Trading Is Sexy

I Am Not

This post is reflection of psychology not physical appearance, or at least that’s what I’m telling myself!

I started investing during college with basically no money and thinking I was smarter than I am. Now, I’m not saying I’m dumb but I was young and naive. During my finance classes I fell in love with the markets. I must admit I still love them, however at the time I romanticized the idea of making millions in short time frame just as I’d seen so many others on the internet do.

Once I was out of college and had a little (emphasis on little) more capital I almost instantly started day trading. I had no idea what I was doing, some days I made money and the dopamine rush was through the roof. Other days my only gain was a shitty attitude and emptier pockets. Probably most importantly, I wasted a lot of productive time at my job.

I started reading books on how to enter and exit trades, conduct technical analysis and trade options. This did actually improve my results but even a 50% improvement from where I was starting still left me in the average to below average range.

This went on for a few years and looking back I don’t believe its because I thought I was going to flip a switch and turn into an all-star trader. I think its because there were days I made several thousand dollars in a few hours and that was very appealing. Especially compared to the amount of money I was making right out of college.

However, as my profits increased so did the size of my positioning and subsequent losses. I was really just hooked on “winning”.

After two/three years of essentially breaking even I started taking an introspective look at what I was truly pursuing with my investing, if we can call it investing at that point. I decided to focus on making smart long-term decisions. The first of which was focusing more on my day job in commercial banking and conducting research after hours.

I eventually moved from commercial banking to the investment industry and ended up at a RIA as a equity analyst and later became a part of the fixed income team as well. I earned a “prestigious” three letter designation during my time there. This experience combined with my introspective look began to yield results.

Slowly but surely I started to figure out what I was good at. For me, that has been taking positions in out of favor companies/industry’s and having the conviction to hold. Many times ideas were coming from the debt analysis. This has taken some time to figure out and I’m still learning. It can surely be boring with all the news flow and exciting investment opportunities available.

Even after I started learning what worked for me, I still wasn’t able to just flip the switch. I’ve “learned my lesson” on options 8-10 times now.

In fact, one of my biggest errors came from a safe option strategy, selling covered calls. I owned shares of FIX with an average cost ~$85. I loved the company and was up a fair amount on the shares but they were trading sideways for quite a while (relative term here) so I decided to be smart and earn some cash flow from these shares. Which I did for a few months, then the shares got called away from me and I thought “well I’ll just re-buy the shares on the next major pull back”.

If you’re not familiar with the name, I’m still waiting for the major pull back… the shares have recently crossed the $1,000 mark. That one still hurts.

Even on pure equity investments it has taken time to trust the research and patiently hold.

I got absolutely worked over on ANF. Twice.

I researched the heck out of the debt as it seemed like a good opportunity for the firm I was with (we did end up buying a fair amount of the debt). In doing this research I realized the company was on the right path and the equity value was clearly being missed in the market.

I initially bought in the mid $30 range and relatively quickly the shares dropped into the $20’s even though the story hadn’t changed. I was feeling a bit embarrassed because other in the firm knew I purchased the shares and this was not a typical stock the firm would own. Due to this I sold my position.

A few weeks later the shares were back up in the low 30’s and I reopened my position. Almost just as quickly, the stock again proceeded to move back to the low $20s and, once again, I jumped ship.

Over the next year, ANF ran up to a peak of around $185. I missed the entire run. Now, surely I could have bought back at any time along the way but I was so in my head about the beating I just took rather than focusing on the story.

I also realized through this roller coaster that I struggled with buying a security at a higher price than I previously paid even if the thesis was still in tact. I was anchoring to a price rather than my research of the facts.

There are many more examples of such losses and wins over the years but I won’t bore you with each one.

Conclusion

I still think trading is sexy and I enjoy seeing the unique strategies others employ. I love seeing their success. It just hasn’t worked for me and my skillset, which I’ve learned is just fine. Embrace your own skillset and continually take note of how your own psychology is impacting your decision making.

Thanks for reading!