a grip on what was going to happen, and instead of attempting to decipher the code, to get out with some coin. This was a good, soberly made, rational decision.



2. I stayed up late last night, digging through charts, reading blogs and news, a little “high” from the profits clenched yesterday. I noticed a few charts looking primed for break-outs. I made some notes of break-out points, and went to sleep late. This is still alright, though I did my stock “homework” at the cost of other tasks left undone. Hence, an unbalanced mindset start coming out of the woodwork.



3. I wake up exhausted and get to work a little late. My boss reminds me to show up on time. He’s right! I was late because I had stopped to get a box of donuts for the office, but that’s no excuse. Why do I include this? I usually show up early, or at the latest, on time. Something was off, and I should have stopped to consider the implications such a “red flag” would have for later in the day.



4. After logging on to check the market, I see breakouts! Cool. However, a small detail toward which I turned a blind eye: I had $0 in “settled funds” in my trading account, after going “crazy” banking coin yesterday. I was 100% cash, but w/out any “settled” funds. You can buy with unsettled funds, but you can’t sell securities purchased with unsettled funds until they settle, which takes 2-3 days. This was one of my “NEVER GET YOURSELF INTO THIS SITUATION AGAIN” lessons I learned in the past. I did not heed this lesson, and proceeded to buy securities with unsettled funds. I am now not allowed to sell them for a few days. This is potentially disastrous.



5. Having backed myself into a corner, I saw the S&P start to make a new intra-day downtrend at around 850. Could I sell ? Nope. My recent gains receded into losses. I couldn’t really hedge against each stock, so I “hedged” by getting short via an inverse, leveraged ETF. This was probably a smart move for my shitty situation, but definitely not ideal. Why? Well, what if the market rallies? That position can’t be sold either, so I lose. I could buy a leveraged long ETF to cancelthat out, but then I’d be stock with my long equities and no further possibility of hedging!

That’s where I lie now. It’ll take a few days to un-fuck my account, and I’ll definitely get a hair-cut on the bottom line, regardless of what happens. Here are some warning signals I should have seen, aside from the “red flag” of showing up 5 minutes late to work. This is starting to get into the issue of maintaining balance in life:

1. Starting yesterday, I stopped posting trade plans and explanation for each trade. Documenting my trades on my personal blog is a method for future review, but is also a safe-guard against compulsive, thoughtless trading. It forces me to vocalize why a stock is good enough to buy. I usually do some chart-work, giving a visual picture too. Most of the stuff I bought today, I had previously charted, but the fact that I didn’t take the time to follow my habit shows I was lacking patience and discipline. Instead of trading with confidence and caution, I traded with recklessness and compulsion.  



2. A crazy sleep schedule lends to exhaustion and fuzzy thinking. When I’m running on low sleep, it’s easy to lose perspective and forethought.

The unsettled funds trading shows a complete departure from a sober approach to trading. I am not beating myself up for it; the market will take care of that. The stock market is merciless toward the slightest mistakes made. An “efficient” market also means that people who act stupidly will lose their money.

I’m glad I “awoke” from this daze. Sometimes, losing in the stock market helps me to remember to invest in the OTHER parts of my life. I figure that I’ve lost some money, but I can grow richer in other ways: by reading and learning more about the world, by getting in a good workout, by studying my profession of warfighting.

Hopefully this kind of review will prevent future mistakes from being made in the future. Pointing out the mistakes made and the signals missed will make them more noticeable next time. Tomorrow is another day!