Summer break – Time to reflect

This is the second time in these first few months of trading that I am forcing myself to take a break. OK, it’s generally time to unwind. It’s summer – time to kick back a little and go for a wee holiday.

They say, you shouldn’t trade when your head is not in the right place. I have closed out almost all of my real and paper trades; just so that I can stay away from it all with a peaceful mind.

And then what?

I’m not sure yet what I’ll do after my holiday. I have just started another free trading course that I’ll continue then. In search for some more inspiration, I thought back to my first break.

Before break #1

I am an experimenter. With this I mean that I’ve got to try the real thing at small scale just to see what it’s like. So, as a complete and utter newbie who had only read about some essentials on technical analysis I entered the markets with real money in spring this year. Of course, I lost money. In parallel I did some paper trading. At this stage, my paper trading is as basic as it can be. – It’s a spreadsheet, and I use the prices on the chart. My goal is only to see whether I can guess stock behaviour right, not the actual figures. Once I want more, I’ll get started on a broker demo account.

So, I took my first break after I had gotten my feet wet.

Break #1

This break only lasted few weeks. I looked back at my real and paper trades, studied more and cursed myself for my own impatience and stupidity. I even performed some very simple backtesting of my new … well, first ever … strategy just using charts and a spreadsheet. Eventually, I got a sense of satisfaction from the realisation that I would have taken none of those early big losing trades with the newly accrued bits and bobs of knowledge. Clearly, I was learning and my judgement was improving, right?!

P/L spreadsheetFinally, I created a simple trading plan that included some signals and guidelines on position size, stops etc. I improved my spreadsheet, that I had already been using to track my trades, with some more columns and started designing a dashboard that would show me the status of my trading at a glance.

Listening to podcast interviews with experienced traders, I realised that my newbie experiences were nothing unusual. Many traders who are now successful went through periods of recklessness and loss Рsome for years. I gained some consolation from the fact that I was realising some of those errors within my first few months.

All in all, I was quite happy with the advances I had made during this short break. So I started up again.

After break #1

I wouldn’t say that I felt confident. I certainly felt better prepared than before. My main driver was that persistent experimenter in my head saying, “Go and try it out for real again. Go on, paper trading won’t teach you anything about psychology.”

I kept trading for real and on paper in parallel. I still agree that my paper trades teach me little about my behaviour. I uttered some thoughts on paper trading recently.

After a short while back in the saddle¬†I realised that, whilst I was using my indicators, I tended to ignore my entry and exit signals when I got impatient on entry or hopeful on exit. What good is a strategy when I don’t follow it?! I even repeated some mistakes from the totally naive early days. The problem is that these things come in disguise, and I didn’t notice it at the time of execution. Once these observations hit me, I felt that I should pause again.

I don’t regret getting back into trading after the first break. It was needed to make me realise that I hadn’t grown much wiser even though it had felt like it initially.

I sense that trading is something I can suss out over time. For now, the main challenge is to put down this exciting new toy and realise that it’s not a toy.