One year of stocks trading: What a mistake!

I lost 30% of my capital trading in the Philippine Stocks Exchange (PSE).

I'll be sharing with you the Things I learned after One Year of Stocks Trading.

Yes, I lost more than 30% of my capital.

That's the figure I paid since the day I decided to become a stocks trader in April 2019. It's been a year now. The figure might not be too huge as most, if not all, newbie traders wiped out their trading account completely in the first year. I started to trade cautiously during the first-month while still learning by reading blogs, books, and watching videos all about trading. Below is the result of my first month. This report was extracted from Quicken---a software I used journaling/recording my trades.

In the succeeding months, I became crazy. After learning a few things, I became overconfident and overtraded like a gambler trying to get back his losses. Mistakes after mistakes ranging from holding for so long on losing trades, taking profits too soon, averaging down on bad trades, overtrading, large position sizing, revenge trading, impulsive entry, trading with unchecked emotion, arguing with the market, listening to recommendations, FOMO, emotions and the list go on. Lahat na. In between, I participated in an IPO (with a trader mindset) with zero knowledge about it. This was where I incurred heavy losses. If only I was able to read this post from TL blog which I reblogged here with TL's permission: https://retechson.blogspot.com/2019/12/ipos-dirty-little-secret.html

In May, I traded aggressively and became overconfident after I completed reading the books of Mark Minervini; Think & Trade Like a Champion and Trade Like A Stock Market Wizard.

I think every newbie goes through these mistakes. But the important thing is to identify those mistakes, learn real quick from those mistakes and not doing those mistakes again and again. Then start doing the right things immediately---but my dear, it's not that simple. The process is long. 

Earlier this year I withdrew 80% of my capital and kept the remaining 20%. I decided to trade a small position and traded again cautiously going forward to the second year of my trading journey.

As I said above, I will share with you what I learned so far with my one year of experience as an active online stock trader in the PSE. Here's what I learned so far:

1. Only 1% of all traders can profit net of fees - should I quit or continue?

After one year of trading, I'm still on the losing side. So I started to doubt and asked my self this question: Do stock traders earn money? I did a research and found out that only 1% out of all traders can profit (net of fees) according to the statistics discovered by Brad M. Barber and his team in their research. I said "huh! Itigil ko na tong kalokohang to!" How to be in that fucking 1% elite league of traders? I wanted to quit! It's a very discouraging figure, but my question was answered. So, 1% of traders earned money. So there's a chance. I have a chance. I decided to continue. I need to be in that 1%. Good luck to me.

Since I know where I wanted to be in (my goal is set). In order to where I want to be in, I need to figure out where am I now (my point of origin) so that I will arrive at my destination. I copied the summary of the research and outlined it on a whiteboard and figured out where I might be.

2. All traders start with a dream to "GET RICH QUICK". 

I created this blog in 2011 for the purpose of sharing my journey as an OFW, with a goal to retire with something or to put it bluntly, to retire rich.

Now back to trading. I embarked on the stocks trading journey in April 2019 to short cut to my goal to retire rich. I thought that trading stocks in the PSEI will get me fast to my goal. I dreamed to have my first million in December 2019. Ha ha ha! Nakakatawa! Isang malaking kalokohan! I realized that this dream will not happen soon. If indeed you get rich trading---for sure it's not quick. It's a long process that few only persevere. Dedication, consistency is the key. This is not a sprint this is a marathon. 

3. 40% of traders trade for 1 month and quit.

At least I survived. Yes, I was able to survive the first month because I traded cautiously. But the second month was crucial to me as I started to doubt whether to continue or not. But I persevered. If you want to get to your dream---this time not quick---but by following the long/tedious process and being dedicated/committed to the marathon. In my third month, I acted accordingly and adjusted to the mistakes committed in May 2019. Below is June 2020. A mediocre win. What a shame!

June was my only profitable month for the entire 2019.

Although I mentioned above that it's a mediocre win and a shame, but if you are a newbie, be very happy to have the above kind of results every month. I'm talking about the quality of the result, not the figures because we have different amounts of capital. Above is the amount I can afford to lose completely. The ideal outcome should be like the above. Ideally, it should be like this: 

• No big losses.
• Small losses.
• Small wins.
• Big wins.

So far, it's not the case for me in the succeeding months. Because I still do not have a trading system/strategy that works for me.

4. The need to have a trading system/strategy.

In the first 8 months of trading, I rely on my hunches, gut feeling, that a stock price will go up. I entered trades at any time of the trading day. My wins were mostly out of luck. I learned that I need to have a trading system. Something that I may develop or from successful traders ahead of me. 

I did not develop my own trading system because I know it will take time. In the 9th month of trading, I adapted a trading system from a generous trader who shared her trading system and tweaked it according to my suitability. I learned also that there's no perfect system. But the system must be perfectly followed.

I would like to take this opportunity to thank the creator and admin of a Facebook group famously called Trader's Lounge. My big big thanks to Gandakoh---the kind-hearted person behind the Trader's Lounge, Trader's Lounge Official YouTube channel and Gandakohtrading.com blog. Maraming salamat po for sharing your knowledge for free. Thanks to Ms. Athena also for the support provided. This is my way din po of sharing back to those who aspired to be a trader although I have one year of experience pa lang po. 

5. The need to have the discipline and laser focus to follow the trading system/strategy. 

As a newbie, It was a huge relief and less time consuming to adopt proven and tested trading system. To formulate one or discover a system that works takes time. By adopting a system from someone like Ms. Gandakoh who has a decade of trading experience. At least, I have a fighting chance of survival in this marathon. 

But the system is just part of the game. You need to have the discipline and focus to follow the rules. You should have the framework in your mind to follow the system either you're rewarded or punished by Ms. Market. This is where I failed most of the time. I still working on my discipline as fear and greed still kick in while I'm trading apart from other factors like lack of sleep, time zone difference, day job workload. These are other factors when you are an OFW and learning trading on the side.   

6. The need to have a risk management plan. 

I learned that when there's a reward there's always a risk. The higher the reward---the higher the risk---and the risk must be managed, controlled, calculated and keep it small by trading smaller size while still gaining experience in order to trade well.

“To win in the markets, we need to master three essential components of trading: sound psychology, a logical trading system, and an effective risk management plan,” according to Dr. Alexander Elder in his book The New Trading for a Living.

I followed the 2% and 6% rule. I paired it with strick adherence to my initial stop loss. This is where I started to see sparks of light at the end of the tunnel. This means you set only to risk 2% of your trading capital on any trade. Either you trade small positions to have a wider 2% stop or larger position with a tighter 2% stop. The 6% percent rule is that you are allowed only to lose 6% percent of your capital in one month. If you lose three consecutive trades in one month, 2% each trade, then you are not allowed to trade throughout the remaining days of the current month.

So far, yan lang po ang mai share ko sa inyo. If you have something to add, please comment below. Salamat po. At kung buhayin pa ako, tayo and we will be able to get through with COVID-19, I will be sharing again with you next year. Hopefully I can show you a green port. But from time to time, I'll be sharing update to this blog. Kaya silip silip lang din po sa blog na ito.
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