The Part-Time Trader (20 page)

Of course, I did not throw my hissy-fit in a vacuum, so when all of this took place, three people came by my office (at least I had my own office with a door at this time) asking me what happened or if everything was okay. Looking disheveled, with hair that looked like it was done by Conan O'Brien's hair stylist, I simply responded with, “Yeah, why? Did you guys hear something?”

I'm sure I sold them on the believability of that response of mine, but hey, at least Greenwood upgraded my mouse to one of those with the fancy scrolling wheel on it.

Those who are considered to be at the top of their line of work, whether it be engineering, medicine, law, professional sports, the military, or any other kind of profession, are the best because they have a passion for what they do. Not because of the money, but because there is an inherent passion that drives them to succeed in such a way that it does not even feel like work.

If you were to ask them why they do what they do, they would likely respond with an answer that does not involve money. Often, it links back to their fascination of their studies or a type of deep-rooted childhood love for their work, or the hope to be the best at what they do, none of which involves money. But what they do have that leads to their success is the passion and drive to be the best, and it is not some fallback option that they stumbled across and thought, “Hey, I can make some nice money doing this.” If that is the case, they will usually burn out in very short order, or ultimately sabotage their own success with a decision or action that was primarily motivated by greed.

One of the main reasons why so many traders fail is that they enter their profession for the money. They see how simple the concept of “Buy Low, Sell High” is, and it entices the fancy of those wanting to make some quick and easy money. Their passion is not for the financial markets and specifically the craft of trading. Instead, their passion is for the money. Those kinds of people are better off in Las Vegas because they'll probably end up losing their money just like they most certainly will in the stock market, but at least they'll be able to stay in a five-star hotel and get free drinks in the process.

Unfortunately, the stock market offers no such perks. As a trader, then, you have to ask yourself whether your motivation for trading is to make money or to really be a great trader. If you seek after the latter, and apply yourself to the principles that allow a trader to succeed, then the profits will be a benefit of the profession you are dedicated to. Just like the athletes who are so well trained and skilled and dedicated to what they do, the money and multimillion-dollar contracts are simply a fruit of their labor. The moment they start playing only for the money, and not to win or be the best, the likelihood increases that they will be in the unemployment line looking for work sooner rather than later.

I love trading and every darn thing about it. There are various aspects of trading that I do not enjoy as well, but the whole experience of it I am passionate about. Writing this book has been something that I have thoroughly enjoyed because I get to take the knowledge that I have accrued over the years and put it to pen and paper and help others in the process with their own shortcomings as a trader in hopes that it makes them realize their dreams and aspirations of full-time trader status.

The greed for money and that being the compelling reason for entering into the world of trading is what will ultimately be your Waterloo. Instead of trading positions based on the analysis you conduct, you will be watching the dollar value of your positions.

When losing money becomes too painful on an individual trade, and that happens primarily with those whose focus is on making quick money, they will not take the loss on the trade like they should and instead pull some crazy stunt like doubling- or tripling-down on a position or remove their stop-losses, and allow a short-term trade to turn into a long-term investment. In the end, they wind up broke and without a chance.

Far too often, traders allow what should be winning trades that are holding some or a lot of profits to turn into losers. Instead of taking what the market gives them, they hold out hope, believing that the stock can go higher, and the thought of that happening without still having a position in the stock causes them to take on unnecessary risks by holding stocks for far too long. Sometimes, traders even believe that the profit that they are holding is not worth worrying about because it is so small or, worse, meaningless.

As in football, you want to come away with something when you are in scoring range. Not every drive results in a touchdown, and sometimes you have to settle for a field goal. Field goals are not sexy, and neither are “small profits,” but they both keep putting points on the board.

I like to draw the comparison of allowing a winner to turn into a loser to the football terminology of throwing a “Pick-Six.” There is nothing worse, in football, than watching your team drive all the way down the field only to see your quarterback throw a sideline pass into the oncoming hands of a defensive back, who takes it 100 yards the other way for a touchdown of his own. Even though they scored only 7 points, it is as if they scored 14 instead, because they negated the 7 points the opposing team was about to put on the board and replaced it with 7 of their own.

I would be lying if I said I did not give this concept a lot of thought after watching my beloved Miami Dolphins repeat the same scenario over and over again throughout the years. I started to equate it to trading when my own winners would turn into losers, and so I started putting a lot more worth on taking small gains, despite not having done that before (previously, I would snub my nose at the notion of a minimal gain on a trade).

These days, I am just as thrilled about avoiding a loss with a small gain as I am about a 10 percent winner on a trade that went in my favor right out of the gate. Trading is a game of inches; sure, you will have times where you cash in on some huge winners, but the real battle is in the trenches and managing those trades that totter between stopping out and closing out the trade with a slight gain.

Over the course of a year, you can have hundreds of these kinds of trades, and if you just throw the small gains out the window and make no attempt to protect and proactively manage even the smallest of gains, thereby allowing the trade to ultimately stop out, you will be shocked at how devastating the impact is on your portfolio.

Losing that which was once profitable is downright disgusting, and should be avoided as much as humanly possible. Now, you are never going to be perfect, but I would encourage you to go back and look at your trades from the past year and find out which trades were winners that reversed course and turned into losers and how that could have been avoided, and in particular, which trades you had the obvious opportunity to come away with just a small profit on. Then look at the impact it and all the others combined would have had to your trading results. I am certain you will be shocked at what you find.

Do whatever you have to do, even at the expense of missing the home-run trade from time to time, to guard those profits that you have and treat the small gain that prevented you from being stopped out just as significant as the trades you struck it big on.

One final thought, and this is one of those shortcuts that will destroy every hope and dream you ever have of becoming a full-time, self-sufficient trader, and that is by entering the world of penny stocks. The volatility in this world is far worse than any 3× exchange-traded fund (ETF) offered on the market, and just as easily, traders are sucked into the lure of the potential for ungodly sums of money. Stop-losses simply do not work. If you use them, you have to place them so far away from the entry price that getting stopped out, even on a semiregular basis, will destroy your portfolio.

When a stock trades in the pennies, there is a reason for it: they are high-risk companies whose chances for survival are slim-to-none. There are so many scandals, scams, and schemes in this world that to jump into the world of fraudsters only lets you feed out of their hands.

I am not even going to get any further into the penny stocks discussion. As you can see from my earlier discussion about my own experiences, the only thing that needs to be said here about this realm of trading is to not venture into it.

All in all, there are plenty of obstacles out there to derail your trading success—even more so as a part-time trader because often there is such a sense of urgency to become that full-time trader and to do so by taking some of the dangerous shortcuts that seem all too alluring. Remain steady, though; do not give in, and do not become dismayed.

Trading is a long journey, and if you remain dedicated to sound trading principles and not circumventing the progress that you are making, I am quite confident you will make it. The key is to keep your head in the game, to avoid getting bored, and trying to become more creative on how you can speed up the process.

If you thought it was boring as a part-time trader, at least you had another job you could do; full-time trading, unless you are constantly scalping the market for small gains, will make you want to pick up a side hobby of some kind just to help pass the time. No matter how bored you get, though, do not take any shortcut that, on the surface, would appear to shorten your education. If you do, it will only add years to your part-time trading career.

I
suppose our part-time trading endeavors would be ideal if we could just push aside the real work that ultimately hinges on whether we stick around or are kicked to the curb by the boss man, and focus solely on the trading aspect that so easily attracts our attention. If we could do that, though, we would not really be part-time traders but full-time traders. If you think about it, the fact that you bought this book called
The Part-Time Trader
presupposes your acknowledgment that you are or are wanting to be a part-time trader and understand that you still have to get done the work that pays the bills and puts food on the table.

What we think and what we do can be at odds with each other. I always knew I needed to get my work done, but when I had a bad day trading, I could become very demotivated in my job responsibilities to where I simply neglected what I needed to be doing as it pertained to my job. When I had a really good day in the markets, I was in such a state of euphoria that I would compare my daily earnings from the market to what I was making in my 9-to-5 job and found utter contempt for the amount of labor that was given to the latter and amount earned in doing so. There were days where I could more than earn in one trading session what I made in a given week on the job. It was quite difficult to remain motivated in that regard.

Neither of these scenarios is healthy for balancing part-time trading with successful job management. Sure, it's okay to feel good about a successful day in the financial markets—it is only human—but in order to balance it with a full-time job, you have to manage the emotions in such a way that it does not put you in the management crosshairs for neglecting your job responsibilities.

It can be hard, though, when you want to get out of your job so badly that a typical day where you lose a small portion of your capital trading in the markets can weigh a lot heavier on the psyche because you realize that it is going to be that much longer that you have to stay in the corporate fold.

There are plenty of obstacles that can get in your way on the path to being that full-time trader that sheds the bindings of Corporate America. If there was one aspect of my job that I hated more than any other, it was meetings. I can say with near certainty that I did not need to be at 95 percent of all the meetings that I was required to attend. In most meetings I had nothing to offer, and when I did, there was someone more senior that they would rather listen to instead. More times than not, I sat in those meetings and just let my imagination run wild about anything but work.

One particular time, I was in a meeting, and thank goodness for that ­laptop approval, because I was finally able to take something with me to these meetings to help pass the time. More often than not, I would watch the markets during the meetings, as long as I was able to sit at a corner of the conference table and angle myself in such a way that no one else could see my screen at all.

This particular time, though, I remember watching ESPN baseball highlights, and sometimes these videos would just start up all on their own. At this point in the meeting, I had about 20 windows running on my screen, when I had one of those rare occasions where I was asked to speak on a particular subject involving our organization. About halfway through my labored response, I hear, “
Vladimir Guerrero up to bat . . . back, back, back, BOOM GOES THE DYNAMITE!!! Three-run homer for Vladdy!
”

The funniest thing about this is that it had not dawned on me that it was my computer airing the audio for all to hear. Instead, I was looking around the room wondering if someone was going to mute their volume. I finally realized that it was in fact me, and it was that awkward moment where everybody in the room knew it was your computer, but they were waiting for you to realize it for yourself. That is when you try to somehow casually turn down the volume, acting as if there was really no big deal about what just happened. I got out of that situation relatively unscathed but the Debbies out there were definitely taking note.

There were certain times when I simply did not want people to schedule meetings. From 9:30 A.M. to 10:30 A.M. Eastern each day, I wanted to be at my desk with access to the markets if need be. The same was true from 3 P.M. to 4 P.M. Eastern. These time periods tend to be the most volatile periods in a market session, and I felt that it was imperative to not have any work distractions during these time periods.

That does not mean I would not do any work during this time, but it did mean that I was paying much less attention to my job responsibilities and more attention to the financial markets when compared to other times throughout the day. Obviously, though, I could not simply send out a mass e-mail to my peers telling them to quit scheduling meetings during those times because that, for sure, would not fly well with others.

So for years, I would block out the 9:30 A.M. to 10:30 A.M. Eastern time block each day, showing it in the same color coding as the meeting color that is used. I would do this as well for the 3 P.M. to 4 P.M. time slot as well. You will want to make sure these are recurring meetings for each day of the week, so you do not have to input the meetings for each new day. After you do it once, you will not have to do it again.

Now, when all those meetings are getting scheduled by the Larrys, ­Debbies, Edwards, and Garys of the workplace, you have about a 95 percent chance when they are looking at availability among meeting attendees that they will not schedule it during the times that you have blocked out. If they do, there is a good chance that your being there is not a big deal to the meeting organizer; otherwise, why would he schedule it during a time that your calendar shows a meeting conflict?

I always made sure to have these meeting times blocked out, and it always gave me the opportunity to observe the market action when I needed to the most. The times you choose to block off should take both the job responsibilities and your trading strategy into account. It may not be the same hours that I chose, but it should be specific to a time period(s) that you need to see the market based on the trading strategy you are using.

It is not at all uncommon now for meeting participants to be interrupted with phone calls on their cell phone. Unless there is a company policy against this, you can definitely use it to your advantage. Often, I would push a button on my phone that would cause my default ringtone to go off. At first, I would look at my phone to see who was calling me and make it look like I was contemplating whether to take the call. Then I would say in a soft voice to everyone in the conference room, “Excuse me, I'm sorry, I have to take this,” as I then proceeded to get out of my chair and head for the door, but before I got to the door, but still within earshot of the meeting participants, I would fire off a stern, “This is Ryan!,” which gave the whole delivery a more serious tone that made it sound nothing like a personal call but a something that must be work related.

The humor in it all is that I had no one on the phone, I was just wanting to get out of the meeting so I could enter a trade or get a market update on my existing positions and then get back into the meeting. Of course, once I had the laptop, I could just do it right there in the meeting.

By the way, if you do not have to sit at the meeting table, and there are seats lined up around the perimeter of the conference room that you could take instead, then I highly recommend you do that. It just tends to keep you away from the fray of the meeting, and it is much easier to use your laptop or other personal instruments without drawing much attention to yourself.

There was really nothing that I hated more than being in a meeting. I came up with everything I could think of to avoid going to them. The worst was all-day events, where more than once I actually thought about purposefully collapsing on the ground, trying to foam out the mouth, and faking a seizure right there in front of everyone.

It was the surefire way to get out of the boredom that ensnared me. However, the prospect of my being able to stay “in character” if one of my colleagues attempted mouth-to-mouth resuscitation on me was more than I could bear. Also, the thought of being taken to the hospital and being hooked up to an IV and other equipment for a seizure that did not actually happen was a bit of a problem as well, but having to choose between a bed and cable television versus staying in that meeting for a minute longer might have given the slight edge to the fake hospital trip.

With modern technology, one of the best advancements is the ability to call in and share your desktop with others. That means you do not actually have to leave your work area to attend a meeting. That also means regardless of whether you work off of a desktop or laptop, it does not matter because you can call in to your meeting without having to miss a beat in your trading.

At times I had meetings that were only down the hallway, and I would still call in because I would rather just be relaxed in my own office setting. The only problem was that sometimes I could go a long stretch in a meeting without having to speak, and I would zone out doing something else that had nothing to do with the meeting when suddenly I would hear someone say, “Ryan, would you like to chime in on that?”

The problem then became that I had no idea what they were asking me to “chime in” on because I simply had not been paying a single bit of attention to what was being talked about. Sometimes, I did not even know what the meeting was about. I would just call in for the sake of virtually attending the meeting that did not really matter to begin with. Instead of asking them to repeat the question or dig around for what they wanted an answer for, I simply took the easiest way out.

I hung up the phone!

I would then proceed to call back in, punch in the access code, and then they would hear me come back into the meeting. I would proactively state, “Sorry folks, I got dropped somehow from the meeting. What did I miss?” as if I had no idea I had been asked a question. At this point, they would provide the background and repeat the question, and then I could actually tell them what they wanted to know, without having to look like a moron for never having listened at all to the meeting.

A final piece of advice in regard to meetings concerns screen sharing. Do not offer to share your screen unless you are put in a corner with no possible way out. There is so much that can go wrong by doing this. Your trading platform sometimes will flash messages on your screen, make noises, or pop up an alert on your e-mail software letting you know that you have been stopped out of a position. The last thing you want to do is allow people to have familiarity with your trading habits.

On one such occasion I was asked to host the meeting remotely with all the other participants. There were about 30 people in total, with about 15 of them being clients of ours. I had a meeting agenda that I was streaming for everyone to see. All was going well, until I started to do basically what I do at every meeting—zone out. I was not paying attention to anything that was being said, and since we were not in a local meeting room, there really was not any opportunity to start seizing in order to get out of the meeting.

Instead, I started looking at some of my favorite web sites, like ESPN, to see how my local Orlando Magic did the night before and to get caught up on some box scores. Then, all of a sudden, an Edward on the conference call caught my attention when he said my name:

“Ryan, who won the Magic game last night,” he asked.

Puzzled, I said, “I dunno, why?”

He sarcastically replied with, “I figured you'd know since you are on ESPN right now.”

Then I realized how big an idiot I was. I became so bored in the meeting that I started surfing the Internet in front of 30 individuals. Thankfully, it was not my trading account that they were being introduced to, and just a sports site instead.

There were times at my job when I would travel up to 75 percent of the time. It was definitely a great way to get out of the office, although when budgets started getting tight, the boss man would try and have me fly out on my weekends. That was one area where I simply refused. They would want me to leave on a Sunday evening, fly for six hours, check into the hotel, meet with another company all day long the next day, and then catch the red-eye that night back home.

Honestly, that has to be one of the most inconsiderate requests to make of an employee. We work five days a week, then you want to take one of my only two days off and dedicate it to flying so that I do not spend any of my work time actually sitting on an airplane. Those who were paid as hourly employees were not even paid for flying during their off time.

When it comes to flying and traveling in general, there is no reason why you cannot still carry long or short positions. The only thing is that you have to be willing to not have as much access to your stocks while you are traveling. That means you are using hard stops on all your trades—no questions asked. When you are traveling, you are not as likely to have access to your positions unless you are on layover or are on one of those planes that have wireless connectivity. Consequently, the stocks you were trading might have had a negative press release or maybe even a surprise earnings announcement causing the stock to drop a considerable amount. In this case, you will be very thankful that you had a stop loss in place to make sure that you got out at your exit price.