Psychology and emotions, like they say, are a major component of trading. Since I’m putting energy into this blog, I have some “ego” invested into my results. This is a little different than when I was trading with real money, where the emotions were more “primordial” – real worries and hopes around money. I’m not sure if the psychological effects will translate the same from paper to real trading (pride/vanity versus greed/fear), but for me, this practice trading still makes me anxious and excited as the real thing.
Today, I started off ready to go because I didn’t trade yesterday. Over-eager. Then I was frustrated with the internet being down. Perturbed. I ran up to an internet cafe to get online. Rushed. I wasn’t able to use my normal set-up of two computers and the connection was slow, so my scanning software didn’t work. Ill-equipped. Right at the open, NCT gapped up and spiked to 300%; I considered buying at $.70 but saw some others in the chatroom exiting, so I did not pull the trigger, even though Muddy was going long. It went up to $1.30 quickly. Regretful. So my first trade of the day was set up for failure. I tried to jump on the tankage of C at $3.92 for a short. Impulsive. I was using Google Finance as my chart and employed no logic to enter other than it was dropping like an anchor. However, it bounced up right away 20 cents and I sold it two minutes later at a loss. All way too reactionary based on the emotional situation leading up to it. This afternoon the stock is dropping a bit more.
So I packed up at the coffee shop and headed home. I calmed down a bit, but wanted to make-up for my first paper trade. My next choice went better, but I exited too soon. DYAX spiked a $1 in 5 minutes on news that I didn’t know about at the time. I shorted at $2.76; the fall stalled a bit, but continued quickly to $2.54 and I covered; but that downtrend went on for another quarter. At the time, I thought about only exiting half my shares to lock in some profit, and maintain a position if it continued the way I wanted. Next time I will start putting that into practice. My last trade was on DEPO; there was a 10/60 SMA cross down, and some mention in chat, but it flattened, so I got out (and it bounced back up this PM). My only other regret was that I saw SIL do a 10/60 upside cross at $.50 and it went up to $.65 and I was thinking about going in with 4,000 shares, but was concerned about a long position in the overall market.
I’m glad I ended up in the green and up 2% overall in my paper account. It doesn’t take much skill to short in such a crazy crashing bear market; the technical things I’m learning now may not help me in a less volatile market, and it will likely be different to some extent with real money as well. One of the best aspects of today, my TOS account was funded, so Paper Money had real-time quotes instead of the 20-minute delay. This makes it so much more realistic. I think one thing that will create some slippage in results between paper and real – orders are always filled in Paper Money if the stock hits the price in the order. We know in real life, especially with fast moving or illiquid stocks, this doesn’t always happen – orders are partially or not filled at all. I will have to keep that in mind, but overall, this is simulating very much like when I was using cash to make live trades.