Trading journal – 30th November 2020

I can’t remember having a run like this as has happened in copper. It’s now my biggest winner ever, unrealised at the moment and I’ve been moving my stops up as we go. Just such a relentlessly strong market. I think my previous best was about 35k and this is already at 55k USD. My stops are set at the equivalent of 50k profit.

I realised I was at an inflection point in my decision making about 40k USD thinking this is great and happy with the gain but had FOMO about missing out on a massive winner should the trend keep going. I remember on one of my last big winners about how much more dramatic and life changing and powerful it was to let your profits run especially if you were adding to the trade as it continued higher, to really just not be attached to your in the money gains.

Another learning episode probably more particularly about my personality was that always forcing myself to choose the absolute outcome rather than finding a way to compromise or integrate the two solutions has been really powerful. I think for me that is because it allows you to stay in the game whilst also managing your risk which helps manage your emotions. So by ostensibly locking in my profits with a stop order, I’ve agreed to give up some of the upside as the volatility increases but it’s much easier to leave the position open to run higher because I feel like I’ve got some guaranteed profits as you mean the market does not gap around my stop too far.

The thought also occurred to me that as my position gets bigger and bigger the distance of my stock from the current market price will necessarily need to become smaller and smaller to manage my risk to the same dollar value which almost guarantees that I’m more likely to get stopped out as the market goes higher because of my sensitivity to the absolute dollar loss. So for example if the market rate is 1% when I only have one lot on then I can quite comfortably lose $1,000 or so and I’ve more or less accepted that’s just a cost of doing the trade wear as if I take the same 1% loss now with 6 contracts that my last will be closer to $7k which is a bit more stomach churning.

1 model I have not looked at is adding contracts up to a certain point for example 5 and then keeping my stop distance constant from that point which might perhaps allow the trade to run further instead of mechanically increasing it the whole time.

I also had another positive thought process the other day involving compromise which was again related to how much I am comfortable to lose or watch fall back to 0. I think if I had an amount of 6 or $7,000 then I will probably be willing to let that fall back to 0 but an amount of $20,000 for example was something that I would definitely want to hold on to even if it means giving up some of the unknown upside. I think for me it’s just too hard to deal with the long periods inactive and unprofitable trades waiting for a really big one like this one when I can get some still meaningful results taking profit if my account doubles for example or at least setting the minimum stop around that level.

So say for example if my in the money profit was approaching $20,000 then I might protect $15,000 of that by placing stop orders equivalent to that level in my unrealized gain. I think that was a compromising found useful the other day both wave being at peace with just $15,000 instead of 20 as well as still taking some risk on the upside should I keep on going. So I reduce my risk from $20,000 to $5,000. too many times I have watched a similar amount if I break back to 0 just because I was waiting for the really really really big one which might be mentally sound but for me it was emotionally unacceptable given my current level of wealth.

So I suppose the summary phrase would be: your head makes the plan which your heart then needs to follow. Sometimes we only find out that our heart doesn’t want to follow in the moment and I guess that’s when we lose more than we expect.

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