Over time and many trades, you really start to learn about yourself, not just as a trader, but as a person.
Focusing on trading, I have certainly learned from many mistakes that I made early on.
More importantly, I learned what my thought process was that led to those mistakes.
Eliminate those thought processes…boom…magic happens.
Today I trade intraday. I do not hold stocks overnight.
No matter how many gap downs I’ve seen since my last overnight hold, I am no longer tempted.
So what happened with my overnight holds in the first place, and what led me to even avoid them going forward?
As I said, trading teaches you a lot about yourself.
Clearly, there is psychology at play in the markets.
Trading will affect you financially (you either make or lose money).
But it affects you even more emotionally.
When I was blinded by the P&L, by the need to be right, by the rule-breaking moves I took, and by the fear, is usually when I would find myself in a hole.
A hole that I kept digging the bottom out of.
I would start into a position on the short side, it would go against me.
I would then believe with every fiber that it would work out in my favor if I only averaged in my position. Another few ticks up it went.
Then in final desperation, I would double, triple down, delve into using margin and go all-in.
This is it, as soon as it heads the other way, I’ll make it all back.
Only it didn’t go the other way, and I was too stubborn to take the loss, a long time ago.
So instead of taking the loss, I held. All-day and into the close, after hours, and overnight.
Looking back I don’t remember the amounts I was down as much. What I remember most was that feeling of being unable to sleep.
Of getting up at exactly 3:55 am (assuming I dozed off, but certainly without the need for an alarm clock).
Watching the market gap up further. Watching the stock I was already down thousands gap up further, and hoping for a fade at the open.
Well, that story played out more than once, twice, five times, and then some.
Sometimes that fade would happen and I’d get out breakeven or a small gain. Other times I would have to throw in the towel and watch that stock never look back.
But again, that lack of peace, lack of sleep is what ultimately bothered me the most.
So while those mistakes that led me to hold stocks overnight have been eliminated, I don’t hold stocks overnight.
Not because I don’t add to losers, or need to be right all the time, but because I want that peace at the end of each day.
Knowing I don’t have to watch anything or be in a panic about what could happen.
I can sleep, in all cash, and be ready to go the next day.
It sucked not only being down but knowing I couldn’t even take advantage of the next day opportunities because I was heavily relying on margin.
When I look back I realize how dumb those decisions were.
But when you are starting, you will make decisions like that. You will let yourself be blinded by the market.
So you eliminated what caused you to hold in the first place. Why not take a winner overnight for more?
It’s a fair question. If I short a stock and it fades, and I hold some, stock closes near lows, why not leave a bit more for tomorrow?
Again it comes back to the core fundamentals of my trading plan. Part of it like I said is having that peace of mind.
But really it is about trading early in the day, capturing the ranges I anticipated, and closing up shop.
I scale out of trades, but I don’t trade all day, nor do I set limit orders on my shorts well below the bid and walk away, willing to hold a piece all day.
To me, holding that last bit doesn’t give me any less risk or probability that I am wrong, so I just don’t waste my time.
I am content with sticking to my thesis and I focus on keeping every day separate from the day before and the next day.
The only thing that matters is the decisions I make on any given particular morning.
What I traded, how much I made or lost, and whatever happened yesterday, does not impact the decisions I make today.
That can be a challenge for many.
You have a losing day. Maybe it’s more than you expected.
The next day you take twice (or more) as much size as you normally would trying to make it all back, only you lose even more. You try and hit everything that’s ‘popular’ with traders that day.
Perhaps your losing day was already riddled with mistakes, which led to frustration, not acceptance of the wrong decisions you made.
I’ve been there.
But my whole not holding overnight thing could easily be viewed as a scar that I keep.
Or that I am still afraid.
But it comes back to the only response that I can think of if pressed for why….because I just don’t care.
I just don’t care if I am missing out on a few hundred dollars because some negative news is imminent in the market, or on a particular stock.
The fact is, in my mind, I feel I am just doing it for no reason. That there is no additional benefit emotionally, or financially for me to maintain the position.
To hold overnight, when I’m usually done at 10 am or 10:30 am and working on other projects and goals requires the sacrifice of those other things I want to do, sit in front of my screen all day, or at least come back the last 60-90 minutes of the day, looking for something.
And yes, I will repeat…because I want to sleep. Not be hindered by what could be going on in the world that is outside my control.
If the probability is in your favor no matter what situation it is, and you choose to go for it, it is your choice. You get to make that choice.
You also get to accept (and many people struggle here) the results that come from that choice.
In trading, the choices you make are going to either go in your favor (you make money) or not (you lose money).
You just have to come to a place where you are willing to accept either outcome.
When you get there…I highly recommend you stay there for the long term.
- I no longer hold stocks overnight as the experience of doing so was based on bad habits, hope, greed, and fear of losing.
- I prefer to sleep more easily, never trapped by the uncertainty that the world can bring to the market.
- I don’t care what I miss. I never take the unnecessary risk especially when the reward is far lower.
I hope this resonates with you. Now go enjoy a restful night of sleep.