The Part-Time Trader (6 page)

That same day I had found the seven stocks that I wanted to buy. Yes, I could not wait for the right trades to come to me; instead, I had to find seven stocks that I could buy the following morning, regardless of overall conditions. I had the money, and I was going to use it.

Throughout that morning, I added those desired positions to the portfolio one by one. I even put on stop losses that made sense and managed risk appropriately. I went to sleep that night, not thinking a single bit about what I had done. I was confident, excited, and in my mind made a bold move that one day I will look back on as being “genius.” This was my moment—the kind of stuff that would be written about in a book one day (that I was right about!).

I woke up the next morning, the futures were up, and everything looked good. I had my stop losses in because that was the best way for me to manage risk. The opening bell at 9:30 A.M. could not come soon enough. When the profit/loss total was flashing green in the early going, I was ready to start projecting my course into the future already (hindsight I should have been selling, not projecting). Maybe seven positions isn't enough, I probably need more capital, perhaps enough to trade 10 to 15 simultaneously.

Margin was never something I considered using, but perhaps I should reconsider. I had a meeting that day coming up, and, as I'll reiterate throughout this book, you have to attend to the responsibilities of your job and make sure it remains the first priority or no matter how good a trader you are, if you don't have enough to trade full-time, you must take your job seriously.

I went to the meeting; it was a short department meeting that lasted all of 30 minutes. Once it was over, I hurried back to the office. I was excited about what I thought I would see. The walk down the hallway seemed to take forever, but once I got behind my monitor at the desk, logged in, and popped open the command center I was trading off of, I saw nothing but red!

The S&P gave up what was otherwise a great day, and was now trading—2.2 percent in the red. Those positions that I had gone into the day prior were getting slammed. Apparently, Alan Greenspan had flapped his lips, and the market did not embrace his comments.

My stop losses were roughly 7 to 8 percent away from the entry price, and they were flashing some major red. I honestly could not believe my eyes. How could this have happened? I felt cheated. Violated. Taken advantage of. Heck, I wanted a dadgum refund! Nonetheless, there are no do-overs in the market.

With one eye opened and the other eye closed, I squeamishly looked at the profit/loss on the day. It was more than what I had ever experienced in my lifetime for a single day. I had never lost even $1,000 in a day, much less $2,000. But that was how much I was down, and my stop losses were not even close to being hit. The thought of getting taken out at my original stop losses was too much to bear. The market looked like it had gone off of some cliff with no bottom in sight.

I really didn't know what I should do. Continue losing the money that I really shouldn't have been trading with in the first place and show a “trader's discipline” of following my plan, or panic, sell now, and cut my losses while I could.

I chose the latter and did a fire sale on all my positions as fast as I could. I was emotional, as furious as one could be, and I proceeded to raise my mouse into the air and slam it down as hard as I could on my desk, not once, not twice, but six times! The bottom part of it cracked into multiple pieces and was rendered useless. To make matters worse, one of the stocks that I thought I had sold out of did not go through as I had inputted the order incorrectly. I watched that stock drop further with no way to stop it because my stupid mouse was broken, and I did not know the necessary shortcuts offhand on my keyboard to close out the order I was so desperate to close.

But before I could even leave for the folks upstairs in the information technology (IT) department, two ladies hurriedly came inside my office wondering what in the name of Sam Hill that noise was. Thinking quick on my feet, I made up some lame excuse about how I dropped the mouse by accident, which somehow or another created a thunderous noise that probably managed to shake the cubicles outside of my office. I doubt they were convinced of my story, but it was not my priority to convince them otherwise right now. I had a position still that was bleeding through the nose, and I had to get upstairs to the IT group and swap out my mouse for one that actually worked. After another lame excuse for why my mouse was in three separate pieces and the exchange for a new pointer, I finally made my way back downstairs, past the ladies now gossiping about what really happened, and then got out of that last position.

Needless to say, there were two major lessons to take away from this episode of bad judgment that I exhibited early on in my trading career. First, I had placed the stop loss that might have made sense technically, but psychologically they were an absolute disaster and would eventually be exposed as such. I placed my stops 7 to 8 percent away from my entry price. This might have been acceptable for me when I traded with less money and fewer positions, but I took on an amount of capital that even from the onset I was uncomfortable with, and did not even know it. Take an average stop loss of 7 percent across seven positions and I'm looking at the potential of a combined 49 percent in losses—not against the portfolio, thankfully, but against my average position size, which is still a ton to lose.

I am risk averse. I don't like the threat of losing a lot of money in my trading. When I do, I become irrational in my thinking. Therefore, I keep my losses on a percentage basis relatively small. Today, I trade with 2 to 4 percent average stop losses. If the stop loss has to fall outside of this number, then I'm not going to take it, no matter how promising the setup is to the upside.

Back then, I never counted the cost if all seven positions went against me. Even had half of the positions gone against me while the rest remained at breakeven, I probably would've still conducted a similar type of fire sale—with probably the same amount of emotion, too. I was not trading within my tolerance for risk, and as a result, I made a decision that was irrational.

You can guarantee yourself that when you trade outside of your tolerance for risk you will undoubtedly make the wrong decision regarding your trades and capital allotted to you. That is exactly what I did, and as a result I had to pay for it dearly. Had I let my original stop losses play out, I would have been profitable on five of the seven trades that I took losses on prematurely. Because my emotions were out of check, and I was trading beyond what I could tolerate from a risk standpoint, I completely mismanaged the trade. The original trades that were made were fine, but the trader clearly was not.

This brings me to my last point. Do not watch the profit/loss total for a day or for a given position. Trading is not about dollars and cents; it's about price and volume. Know beforehand how much you are willing to risk on a single trade and across multiple trades at once. After you determine that, there is no reason to follow the profit or loss you are incurring on a given trade. It will only stir up the emotions. Furthermore, don't look at your profit or loss until after the trade is completed. For some out there, you may want to see if you can go an entire month without looking at the bottom line.

Profits (or losses) are tied to your position size and how much you are risking. You can determine all of that before you ever enter the trade. But it has nothing to do with the stock you are trading and the subsequent price action thereafter. If you watch the dollars and cents, you will start to do what I am very susceptible to doing. If I'm up a few thousand on a trade, I will begin thinking of what I can buy with that money, or how I can add that money to my son's college tuition or some other materialistic motive. But what is it good for? What does that have to do with trading in the least bit? Absolutely nothing!

Decisions on buying or selling have to be based on price and volume and any overlays, indicators, or oscillators that you might choose to use. Basing it on a dollar sum is foolish business and will only cause you to trade based on your emotions. Trade what the charts are telling you. If the trend is up, and there is solid support underneath it, then trade accordingly. If you are up 10 percent on a trade and want to ensure that a winning trade does not turn into a losing trade, then tighten the stop loss in an appropriate manner. But do not look at the profits that you might be making and say, “$500 is a lot of money. I'm taking my profits now and my wife, kids, and I are going to the Sizzler.”

The percentage gained or lost on a given trade is much easier to manage from a mental standpoint than are the dollars made or conceded. Seeing it with your own eyes brings a sense of realism to the trade that allows you to identify with the trade on very personal terms. Do not allow that to happen. Many platforms, like ThinkorSwim, for instance, allow you to block the actual portfolio value as well as the gains/losses feature on a given trade. I am not saying that you should be oblivious to the destruction you might be causing to your portfolio, because that can be seen by simply looking at the past performance from a percentage standpoint. Avoiding the actual dollars you are making or losing on a given trade will help you to eliminate a great deal of the emotions from the trade that could lead you to making a fire sale–like decision similar to the one I engaged in early on.

Emotions are killers in a trade, and if you allow that to creep into your workplace and its responsibilities, then you are creating double trouble for yourself, as you will become inept not only in your trading but likely in your job as well. An influx of emotions from trading often paralyzes the trader, and if that happens, you are not likely to be fit for your real job either.

I
've always been a big fan of the NBC show
The Office
. Besides the fact that the show itself is absolutely hysterical, I was always able to identify with the character Jim Halpert. Here was an individual that was probably the best employee in his office, yet completely unable to relate to his job function or actually find any passion for what he did each day. It is no wonder that by season nine of the show, Jim is trying to find his own escape from the Dunder Mifflin branch in Scranton, Pennsylvania, to a new start-up company that identifies more with who he is as a person.

How can one possibly be passionate about selling paper? That is how I felt about where I was in my career. As a contracts manager, I would simply fill out countless forms each and every day. Every once in a while I would be allowed to negotiate a multimillion-dollar contract, but before I could get excited about that, I would be faced with having to follow a stack of processes so detailed that it practically covered the way I was to regulate my breathing while I was at the negotiation table. Despite the impressive dinner talk that “negotiating multimillion-dollar contracts” was, the reality of actually doing it was very robotic and restrictive. There was no opportunity for me to be like Jerry Maguire.

To say the least, I was inundated with about as much paperwork to fill out as Jim Halpert was in selling it—form after form, process after process, metric after metric, and report after report. I became miserable in my job. I was a person who needed to use the brain cells that God had given me, yet in order to do that there would have been a clearly outlined process determining how I could use them, too. I was allowed only to follow processes and nothing more.

Furthermore, there became this obsession with reports. I was considered a salaried person, but there was literally a requirement that stated we had to account for every bit of our time on the job down to one-sixth of an hour. There were these things called project codes, where every assignment we were given had a six-digit number assigned to it. Project codes were like currency. If you had project codes, you had work. If you did not have a project code, it meant you did not have any work to do, and ultimately it meant you would probably be shown the exit door.

I never had an issue with acquiring project codes because I did good work on the job and, frankly, I was a noncontroversial person. If the boss man wanted me to do something, I did it. I really did not care if what they wanted me to do made sense, nor did I care if the assignment I was asked to do was strategic and in the company's interests. There were plenty of people who wanted to be the Donald Trump of the workplace and thought that they were shrewd and genius in their business activities. Maybe I could have been more like that as well, but I did not try to be. I was not worried about seeing the business succeed because like good Jim Halpert, I was not involved enough in its success or failure. I just did my job and did what was necessary to keep getting paid.

We also had to fill out biweekly activity reports. Sounds exciting, right? But there were so many other reports from financial projections, contract metrics, supplier report cards, work-flow expectations, and program report cards that when I actually got around to doing the activity report that was to detail what I had actually done, I would typically list 40 percent of my time being spent on reporting on what I was doing. That's right—we were so consumed by metrics and reports that I spent roughly 40 percent of my time having to detail what I did with the remaining 60 percent of the time on the job. That is the definition of
circular logic
—reporting on what you are reporting on.

I honestly do not think they cared what I put in those reports; they just wanted them so they could, through some way of metamorphosis, know what was going on because they required that we fill out these reports, not that they actually planned on reading them. From time to time, I would drop a ludicrous comment in the activity report. Under the section entitled “Ways to Improve My Workplace Efficiency,” I would write, “Fill out fewer of these pointless reports.”

Pretty brazen, I know, but honestly, this B-level employee with a personal identification number of 239405 was unlikely to be highly thought of enough to actually read one of the 104 reports that I submitted each year, in conjunction with the other 30 employees in the department, which meant that in the course of one year our department expected its employees to fill out a combined 3,120 activity reports. Great use of time, wouldn't you say?

The point of this is, even if you find the strains of business pointless, you have to do them. It is perfectly acceptable to hate them, even complain to the non-powers-that-be about them, but do not neglect them. One of the most important aspects of trading in the workplace is not becoming a drag on the organization and a resultant problematic employee by placing a greater priority on the actual trading itself than the work you are required to do to stay employed.

Many times the events that took place in the workplace puzzled me. There was a guy named Joe, a clown and wannabe “Edward” who, despite his insignificance to nearly everyone who worked with him, tried to place himself on a pedestal above his coworkers and equal with every executive and director he fell underneath in hopes that someone might take him seriously.

One day, while working on Christmas Eve, he insisted that I process an invoice that I was not supposed to submit and have accounts payable cut a check that same day, which actually takes about a week, for reasons unbeknownst to me. And he wanted me to overnight that check to a supplier so that it would arrive the next day, on Christmas, which was also impossible since that was a federal holiday and the post office doesn't even deliver on that day.

This was all because that date was the cutoff for our monthly revenue forecasts. Since he was short on his financial forecasts that month, he insisted on this payment being made. He was so adamant that he tried to give me the Lyndon Johnson treatment and slam his fist down on my desk and demand that I “do it or else” and then proceeded to walk out of my office. My first instinct was to look for the nearest camera (as if that existed) and give it the Jim Halpert shoulder shrug, with the confused eyebrow raise and bottom lip grimace.

My next thought was to knock this punk's lights out, but I withheld—not because I couldn't get the job done but because keeping the status quo was more important for me. I had a nice office at the time (with a rare window view, too, though the actual window was outside in the hallway) where I could do my trading without any significant interference.

Now, had I reported him to Human Resources or the boss man, it might have been determined that they needed to move my office somewhere else so that I did not feel threatened by the dude with the funky mullet haircut and “I'm a tough guy” goatee. If that happened, who knows where I would wind up?

Offices were at a premium in that building, and I didn't want to lose the one I had, especially one with a quasi–window view. I was able to trade unfettered in my current location, my performance was solid, and I wanted it to stay that way. So Joe got his way. I submitted the invoice for processing, not because I was worried about him and what he might do, but because keeping the status quo and being viewed as a team player was more important than stroking my own ego as the office Don Quixote. But I am pretty sure the check didn't arrive on Christmas Day as he had hoped for.

If you work long enough, you'll find that there are challenges like this in different shapes and sizes that will affect your ability to trade successfully in the workplace. Your response is critical, and to stay cool at all times will help to ensure that you do not draw unnecessary attention to yourself. The last thing you want is to be micromanaged.

It did not take long before I realized that I could not be successful in my job if I was going to be successful in my trading. I wanted out, but for me to get out, I would have to find that balance in the meantime of being a “good company man” while making sure my trading did not get sidetracked, but steadily increase my portfolio value all at the same time. I knew that rising up the company ladder, or getting on that “promotional fast-track” list would not happen if I was going to take my trading to the next level. A Bible verse that I learned as a child stated, “No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other” (Matthew 6:24).

Just as it was true in how we worshipped God, it was also true in my work. I could not pursue two careers simultaneously. Either I was to excel in my job as a contracts manager, which I was fully capable of doing (but did not want to do), or I would excel in my trading. For obvious reasons I chose the latter.

With that, I had to guard my expectations. Each year we had to be reviewed in our current job position. Now, let me tell you something—this was a total circus. Later in this chapter I will discuss how the organization had pitted all of its employees against one another and how they would create only a certain number of possible promotions, each year, and purposely below the usual amount that would be deserved. But to make it worse, during our reviews, they would make my peers review my performance from the past year. That's right—I would get to choose five people who would critically review my performance. It was literally a corporate “Hunger Games” scenario.

This was often a problem for me because, frankly, some of those around me knew I did not go the extra mile in my job and that I was indifferent toward aspiring for more responsibility. But, with that said, I did do a good job at what I was asked to do. That, however, did not help much when they would ask such questions as:

• Does employee exhibit a team-like attitude?
  
• Does employee take the necessary steps to achieve “next-level resolutions”?
  
• In daily activities does employee exhibit a mindset toward company shareholders?
  
• Do customers experience increased levels of satisfaction when interacting with employee?
  
• As a corporate citizen, does employee maintain mutually beneficial relationships with suppliers and coworkers?
  

As you might imagine, on the surface I probably would not fare too well on the peer reviews when they came around each year. But I was smart about how I approached it. My approach to peer reviews was similar to the CBS show
Survivor,
as I would try to create alliances with various employees, since I was having a secret affair with the stock market and wanted to guard my clandestine operation from being exposed. If I were going to successfully do that, you better believe I would have to create some alliances for myself.

Now I couldn't just go up to another employee and say, “Hey, if you give me a good review, I'll give you a good review.” It just does not work that way (unfortunately). That kind of strategy will (1) make you sound incredibly desperate and likely get turned down like a sixth-grader at an eighth-grade dance; (2) get you a horrendous review that will create the opposite effect of what you were hoping to achieve (in fact, they may snitch on the request in your review itself), or (3) possibly land you in the boss man's office for, let's just say, soliciting a positive review, which in the boss man's eyes will make you a “bad corporate citizen.”

That means you must be doing pretty crummy work (whether you actually are or not), so much so that you are going around trying to convince others to provide you with a good review. Congratulations—you are now on the boss man's radar.

Here's how you do it. For however many employees you need to review you, find those who are the least vocal and controversial in your department. Stay away from the loudmouth brown-nosers—they will throw you under the bus faster than you can imagine, no matter how friendly you think you guys are with each other.

Once you have identified these individuals, go to their offices, one by one. Strike up a friendly conversation about something you both have a mutual interest in or something you will both be able to agree on. Stay away from controversial topics, and at the end of it, try to migrate it into the drudgery of self-reviews and how time consuming and useless they are. As working members of the proletariat, you'll likely be able to agree on this.

After you have finished yapping, go ahead and close out the conversation by saying something to the effect of “Looks like I better get back to my cubicle before someone notices” and nonchalantly exit the office, but right before you are out of arm's reach of the office door, spin around, grab the door frame with one hand, and say, “Oh, and on the topic of employee reviews, if you need an extra peer review, send me a request, and I'll make sure to hook you up.” Then smile and proceed back to your desk (for real this time).

Once you have done this, you'll soon get a request from this person because no matter how great an employee he or she is, there is nothing that a person likes more than assurance in an insecure work environment. I would say this strategy worked well for me nearly every time, and 9 times out of 10, I would have a peer review request from that person by day's end.

Now that you have received that request, don't sit on it. Oh, no—fill it out right away. If they ask for any negatives on the person, simply write “N/A” or “Employee excels in this area.” The boss will be happy to see that someone else views them in such high regard. But when you send it to your boss, also blind copy (the dreaded “bcc:” field on an e-mail) the individual the review so they can read the high regards that you hold them in. They will be forever grateful to you for it. They will never tell on you for doing this because they will be so thankful for the kind words you said and are vulnerable enough to believe that it will somehow help advance their own careers.