I lost $700,000, or 70% of all the money I had in a trade gone seriously wrong.
I lost another $100,000 in a failed start-up business. I then decided to go back to trading.
I reached a low point of $35,000 left in my trading account.
But after taking a break from trading to spend several weeks reviewing my trades, I finally figured out how to make money in the stock market.
I live a comfortable life from trading alone. My trading profits not only cover my living expenses but also allow me to reinvest a good chunk so my trading account grows every year.
It’s just mind blowing what a difference a decade can make in one’s life.
Don’t over-estimate what you can do in the short-term.
And more importantly, don’t underestimate what you can do in the long-term.
My 2019 trading results
Although I’m about up +35% for the year, unlike other years, I won’t go into details about my real performance vs my performance if I had traded my strategy perfectly.
You already know that post-analysis is THE most important step to take if you want to be a consistently profitable trader. I already talked about this process in this post here and here.
By the way, always remember that a year’s returns doesn’t mean anything.
It’s the consistency of the process that matters.
ANYONE can have a good year. VERY FEW are consistently profitable.
My only awesome takeaway from my 2019 trading results is that it is the very first year I left very little money on the table, compared to if I had traded my strategy perfectly. So I got really close to my goal of taking full advantage of my trading strategy. And I can attribute this mini success to 3 things:
1- My trading journal
You remember the changes I made to my trading journal right? Well they paid off big time.
There are 2 ways to change your behavior. Either it comes from within, by working on yourself, on your mind. Or it comes from outside, from your reaction to your environment. I leveraged that latter technique through my trading journal. It’s like if you want to eat less, have less food in your fridge and avoid places where there’s plenty of food.
2- Less focus on money
2019 was the year I had a lot of distractions outside of trading. I became a father, which is a full-time job. So I didn’t have too much time to think about my opened positions and get scared of losing some paper profits.
It’s been more than 10 years I’ve been involved in trading and this year, I really started to have a big picture mindset. I noticed that my losing trades didn’t bother me as much before, and being in a drawdown for most of the year didn’t bother me either, simply because I just knew that following my strategy would pay off down the line. And this is something no one can teach you. This is really something you have to have experienced for years, trading one strategy, until finally, you start fully trusting it, on a subconscious level. This is experience.
U.S. Investing Championship
Unfortunately, nothing much to write here. I’m up something like 11.61% since I entered the competition late, in April. But no excuse nonetheless. I have nothing but respect for those who also competed with their own money.
I’ll probably enter again this year, without expectations, but with my process again.
It’s only a matter of time
I’m going to show you my results for the last 4 years. I didn’t think of taking screenshots in prior years.
But before that, I want to be clear that I’m not doing that to show off. I’ve had many bad years and last year, 2018, was pretty bad. In an industry selling you dreams, I just want to show you what is really possible to attain as a retail trader trading from home (or from Starbucks).
So here is my performance for the last 4 years.
Note that those are not spreadsheets made up results and equity curves, but real screenshots from my brokerage account.
2018 (If you want to know the reason for the drawdown, I wrote about it here.)
Last 3 years
Most unprofitable traders are trying to hit the jackpot. They are trying to double their money quickly, or trying to make money on every trade, or every day/week/month.
But by doing so, they are focusing on the wrong thing.
Trading is an infinite game. You don’t “win” in trading. The goal is to stay in the game. And to stay in the game you have to avoid at all cost being putting yourself in a situation where you could lose all your chips. And you have to focus on being consistently profitable.
Never forget that just averaging 20% per year over a long period of time not only puts you in the top 5% of all traders in the world, but it will allow you to grow your money like nothing else.
So I’m definitely NOT the best trader out there. But I’ve averaged about 35%/year in the last 5 years, and I am 100% certain that I will become a multi-millionaire in a couple of years.
To give you some perspective, thanks to the power of compounding your profits, 35% on average per year will turn $10,000 into $1.2M in 16 years (and into $2.2M, 2 years later), and $50,000 into $1M in 10 years (and into $4.5M, 5 years later). And before you say it’s too long, not only will those kind of returns attract money to be managed your way, but it also beats having to work a job you don’t like for 45 years. Once you’re worth several million dollars, you can still work a normal job. But you don’t have to anymore.
Don’t focus on taking as much risk as possible to try to double your account, or making money every day or even every month.
Simply focus on becoming and remaining consistently profitable, for when you are, it’s just a matter of time before you reach any financial goal you have.
What I’ve learned this year
If you want to change your results, you have to change.
You will not get better results by being the same person and doing the same things you’ve always done.
10 years ago:
- I didn’t exercise. I now run and do some body weight training everyday.
- I couldn’t think in probabilities. I’ve now embraced that concept and it spread to many areas of my life
- I never read any books. I now read about 30 books a year
- I couldn’t care less about analyzing my trades. I now do it regularly
- I wanted to get rich quick. I now know that the focus should be on consistency. Averaging even 20% a year will not only put your in top 5%, but it will also attract other people’s money, and it also change your life as any number you have in mind will now be reachable with time.
Losses begets more losses
Very often, a loss of discipline comes from a string of losses.
When the market environment is not conducive to your trading strategy, you get more losing trades than usual. This often has a huge negative impact in our psyche and we start making tons of mistakes (i.e. not following our trading plan, or even failing to come up with one). Which in turn results in more losses and a bigger account drawdown.
We then often think there’s something wrong with our trading mindset and feel the rush to read books in trading psychology. It actually all started with a couple of losses.
Review your trades, especially the ones that triggered this loss of discipline. You will often find that either the market had changed and didn’t favor your strategy anymore, or your expectations were not in line with reality. Never forget that most of the time, especially for swing/momo/trend followers, we are in a drawdown. We tend to forget that too easily when we encounter a hot streak.
There will ALWAYS be losses after profits, and vice versa. There will always be corrections after legs up. There will always be volatility spikes after periods of low volatility. Always remember that after every winter comes spring.
When you discover what triggers your lack of discipline, and adopt this mindset, you will be more relaxed, more patient. You will be able to keep most of your winnings during winter periods, and take advantage of spring periods.
What’s next for me in 2020?
Finally treating trading like a business
At the end of last year, I finally took the plunge and created my company through which I’ll be trading. I’m now finally officially self-employed in the eyes of the taxman and the banker. I’ll be able to claim expenses against my income, and if I need to, borrow money to buy assets. I will also pay myself a monthly salary, which will be psychologically much more comforting than what I’ve done up until now, which was withdrawing a part of my profits once a year.
I got into the awesome habit of recording every new setups I wanted to test. You all know that trading is a probability game and that judging a setup, an indicator, or a trader’s skill on the last 5 trades is not how trading works. Our brains are really bad at processing these kind of data, which is why gathering data (or backtesting) can be useful. And recording new setups not only allowed me to test their validity.
It also greatly reduced my tendency to overtrade. When I saw a setup that was outside of my trading strategy and felt the urge of taking action, instead of wasting my hard-earned money on it without any proof that it had any edge, I recorded it in a spreadsheet dedicated to that setup. It wasn’t as satisfying as placing a trade, but was good enough for me to seriously drop my overtrading and gather useful data.
Now this year, I’ll start analyzing the data for the setups with a large enough sample size. Quite excited about finding new setups that have an edge in the market and add them to my trading strategy, especially on the short side, which could nicely decrease the volatility of my equity curve.
I’ll finish this post with this:You are not your thoughts. You are your actions. You are what you do. Not what you say you will do. Click To Tweet
I wish to every single one of you, who had the courage to read this post until the end, a fantastic New Year 2020! Let’s do this!