Never Stop - 2 The Bounce
One of the key things that helped me steer myself away from the landslide of the junior market, from handing my money to the Market and continuously failing, was taking full responsibility. I had to be accountable for my actions. I decided to take time off, sit down and write what I was doing, noted the reasons I made the losses and highlighted what was and what wasn't working.
If I wanted to start making money from the market, I had to stop doing what I was doing wrong and start doing something that would actually work.
It didn't take long to realise I was either not doing my own research or not doing enough of it. Far too many times I was buying high and selling low, letting my emotions run my trades and allowing the fear of missing out to push me to take positions or trades in companies I knew nothing or very little about. If a share had multibagged (multiplied in share price), surely it would keep on going up in a straight line?! There is no such thing as gravity in the market… or so I believed at times.
But one of the biggest killers for me was not cashing in profits. I was buying into winners, then holding on to them for far too long until they turned into losers. I didn't quantify the risks, there was no such thing in my vocabulary. On top of that I was always wearing my boxing gloves and fighting the trend, but Mr Market kept knocking me down, every single time. This was very costly, not just from a material aspect. It broke me emotionally and knocked my confidence. With every day that passed I was losing my confidence in decision making; whether to pull the trigger on a good trade, to know when to bank profit, or simply cut my losses and run for cover.
Many times I remained invested even when I wasn't happy with progress or when bad news landed. At times it felt like I was too emotionally attached to the shares, I didn't let go, or even worse, I just wanted to be right. My ego/pride was getting in the way of me seeing I made a bad judgment call. I was trading out of bad habits, and didn't try to develop new good ones. If someone pointed out the downside of a share I was in, I took it personally. As if he insulted me and my family! The facts are, they weren't. They were just more rational than me.
If any of the demons (sorry guys) posted a chart that suggested RSI was high or a shooting star has formed ... etc I just hoped they were wrong. For me, charting was like Black Magic, only demons could read a chart. Normal people aren't meant to. So I never tried to learn.
Knock out after Knock out and years practicing the art of buying high and selling low, I had enough. It was obvious I had no concept of strategy, I didn't grasp how the market worked nor what charting was about or its benefits. I understood what I was doing wrong in the market, but also realised that my vision of myself as a trader/investor in the future was projected using my past failures. This meant I would continue to fail. I would continue to give the money earned from the market back to the market.
This exercise had helped me to understand what I should avoid doing but also crucially what I could improve: I wrote a simple yet efficient strategy that could work. By looking over the trades that worked well for me in the past, and trying to analyse why they were successful. Some common themes were; they were near an all-time low, had good assets, were on the verge of getting news or updates that could potentially transform the company, but mainly they had positive sentiment which yielded solid upward momentum.
From that point onward I started to see better results. I wasn't making the most of my trades, but nevertheless I made good progress, the modest success enabled me to recoup my house deposit and more. This helped me and my Mrs buy our first (small yet good enough) house in 2012. I became more rational in my decisions, although sometimes maybe taking unnecessary risks. But considering I had a very small pot to invest I was happy to take them.
It was working, I simply applied a very simple and solid technique; find an unloved, undervalued stock, with catalysts that would send it flying. Take a position and await the rise. Sometimes it took weeks, sometimes a couple of months, but overall it was paying dividends. I still lacked full market understanding, charts, or even comprehending fundamentals in full, but I was making progress. I was ready to learn and assimilate what I deemed incomprehensible and complex. I started educating myself in the oil and gas industry, mining sector etc, charts, market mechanics, what makes shares go up and why.
Slowly and surely I started to believe in myself, my ability to make money from the market, but above all I was no longer chained by my past failures, I started to harvest that energy I got from hitting winners and build on it, instead of doing something careless and handing it back to the market.
Another aspect that helped a lot in winning was sharing. I wasn't trying to succeed on my own, I was sharing and cross referencing my research with someone else - BigGib. We were both trying our best to succeed and spent the best part of our day and night on research, looking up shares, emailing CEOs, calling each other up, discussing ideas, shares, the market and many other aspects. There were other people that helped along the way by pointing out good shares, ideas, brokers, tools etc. Success, as always, requires effort, it requires commitment and I was fortunate enough to meet genuine like minded people who also wanted to succeed and were ready to share ideas, views and their knowledge. This highlights the importance of sharing and surrounding yourself with people who are as positive as you are. Like minded individuals add incredibly to the probabilities of success. Having someone else going over my research was fool proofing it, if I missed something or had a blind spot he was able to spot what I missed and vice versa.
I consider myself lucky to have met many (the list is long, so my apologies for not mentioning you by name, but you know who you are. Yes, you!) people who have had a great influence in helping me learn and improve my understanding of the market, shares or even life. Many of these individuals were unselfish and very helpful in providing me with insight, knowledge, views and many other aspects, and for that I shall be forever grateful.
Finally after 3 long years (Sep 2013) of failures and struggle, with many lessons learnt, I was making money without handing it back to the market. One year after seeing good results I felt ready to make the jump to full time trading. Leaving the industry I worked in for over 10 years was a major decision, I was about to leap into the unknown. I didn't have a big chunk of cash, but I paid off my mortgage and put aside 12 months of bills for contingency. What was left went into a small investing pot. I knew as long as I was methodical and disciplined I could make it work.
In November 2014 I made the jump, work was getting too demanding and yet not rewarding enough. In between work and the consuming world of AIM, I found myself frustrated and struggling to find time for my growing family, my social life, sports etc. Going full time wasn't about just the ability to trade the market full time, but the ability to trade my time for what I valued most, my kids, my family and everything else I cherished.
Still, the first four months of me going full time were rocky. I wasn’t making money and I had to adapt to the fact I no longer had a monthly income, despite my contingency cash reserve. I started to have doubts, the strategy that had served me right for some time was suddenly not yielding the results. The shares I'd invested in were simply not moving in the direction I expected. I needed to adapt to a different type of market and life style….
To be Continued ....