If you haven’t read Part I and then the Part I addendum on AAMRQ, please do so!
Let’s run through November to February.
The amazing opportunities just kept knocking on my doorstep.
November: Bitcoin goes to the moon*
December: Bitcoin bubble pops
January: Pot stocks go to the moon (and some go too far and gravity takes effect)
February & early March: Pot stocks continue and FNMA trades to new 52 week highs
*I will eventually write a series about trading bitcoin
This is stuff that’s right in my wheelhouse. The easy money created by speculative bubbles, and then created again on the crash back to reality that inevitably followed. Initially, I just kept sticking to my rules and grinding. Take the easy money and run. Stay consistent. Avoid losing money. Don’t do anything dumb. It was more important to keep the good vibrations going then it was to maximize the amount of money I could make.
But gradually, the old automatic thoughts started to shift.
The Not Enough Phenomenon
The more I made, the more I would look back and reflect on how I was wasting an all-time great opportunity. I’m stuck in grind mode when I should be throttling my position size to obscene amounts. I knew the easy money wouldn’t last forever. I knew it was an unusual period for OTC stocks.
I was feeling the burn out in January — erratic moods (days where I didn’t even want to get out of bed) and higher levels of fatigue* led to lower levels of concentration. The weekend after the month ended, I uploaded all my executions on Tradervue and reviewed all my results. I managed to grind out around $62,000 in the stock market. I also read through my trading journal on Evernote. I recalled all the textbook setups that I missed and all the trades that I sold too early or traded too light — all that theoretical money being left on the table. It became a graphic in my head.
*For 2.5 months I spent more several all-nighters trading bitcoin at its most volatile periods. It was a 24/7 trading market. I needed some reset time.


I had thought about everything and arrived to a conclusion: you can do so much better.
While out drinking with some co-workers, I expressed my frustration.




The Day of Reckoning
Around 1:45 est, FNMA started to show sustained weakness. It had the look. I saw dollar signs. I started thinking 1st six figure day.

FINALLY!
It’s by far the best stock I’ve ever traded.

Status | Symbol | Side | Qty | Price | Route |
Accepted | FNMA | Buy | 3000 | 4.92 | NITE |
Accepted | FNMA | Buy | 3000 | 4.83 | NITE |
Accepted | FNMA | Buy | 3000 | 4.72 | NITE |
Accepted | FNMA | Buy | 3000 | 4.65 | NITE |
Symbol | Shares | Avg Price | PnL |
FNMA | 12000 | 4.78 | -2880 |


Side | Qty | Price | Route |
Buy | 88000 | 4.57 | NITE |
Side | Qty | Price | Route |
Buy | 20000 | 4.57 | NITE |
Pingpingpingpingpingpingping


Symbol | Shares | Avg Price | PnL |
FNMA | 100000 | 4.604 | -30400 |
Symbol | Shares | Avg Price | PnL |
FNMA | 100000 | 4.604 | -45400 |

Symbol | Shares | Avg Price | PnL |
FNMA | 220000 | 4.32363664 | -71200 |
$4 dropped way too quickly.

Symbol | Shares | Avg Price | PnL |
FNMA | 280000 | 4.188 | -108640 |
Symbol | Shares | Avg Price | PnL |
FNMA | 280000 | 4.188 | -130360 |
Oh My God. What have I done?

The platform had locked me out. No new orders allowed other than to liquidate an existing position.
Then someone finally spoke up.
“Um. 3.50. Then I’ll get out.” I replied. Obviously I had no plan but I had to come up with something.
He added one more thing: “There’s news on it right now, the Senate committee agreed to a deal that’s going to phase out the GSE’s.”
Wait. This is news-driven? Now I had all these questions and thoughts rushing to the forefront.
Isn’t this old news? News that aleady had been digested earlier this morning? Or did they update it with a key item? Is there some live event going on right now? Why didn’t I pick this up on twitter/chatroom? Had I been blind all along? All along I was trading on an implicit assumption this was FNMA as usual, trading on panic rather than any kind of fundamental re-pricing. What if this is still the middle of the move? What if technical areas like 3.50 and 3 didn’t matter? What if the panic occurs at $1 with a bounce to 1.50? (that’s too late…)
But I uttered nothing except a quick “Thanks.” I knew it was over.
There was nothing left to do except feel the rope tighten up around my neck.
The Longest Road
They continued to walk it down tick by tick. Just a marching line of red candles. There was no pattern change. No sign of bottom. No bidders stepping in front to save the day.
I didn’t care to pray. I knew I deserved everything that was about to happen. I was only thinking about the emotions that would come rushing out of the floodgates once the adrenaline wore off. How would I feel? How would I cope with that feeling? Would I want to jump off the building? The guilt, the regret, the anguish, the desperation, the self-loathing, the unbearable shame of losing big — I was dreading the moment when it would all hit me at once.
3.50. No bid.
For the first time since entering the trade, I finally followed a plan.
Pingpingpingpingpingpingpingpingpingpingpingpingpingpingpingpingpingpingpingpingping
Symbol | Shares | Avg Price | PnL |
FNMA | 0 | — | -195,483 |


Picking up the Pieces
For awhile, I just sat there without speaking to anyone, or even standing up.
I wasn’t ready to experience all that emotion. So I kept staring at my screen.
3.30.
Just go to $3 already…
The offer kept pressing. It wouldn’t trade over 3.35.
Why bother… they’re gonna crush all the buyers again.
It was taking a little longer for the offer to step down. It had been trading above 3.30 bid for 5 minutes now without a new low.
Hm…. seems like the pattern’s changing.
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click click click click click |
I got long in my personal account. My plan was to risk to below 3.30.

It acted right, showing the immediate explosive price action, so I never had to pull the trigger. That was the bottom.
After the bounce peaked out, I just kept trading in and out of FNMA the way I always traded it. Play both sides. Precise execution. Don’t ever take pain. Never hold onto a bias, just react to the flow. Take profits and get flat when in doubt. Only trade the size you can handle, not the size that you want. My max position at any point was less than 20% of my position size when I took that huge loss.
I finished the day up $48,500 on FNMA in my PA, without a single loss over $500. Technically, my net worth actually went up when the day ended.
The Aftermath
There’s still so much to write about: what happened after the trading day ended, what I should have done differently, lessons learned about the relationship between my trading and my emotions, the regrets I had to deal with, how I coped with that moment when it all hit me, and other such musings…
Heck, there are so many details left on the cutting board table for the sake of length. My good friend, who’s also a damn good trader and had sat to my left since we both started at the firm, was in the same trade. He drew down far more than he ever had in the past making the same mistake, but his position was smaller than mine, so he survived and minimized his loss close to the break-even point. One of my biggest regrets is not recognizing the moment like I should have and saving him (as well as some others, although we were by far the two biggest delinquents) the trouble with some kind of vocal leadership. Clearly I recognized what was going on at 4.55, from a pattern recognition stand point, considering I quickly sold flat on my PA. I had all the experience on otc bounce trades as well as the baptism by fire on AAMRQ to properly build my intuition. It was a lesson (don’t add out of panic) that I should’ve only had to learn once.
Yet I still fucked up.
I’ll probably write one more post to wrap it all up but as you can see, I pour way too much time and effort into everything I write. The more I write, the more ideas I come up with to write (and fool around on MS Paint) even more — that’s how it works. I have a lot of fun with it. Problem is… I’m still a trader and I’m kind of itching to start trading again. So here are the quick spoilers on some questions I’m sure you’re dying to find out.