Please bear with me. I need to vent. I’m hoping I’m not the only one this seems to happen to. I’ve only been doing this for 3 months. I’ll be retiring in a few years and I’m trying to find something to make money once I retire so I am testing out trading stocks. My personality does not allow me to invest over years time. I don’t have that kind of patience. I want to get a return of some kind every few days. So day-trading I guess. And don’t get me wrong, maybe I shouldn’t be complaining. I’ve done 37 trades so far with 33 “winners” and 4 “losers”. With every trade I do, I try to find a lesson. However, those 4 losses are a full third of all of those wins combined! 2 of them in particular. They were whoppers and this last one I’m trying to find SOMETHING as a lesson other than just remarkable crap luck! I seem to have made miraculous things happen but not good things! In fact just two of the losses are worth 25% of everything I gained. It’s HOW they happened that pisses me off. What’s the lesson from this? Here’s what happened: ABC stock (made up) has been like clockwork. Has a very specific pattern 2-3 days up, then 2-3 days down. Buy it at the low, ride it up, sell it at the high. Easy right? I recently bought 500 shares it at the recent low at $7.16. A little higher than normal for me. I prefer below $7 on this stock but it’s reliable so what the heck. BUT…then it magically went out of its norm. The company is pretty solid. No news of any kind. No indications at all that it shouldn’t start that upward swing…but it kept dropping….and dropping…and dropping. For 10 freaking days! It hasn’t done this in the last year. It’s a miracle! So eventually I’m thinking I need to eat the loss but man would I be pissed if I bailed and then it flipped. I even extended my stoploss because I was confident it would turn around but it just kept dropping….and dropping. Finally after it showed no sign of reversing day after day I had to throw in the towel and at 11% down I bailed. Now here’s the part that passes me off: As soon as I bailed…it stopped dropping! Like at that moment! Then…you guessed it…the next day came and the entire 10 day losing streak was erased in 5 hours. It’s like the only reason that miracle drop happened was to make me lose money and once I did, the stock world was happy and it completely bounced back with the largest 1 day gain in its last years history. Another miracle! I swear all indications were just to make me lose money. There was no sign of anything else as to why it would drop so far out of its normal pattern. The other loss (my biggest) did the same thing. I stayed in it longer than I should have to make sure I gave it every opportunity to show me that a turnaround is coming. I bailed, it stopped dropping at that moment, and took off the next day although this one took longer to recover than my first example. So…WTF? Really? I wait extra long before bailing…and then it stops dropping and follows up with a miracle recovery after I’m out? My thought when I bailed was that clearly something was happening here that I can’t see and I can’t just let it continue to bleed. My new saying since being in stocks: “Oh that burns my a$$”. So if anyone else is new to the game and this stuff is happening to you…just know you are not alone.
A pretty normal beginner behaviour. You lock your profits as soon as you see some and keep waiting on the losing trades to come back, resulting on huge drawdowns. Probably, you have seen some of your winning trades going way better once you got out, saying: "man if I stayed in, I would have made way more". You said that you've been doing it for three months, it checks out, beginner pashe. Get used to losing. Losing is part of trading at the beginning. You bet on one trade and expect it to go well, that's not how you trade stocks. You have to prepare your capital and distribute it in different trades as it goes along. Enter one trade at the minimum capital required and react to your pnl with more trades. For losing trades look at "buying the dip with intervals". Those intervals at the beginning of your trading should be big, so you can take advantage of the average trade with multiple entries. Calculate your stats and see the average duration of your winning trades, look for the best execution time. Normally markets have a pace, find that pace. If you manage to let your winners running for longer, you will overcome those drawdowns. Trailing limit orders help to run along with the market, so you won't need to exit at anytime, the system will do it for you. Cut your loses as soon as you can, assume that you are wrong and get out sooner, one of the most difficult parts of trading is to tell ourselves that we are wrong, tell yourself that you are wrong more often. There will be another opportunity to get in. Automate as much as you can, we are our worst enemies staring at a screen. It will help to keep you out of doing something wrong. Trade demo accounts first, but do it forcing yourself to think that you are using a live one, if you get angry with loses on your demo account you are doing it right. Do not enter a trade without the exit level in mind, regardless of what happens, have two levels ready, one to stop and one to take profit. Look at brackets orders, they help with that.
The only time you'll notice it happening is on a losing trade. You will never notice all the winning trades you'll make where you got out at the top. Just human psychology at it's best.
Trading is one of the most difficult professions. It might take half a century or infinity to learn how to trade. Since you will be retiring soon, you have to consider how long it takes to master the skills. If you don't have a trading mentor, better try other simpler things. You should have started learning how to trade very long ago (before the computers were invented).
The lesson is that when a stock doesn't do what you expect it to do, take your money and run. You can't control what the stock does, you only control what you do. It's easier to hold stocks when they do what you want them to do. To add to your frustration some morning you will wake up to find that your favorite stock has fallen into the crapper for no apparent reason. Welcome to trading!!
Wow! Yes! The wins situation I have been able to counter with “Any win is still better than a loss”. I have some rules I’ve made up along the way and one of those rules is to not be greedy. For you to type what you did makes me think my attitude on this is good. Thx
You exited on maximum pain. Waited additional time to get there. There were only three options: Sell early, and it this case, fear of taking a small loss. Sell at Max Pain, loss fear was maximum otherwise you would have waited for the bounce. Sell after max pain on the bounce and exit, probably for more than a small loss, but a confirmed loss. Also you based the trade on a pattern. The patter broke, and you did not have a plan. Trades have several exit plans: Profit plan, Break even plan, loss plan. Sounds like you did not realize you needed three plans for this single entry trade. Lastly, any rule based ONLY on your PL is ignoring the fact the market cares nothing about your PL. Try prioritizing PL agnostic rules. for PL dependent rules. I.e. PL agnostic rule first, PL relative rules second.
You're a newb so of course you think that. But best to think a good loss is better than a win that you "lucked" {hate that word} into. Your screenname says to me you are focused on the wins, when you should be laser-focused on your losses. In team sports there are offensive and defensive players. Of course the offense often gets all the glory and bigger bucks. But coaches know without a great defense the team goes nowhere.
Wow. The trading psychology books in real... Sorry man, but it's not a miracle, you capitulated at max fear (psychological), which everyone else did as well - and as no sellers left, the stock went back up. 2nd mistake, you didn't close your loss early, as you knew better, and couldn't adapt (psychological) to the fact the chart doesn't keep to his year long pattern. This 'stuff' shouldn't happen to anyone - read some trading psychology books - and be succesfull ! (btw, as you trade only to make money, and at a age where you can't get back to a regular job in worst case scenario, you're very vulnerable to psychological influence on your trading - beware !!!)
All good info. Thx! Clearly I need to handle the losses differently and I’ve got some good advice from the board already.