What’s up everyone? If you can tell, the lights behind me, it’s another red day. This is our third red day, market recap for the month of August, and here’s the really bad news, this is the fourth trading day of the month of August. So, this is obviously frustrating. We’re gonna talk a little bit about it, actually quite a bit about it during the recap today.
This is part of the job as a trader. It’s absolutely without a doubt, the most frustrating part to really grasp, just the fact that what’s happening this week, is gonna continue happening as long as I’m a trader. There’s gonna be amazing hot streaks where you make tens of thousands, maybe even hundreds of thousands of dollars.
And then there’s gonna be these periods where you’re following all the rules, you’re doing everything right, and you lose money. Or maybe you break a couple rules and then that makes the losses even worse. So, it’s no doubt frustrating. This is what gets you through. You have bad weeks like this, this is what gets you through. This is just a little bit of bubble bath. Just jump in the bath, just relax, let those worries go. This is what’s gonna get me through.
So, you know, another red day. But, I’ll be back at it tomorrow. I’ve fallen off the horse more times than I can count and I always get back on. That’s what we all have in common, as traders, we’re just, we’re resilient. We get knocked down, we bounce right back. So, be back at it tomorrow and in the meantime, enjoy the recap. Any questions, any comments, leave them below and give me a thumb’s up for doing the red day recaps. They’re not easy, but I know you guys love them. So. All right, enjoy. I’ll see you tomorrow.
All right everyone. We’re gonna do our Midday Market Recap here, but it’s really a mid-morning recap, but, we’ll go over the trades from this morning. Today’s the day where there really was just not a lot on the scanners. You know, every day for us starts the same way.
It starts by going over the gap scanners and looking for stocks that have the potential to move 20 to 30 percent today. So the leading gappers were you, you, you, and TCCO. Now both of these were gapping up in the range of like 40%, which is a really big gap, but, they’re also both five-cent tick stock. They’re part of the Five Cent Tick Pilot Program, which means they trade in five cent increments.
You can see the spreads right now on this one, are 10 cents, which is certainly not ideal and in fact, that’s how they trade most of the time. It’s five, ten cent spreads. They’re difficult to trade, they don’t move very much. Not a lot of momentum.
These two leading gappers were off the list. CHKE is too cheap, these ones were too cheap or too expensive, VVPR was interesting but didn’t end up doing much. And so basically there was nothing on the gap scanner that I liked.
What I ended up watching out of the gates were our high day momentum scanners. And, I’ll just move this out of the way here. There is goes.
So, the high day momentum scanners, this shows us stocks that are moving right now, that are showing momentum. TCCO pops up on there, you know, there were a couple of opportunities I suppose, but, excuse me, it really wasn’t very clean. Popped up, dropped down, squeezed up, dropped back down. Just choppy. BLNK hit the scanners early on, this one, I didn’t jump in immediately, I kinda waited for confirmation.
And then I got in, right actually, way up here, which was a horrible entry. I thought this was doing a one minute micro pullback under 410, popped up to 412, and then it dropped a solid 30 cents. So, it just, that’s not impressive at all. So I lost $300 on that. It’d end up coming back up and then doing another false breakout and dropping right back down. So just a choppy stock. Only $300 loss on that with 6,000 shares.
The PNL today, you can see here, is a $2,000 red day. My max loss is $2,000, down twenty-one hundred, that means I can’t take anymore trades. If I tried to buy this stock here, it’s gonna say, “Nope, can’t place any long position. You’re maxed out.” So, that’s important. Keeping the losses small, really, I mean, that’s the name of the game because when you get into, like right now, I could say to myself that the fastest way to make back the losses from last week are to trade with bigger size. And you keep doing that, and you snowball and the losses get bigger and bigger and bigger and you’re not trading, you’re gambling.
Over the weekend I watched that movie called ‘Molly’s Game,’ and it was so funny because, and those of you who haven’t watched it, I recommend it because it was a good movie. But in the middle of, it’s a game of, it’s a movie about this woman who was running kind of like underground poker games. And there’s this one game where this guy, he’s been like a winner for like forever, he’s like a really good winner.
He is you know, very successful, blah, blah, blah, blah, and he has this one game where he ends up losing like a hundred thousand bucks. And he’s like, you know, I don’t know, cash me, you know, “I want another hundred thousand.” And so she’s like, “All right.” Takes another hundred thousand. He loses it immediately. “I want another hundred thousand.” Loses another hundred thousand. “I want another hundred thousand.” Loses another hundred thousand. He’s like, “I want five hundred thousand.” And in that one game he lost, I think 1.2 million dollars. And it’s a true story.
The story’s not at all about him, it was really about her running the game, but I was interested in the behavior that he was displaying because I just looked at that and I was like, “How many times have I talked to a trader who did that?” You know? “I’m going back in, I’m doubling down. I’m tripling down.” And he was saying this stuff like, “I’ve gotta make it back. I’ve gotta make it back.” You know? And that’s, you’re gambling, when you’re doing that.
You’ve thrown all rules out the window, risk management is gone. Strategy is gone. You’re just gambling. That’s something that sadly can happen to traders, because trading is absolutely a career of skill. But, if you choose to gamble, you can gamble. You can choose to just throw ten thousand shares at this and ten thousand at that and hope that it’s gonna go up.
And that’s not a sustainable strategy. It doesn’t work. And I’ve seen traders over the years, I’ve done it, I’ve had times over the years where I’ve done it, just impulsively, after one loss, jump into something else hoping it’ll be a big winner without really, fully analyzing it. And I’ve seen students do it, where they’ll say, “Ross, I’m down $3,000 today, what should I do?” And I’m like, “You should, what’s your max loss? If it’s a $3,000 max loss, you should be done and come back tomorrow.” And then they’re like, “No, I think I’m gonna keep trading and I’m gonna try to make it back.” And then next thing you know, they’re down 6,000, 9,000, 12,000, and it just goes down and down and down. Those are snowball days and they happen to traders, I mean really, it happens all the time.
Anyways, it just kind of … When I was watching that and I was thinking about how disappointed I was with my red days last week, but this max loss is so critical to my risk management. Because at this point, as angry and as frustrated as I could possibly be, I’m not really that annoyed right now.
But, let’s say I was totally furious and I was like, “No, this is crazy. I’ve gotta make it back. I’m really, really angry. I could try to buy ten thousand shares. I can try to buy fifty thousand shares,” and it’s just not gonna go through. This is gonna say, “Nope, sorry. You’re exceeding your limit.”
So you can place these risk management techniques to these limits on your account and it’s what helped control those red days. Red days will happen, they’ll happen to all of us. Whether you trade stocks or you play professional poker, it doesn’t matter, you will have losses. It’s not about not losing, it’s about minimizing the draw down and not losing composure.
Yeah, ultimately right now I could call Light Speed and I could say, “Take the max loss off my account,” and they could do it, but that would be crazy and fortunately I have enough self-control not to let myself do that. However, when drugs and alcohol get involved, then you may lose that self-control and I don’t think any of us, or many of us, would be trading and using drugs or alcohol. In the movie, the guy was drinking heavily and that maybe influenced his decision just to, go totally off the walls. It’s all about maintaining composure. And it’s not about never having red days, it’s about losing with grace and saying, “Okay, I’m taking my loss.” And that’s what it is.
ESRX is the one that got me good today. Now this one’s kind of annoying, because I had said this morning, I was gonna max my size at 6,000 shares. And I pressed this three times, thinking I would, I might be getting partial fills, but I would try to get 6,000 shares across these three orders, and boom. I had 9,000 shares. And I was like, “Well, hold up. Well how did that happen? I thought I had put my max share size in here.” And so, I realized that I did put it in here, on Friday, but it must not have saved it. So I was back to 15,000 shares. So 9,000 went through no problem, and now I have 9,000 shares. Which was more exposure than I wanted and pretty much immediately, it dropped 20 cents.
On, what day was it? I don’t remember, but one of the days last week, I had a trade like this that I got into and I held it, down to five dollars, and it broke five, and I ended up stopping out and getting slippage on the drop. And when this one, as soon as it did a false breakout here, I stopped out right here. So this is where I was out. It was actually right here. So, I got in right here for the first one minute, can, [00:10:45] will make a new high, and then I stopped out right here. So I kept a tight stop and that was the right move. Now I had 9,000 shares, so I lost 20 cents, which is eighteen hundred bucks, but the risk management was still on point. The share size was larger.
Someone was talking, made a post in one of the YouTube comments over the weekend, he said, “Ross, why would you reduce your share size right now, if you know your accuracy is 68%, then shouldn’t you just keep trading with the same size, knowing that even if you, whatever, had a couple losses last week, that you’ll make it back. If you reduce your size, you’re just gonna make less money.”
And what I said to that comment, which I thought maybe others might have and that’s why I’m bringing it up, is that there’ll be times when, even though over the course of the last two years, since I started this Small Account Challenge, my accuracy’s been 68%. There’ll be times where my accuracy might be as high as 80% and there will be times when my accuracy might be as low as like 40 or 50 percent. Through really bad weeks, through a cold streak.
What I try to do, and this is a little bit more difficult, because I’m trying to time when to be aggressive and when to be conservative. And if I time it wrong, then it’s not good. But what I try to do, is I try to increase share size during the period when my accuracy is higher and when I’m seeing a really strong market. By doing that, I made $100,000 in January.
And then on the flip side I try to reduce my share size during periods where I feel like my accuracy is not going as, is not as high and where things are just choppy. And then by doing that, I reduce the losses during the slow period.
I think that inevitably if I tried to trade with the same size, just always, I never increased, I would feel like I’m under, I’m not fully maximizing on the opportunity of a strong market, but not taking really big size. And then at the same time I would feel like I am kind of, unnecessarily losing money during a poor market.
So I think the fact that I increase share size during the strong market amplifies the swings to the upside, and then the fact that I try to decrease share size as early as I can, during a pull-back, reduces the swings to the downside.
Then instead of going up and down, going sideways, I go up and down, up and down, and the equity curve is looking like this … If I, I’m concerned that if I kept the same share size, the equity curve would be more like this … Because the draw down to be bigger, the ups wouldn’t be as big, and it would be more of sideways. I’m not sure, because I haven’t done it, but that’s what I would maybe suspect.
The hardest thing is that after a really big hot streak, it can feel hard to reduce share size and so sometimes you’re not as quick to reduce and you have a little more pull-back than you’d like to have.
So as of right now, I’m down about $12,000, during this red streak. And the red streak has been about one week long. So, that’s disappointing, but I’m up over $100,000 since the last time I had a red streak. I had a red streak where I lost like $20,000, I lost about $22,000. And then, so let’s just map this out to show what it looks like.
Let’s say this is 10,000 down, and this is another 10,000 down. And then I had a hot streak where I made 100K. So that’s 10,000, 20,000, 30, 40, 50, 60, 70, 80, 90, 100, and now I’m down right here. So this is where I’m at. This is why it’s so helpful to put things in context, because even though this feels crappy, to have a red week, and to be down $12,000, this is the context of the last two months. Right? So in context, being down $12,000 actually isn’t that big of a deal.
Now I don’t want to go like this … and like this … because that’s gonna start to feel worse. I’m still at the point where I have the opportunity to cap the losses to the downside, we’re one week into a choppy period, and kinda go sideways a little bit with smaller size until I start to see things improving. And that’ll increase my size and get ready for what will hopefully be another big hot streak like this.
That’s kinda what I look at when I have a bad day, or a bad week, is, let’s put this in context. I’m still a millionaire, I’m still, you know, made over $350,000 this year. There’s, it’s easy to beat yourself up to get really frustrated, to get tunnel vision, where you’re just looking at that little blip right here. Where this is all you see. Because the reality of a trader, like anything else, like a lot of things, is that we sometimes only feel as good as our last trade. So this is the area that becomes focus, but when you step back and look at the bigger picture, it reminds you, “Okay, you know what, take a breath, you’re being a little hard on yourself. You’re in good shape.”
Anyways. I say that, hopefully for your benefit as well, because I’m sure many of you guys go through the same type of thing that I’m going through. And you guys have seen this happen to me, every single day, we’re doing a recap. So you’ve seen me do recaps during all these days here, during two weeks or three weeks or four weeks of bad trading. And then during all of these recaps going up on the days where I make 20, 30, 40 thousand dollars. It’s, I try to just give you guys the full picture into what it’s like to be a trader. The ups, the downs, everything in-between.
This is a red day, but this is not the worst red day of the year. In fact, it’s this is just totally like, not a big deal type of day. The only thing that’s a bummer about today, is the fact that it’s the third red day of the month, and that today’s the fourth day of the month. That’s the only thing that’s a bummer, is that I’m down $12,000 or whatever it is on the month.
I’ve had months that started worse and finished in great shape. So, it’s … It is what it is. Even if this month does close red, I was red in February. I lost $10,000 in February. And look at where I’m at now. You just have to sometimes keep yourself focused on the big picture.
I’m in the middle of a marathon. You know when you’re running a marathon, you’re not gonna set the same … You might say like, for instance, “I need to make $50,000 every single month in order to make 600K this year.” Okay. Fair enough. You may think I’m running a 10 kilometer, a 10K marathon, I need to average this time, every kilometer. But that’s not realistic because you’re time is gonna be different when you’re running uphill versus running downhill. You know what I mean? You’re gonna have some months where you’re way above the goal and some months where you’re below the goal. And you can’t get bent outta shape because you just ran up a hill and you are on a lower time than when your running down. I mean, it’s just one of those things. It’s so easy to lose sight of it, but, anything you can do to keep yourself grounded and keep perspective, is important.
Anyways. That’s where I’m at. I’m saying it to you because I’ve gotta say it to myself, because it’s easy for me, I’m my biggest critic. I’m the one who’s like, upset with myself for not performing at a high enough level. I’m very competitive with myself. I’m not happy with where I’m at right now. But, I’m saying everything to you, that I’m trying to say to myself, “Keep it in perspective, these are the ups and downs of trading. This is part of this career. You will bounce back.”
You know, Tyler, it’s a good point, you think the $2,000 max loss is too small because the problem is what could happen is I take a loss like this right outta the gate. And then we end up seeing five or six great opportunities an hour later, now I’m missing them all because I’m at my max loss.
I tightened up my max loss, $2,000, because last week I had a day where I was down 4500, which was below my $5,000 max loss, and I proceeded to take one more trade and lose another $4,000. Which was totally unnecessary. It was so stupid. And so the fact that I made that decision is what told me I was being impulsive and emotional and forty-seven hundred dollars was too deep in the red for me to continue to make good decisions. So I’m tightening the max loss of $2,000. And reality is, if I start the day down two grand, the odds of me finishing it up five or ten thousand, are pretty slim. It doesn’t mean it couldn’t happen, but this is not a good way to start the day. It, the odds that trade three is gonna be a big winner are pretty slim.
It’s true though, this might end up being too tight of a max loss during a hot market and if that is the case, and I’ve had a month where I’m up 20, 30 thousand dollars, and I’m starting to be in really good shape, then maybe at that point, I’ll call Light Speed and say, “Hey, let’s move the max loss to 5,000.” I just wanna make sure that the day I do it, is calm, composed, and doing it for a strong, a good reason, not just because I’m trying to make it back.
I’ll probably, if I had a day like, if today we end up seeing amazing opportunities later in the day, and I’m like, “Well, that’s disappointing, I missed them.” That might make me second guess this, but I don’t think I’ve missed anything today. I think today’s been a choppy day and I’m, this is really the best decision right now.
So, we’ll see. Always subject to change. These things, I have no issue changing if I have a good case for making a change, but, it’s not gonna be based on emotion. It’s gonna be based on rationally, logically, this is too tight of a max loss and I need to give myself more room if I’m gonna continue trading with 10 or 15 thousand shares.
Anyways. That’s it for me and I hope you guys enjoy the recap and I’ll post it up on YouTube. Any questions, any comments, leave them below, and I’ll answer them later today.
All right. I’ll see you guys back here, first thing tomorrow morning and hopefully we can just finish the day green. That’s what I want. Green day.
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