Selling drugs and trading are exactly alike, on the procedural side that is. Selling bonds is like selling heroin.
It costs more, if your gonna sell it you usually have to buy a lot because the first time you don't have any you lose your customers.
Selling Stocks is like selling crack.
You need the best crack in the city to make money. Some times you come across good low cost crack that sells fast but then everybody has it so you better not buy too much of it because if somebody comes with something different it won't sell anymore. You need the best to really see some money. The same way with stocks, you need the best stocks to have the greatest chance of making money.
I can go on and on about the similarities but my point is there's a difference between the drug dealers that make money & the ones that sell drugs for a long time and never have anything to show for it except prison time or a grave stone. Those differences are the same things that separate winning traders from the losing ones.
When I got caught dealing it was because I wasn't patient when it was time to be patient because I didn't realize that the paradigm had shifted and it was time to be patient (unknown unknowns)... One of my biggest struggles in trading is patience. I don't lose a lot of money but I don't make as much as I should on some trades from selling early and or buying wrong. For example I buy wrong in my momentum plays some times not waiting for the price to go the whole 10 cent over the last high thinking it's gonna run on me I'll buy when it's 8 cents over and stalling, it breaks down and I gotta cut my losses. In drug dealing you have to have a good eye for trends and when those trends change. Dealers get killed by people they think are their friends all the time when the signs were there but they just missed them. The same is true of trading. And with dealing and trading once you start making good money you start slacking on putting emphasis on spotting those changes or following the rules that help you mitigate any mistakes you may have made in judgement.
These past 3 months have been a case study.
The European debt crisis was compounded by S&P downgrade and all hell broke lose. Last month the Dow closed down 500 points with the rest of the indices dropping heavy right with it. They were ringing the "financial markets will colapse" alarm everywhere and every one knew exactly why. They said "It's contagion from the Greek default not Greece it's self" and that sounded scary because it is scary... A flat out Greek default would be catastrophic so I won't down play it @ all. The thing is, there are ways to avoid that.. How ever remote and unconditional and out right delusional they are, they're there... And people know them. So when the market prices in with certainty a Greek default in 2011 what do you do? You know the world isn't running out of ppl and ppl gotta eat, ppl need shelter.. right? So you buy the things ppl need in case that dreaded US reserve currency nightmare comes true. Or do you buy stock in a company that's bringing worth out of the ground?
Do you buy an ETF or ETN? And what's the counter party risks x20? And all these monstrous questions come to mind... or maybe that's just me... Either way it's harder for me to think when it's in the heat of the moment so I revert back to my core rules because think I must so I mine as well think inside the only parameters I control, my rules.
It gets so crazy thinking about the "contingency plan" that we miss the forest for the trees, in trading and drug dealing, or construction working, or doctoring, or anything. Everything is the same. If you barter for pop sticks or cash and $aapl stock your going to face situations where scarcity or the perception of it creates opportunities to make or lose money. These times call for quick thinking and quick decision making equally but if one of the things @ risk is your life the adrenalin rush is a million times more powerful. The feelings I have in the heat of the moment trading are nothing relative to the situations I've been in life. So I keep it in perspective but the feelings of life or death, fight or flight are close enough in trading that I realize from experience that my survival depends heavily on what I do in the heat of the moment.
So, when ppl say the world is ending and we better sell everything it reminds me of a time when the whole hood was afraid for me because they liked me and heard me have a verbal altercation with some ppl. These "ppl" planned to do me harm but it didn't pan out the way they planned. The reason was the fact that they had such a ridged and not so well thought out plan.
Every day they sat in the same spots @ mostly the same times on my block and waited for me to come home or leave out. They thought they knew everything about me and they probably did, but they didn't know about my neighborhood. It wasn't so far from where I grew up and where they knew me from so it wasn't some gated community or anything. It was just gentrified completely.. ppl needed a sticker to park on my block for more than a half an hour. These changes only happened in the past 6 months to a year @ that time so they knew the hood but they took it for granted that parking was the same and didn't bother to read the got damned new signs!! I lmfaoo even thinking about it. They're sitting there with guns on their laps and the parking authority pulls up on them. They look like cop cars.
1.) Always drive around the block @ least 3 times looking for new strange cars or ppl lurking around before I parked.
2.) Switch up the times and places I come and go, home included and EVERYWHERE else frequently.
3.) Trust myself over everyone
4.) Never think I'm that cool that I can not obey the rules.
So I was hard to catch up with most of the time.
These simple rules kept me out of a lot of jams, and got me out of even more, but that's another post.
Here I'm just making a comparison because the same feelings I had then I have now in this market environment... It's kill or be killed out this bitch so you better be sure, and if you can't be sure you better be careful. Trust your rules. They don't have to be complex rules but they have to give you the best chance of survival. If your any good all you have to do is survive turbulent times mind body, soul, and trading account capital in tact and you'll catch good trades.
It's important to realize that your not going to get rich off any one trade, so you need to be able to be around long enough for experience to payoff. This concept out weighs all else.. fuck your macro plan and fuck your micro outlook. When things get rough trade smaller. If your losing money on day one of the trade tighten your stop a little, especially if everything is dropping crazy.
(About stops they're not just a price your gonna sell @ they're signs in price and time that tell you if your right or wrong whenever they get hit. Blood is money. If you keep losing blood you will die. If you keep losing money your account will die and if you love trading like I know you do, you will die from not being able to do what you love. So respect them and give heavy weighting to them)
This past 3 months have been hellish for me. I was trapped in the market long on August 4th. the day the $es_f went down 71 handles. It felt like I was committing harry carry because I had misjudged the market. I knew I had miss judged the market because I was down like crazy so I sold. This is a rule of mine. If I'm wrong and I know I'm wrong I sell. Fuck market dynamics and price action waiting for the snap back.. Sell Now Asshole.. Is all I'm saying to myself. After I'm out and see my mistakes and feel like I've corrected my outlook or trade entry technique or whatever's wrong my next trades' trading size goes down according to how wrong I was. Vise vers is different since going up on a upswing I'm adding risk instead of taking risk off. But yeah, I traded small the last 2 months losing way less than I did on Aug. 4th and most was due to transaction costs.
Transaction costs are tuition so I can't get mad @ that.
Granted I'm not managing even anywhere near say $10 million dollars where the pressure really starts but ppl who are managing large money can bring their trading size down when they know they're wrong. And have the mindset that the chances are that they're wrong. That mindset, long the market August 4th 2011 you knew weather you were wrong or not. If you took your losses, watched the market a bit and picked a strategy according to what you saw you would have made money weather you were managing $10 million or $70 thousand, weather your selling Amazon stock or crack rocks... If you have a good system you'll judge the market right soon enough and you'll be increasing your trading size making money in no time. But it all depends on how fast you can figure out when your wrong. That's Where the indicators and or your system and your understanding of it and the market comes in, which is another post all together. But I'll say this, you need all your wits about you to trade. Since your human you have to have rules you abide by that dictate your actions for a given situation no matter what your "feelings" are @ the time. Without that you can have the best market intuition in the universe, you won't reach your full potential assuming your a discretionary trader like me that is.. If not you still can find proof in similarities with trading and other parts of life and get the discipline you need to stick to the rules..... In life and trading.