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Behind The Trades: How to get out of a Trading Rut | Ep. 7

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Behind The Trades: How to get out of a Trading Rut | Ep. 7

 

 

everyone, so today we’re going to start our seventh episode of Behind the Trades. This is actually the first episode since I got back from my month of traveling. I was in Italy for a couple weeks and then, I was in New York City. Then, I went to Las Vegas and then, San Francisco and Sacramento, and Napa Valley. Now, I’m back home getting settled in so, it’s time for our Friday episode of Behind the Trades and get back into the routine of doing these episodes every Friday.

Let’s see, the topic for today is how to turn around your trading and how to get out of a trading rut. This is very topical for me, as many of you guys know, because I went through a bit of a trading rut in the month of April. I want to talk about how I traded through that period of frustrating trading and how I was able to get out of it and redeem myself with $17,000 profit in the month of May.

Now, you may be watching this, those of you who watch or listen to the podcast or watch this and it may be months and months later, so don’t worry about April and May. What we’re going to talk about specifically is how to handle going through a period of difficult training, how to create a game plan to get out of it and how to follow that game plan and work your way out. All right?

So, let’s see, looks like we’re going to have a good collection people listening on today’s live broadcast. Both on Facebook live and in the chat room. So, I want to remind you guys that you can participate in episodes of Behind the Trades by going to WarriorTrading.com/Show. When you go there, you can contribute questions that’ll answer during this episode. I’ll be answering three questions that have been submitted by listeners of pervious episodes and I’ll be sharing with you one story of one of our students who submitted her story on the show page, hoping that we would share it with everyone.

Make sure if you are interested in participating that you check out the show page over at WarriorTrading.com. Those of you who are watching in the chatroom, I’ll put up the show page so you can see what this looks like here. All right, so this is the show page for Behind the Trades. You can subscribe either on iTunes, sound cloud, stitcher, Google play, YouTube, Facebook, etc.

If you scroll down, you can see some of the latest episodes and you can see here how to be part of the show. If you have a successful trade story you want to share with us, I will share that with listeners on one of our upcoming episodes or, you can ask a question that I’ll answer during an upcoming episode, all right? So, make sure you participate.

And, what I’ll be doing for the students or traders who participate in episodes of Behind the Trades, is I’ll be giving away a gift on each live episode. The gift today is, I’ll be giving away one warrior starter course. The last gift here … The last one I gave away to a student or a trader, Eric who was listening in so, Warrior Starter 997 total value. All right guys, so make sure you check out Behind the Trades, the show page over on WarriorTrading.com.

Now, let’s jump into today’s episode. As I said, the topic for today, episode seven, getting out of a trading rut. Then, after I go over the topic we’ll go over the viewer submitted questions for Ross, viewer submitted story and the gift give away. All right, so topic of the day, getting out of a rut.

As you know, as I already mentioned, and as many of you may know from following my journey on YouTube, April was my first red month in a really long time. Now, my goal for the month of April was, I think, conservatively … I think conservatively $20,000, more aggressively 40 or $50,000. I mean, that’s what I would have certainly liked to have been able to do. I was consistently doing 40, 50,000 a month through January, February and March so, for April I kind of figured, 20, 30,000 should be realistic and if I can get to 50,000 it’ll be a great month. So, halfway through the month of April when I was break even, I was like, “This is not looking good. This month is not coming together the way I thought it would.”

What’s interesting is that I started the month of April, my first week of April, I made $12,700. That’s a great start to the month. In the second week of April, I ended up losing $2,200 and what ended up happening is I had that Monday and that Tuesday I made 5,000 and on Wednesday I lost seven grand. So, I started to continue the momentum and then I had this really quick drop. I lost another thousand dollars on the Thursday and then, into the next week I lost money again. I lost $1,400 the next week and I lost $4,400 on the last week of the month.

So, I went from being up 12,000 to just giving it back slowly, slowly, slowly until I closed the month down $4,000. My last day of the month, or my second to last day of the month I lost $7,700. It was completely avoidable. I was getting myself … I was starting to get myself frazzled. I was getting myself frustrated that I wasn’t having a better month. I started swinging harder, and harder for the fences, trying to redeem myself. Trying to regain some profit for the month and I was thinking, “With 20,000 shares, if I can get 30, 40 cents on this trade, I’ll be up 6, $8,000. That puts me back into the 10, 12, $15,000 range on the month. But of course, when you trade with big size like that, you’re exposing yourself to a fairly steep draw down and that’s what kept happening.

So, what I want to do is I want show you some of my metrics here for the month of April. It’s not impressive and something that I’ve said to all of you guys is that one of the big challenges for me is that … I, certainly, like any other trader, I have bad days but I’m doing this live in front of 7, 800 people in our main chat room and right at the moment, typically 8, 1,500 or so a regular day plus 100,000 people on YouTube and 150,000 on Twitter. I mean, I’m being transparent and it’s in front of so many people that when it doesn’t go well, it’s a little embarrassing. I can’t help but feel that added pressure that I have people watching.

One of the things that I committed to doing earlier this year was documenting this entire journey. From $583, that was my starting balance on January 1st. As of right now, I’m up to 113,000. You might think that that’s pretty impressive and I suppose that it is but, I hit $101,000 on March … I think it was March eight. Well, you know what? Let’s just check this. You know what? That’s funny, it was March 8th, which was my dog’s, my old dog’s birthday. My dog that passed away. Coincidence I’m sure but, in any case, on March 8th, I hit $100,000. Today is June 9th. So, from March 8th to April 8th, to May 8th, to June 8th here, I haven’t made a lot of progress.

What’s that about? I moved up really quickly and then, things have pulled back and I’ve kind been flagging under high of day. Just consolidating underneath the highs. Yes, the big picture is $583 to 113,000 is impressive and during that time, I also was taking some trades in one of my other accounts, which I’ve since closed. I’ve consolidated to just trading in this one account now that it’s a $40,000 account. I’ve been drawing out money when I make enough to draw some out. But, I’m up total about 150,000 on the year right now, which again, for June, is not bad. That has me tracking it about 300,000 for 2017. I did 222 in 2016.

So, to increase your annual trading profits from 222 potential to close to 300,000, I mean, that’s like a 30% increase. There’s no job in the world as a nine to five where you’re going to get 30% increases in your salary year over year. But, as a trader, you can if you really refine your strategy and you have the combination of good markets on your side, you can grow your account very quickly. You can roll over those annual profits and see increasing percentage growth year, after year, after year, which is definitely pretty cool and I think that’s inspiring and it keeps all of us motivated to really work hard.

But, in any case, the month of April for me was not particularly impressive. I finished … This is my trader view report here that you guys are able to see on the screen. I’m actually interested that I don’t see day 28 on here but … Oh wait. No, that’s day 27. I might have to check. It’s possible that there’s one day that’s not being imported but … Oh no, I think it’s there, it’s just a small gain.

Anyway, we’ll look at net gain instead of gross. If I look at gross, that’s before commissions. So, before commissions I was flat on the month, basically, is what this is showing. We’ll go to detailed here. I lost $600 in the month of April, not including commissions. When you include commissions, that’s when I’m down 400, or $4,229.

Okay, so obviously, a little bit of a difficult month. Let’s look at the kind of stats for the month of April. My accuracy was 60%, all right? So, 60% accuracy. My average winning trade $781 and my average losing trade $1,364. What does that tell you guys? I had a negative profit loss ratio. In fact, I lost almost twice as much as I made on average. Sounds pretty bad. Well, it is. This is not sustainable. Statistically it’s not sustainable to lose twice as much as you make. If I had this profit loss ratio, I would actually have to be right 66% of the time to break even. Flip that ratio to being right … To making 1,300 on your average winners and losing only 700 on your average losers. You only have to be right 33% of the time to break even. That’s a big shift. Obviously, there’s a ton of range in between.

The important thing to understand here is that, you need a positive profit/loss ratio. Having a negative profit/loss ration is not sustainable. So, in the month of April, basically what I did is I kept stepping up to the plate. I kept swinging for the fences, looking for home run trades and they kept coming up empty handed. I was taking $1,300 of risk per trade but I wasn’t making $2,600 on my winners. I was only making 780 on my winners.

Now, let’s contrast that against my best month of the year so far, which was the month of February. The month of February here, my average winners were $1,870 and my average losers, $1,318. So, my average losers were almost exactly the same as the month of April. My accuracy was 68%. My accuracy was a little bit better but, the big change here was that the average winners were $1,800 versus the month of April, which was only $700.

This shows me that my risk wasn’t actually any different between April and February. What was different was that I wasn’t getting the home run trade. I was stepping up to the plate and I was swinging for the fences and in February it was working. I kept walking away with winner after winner after winner finishing with $60,000 in this small account plus another 10,000 in my other account. $70,000 in one month.

Now, accuracy was only slightly better. The big difference was the profit/loss ratio. As I finished the month of April, I knew that I needed to do something different. I knew that I couldn’t have another month like this. This was not sustainable. When I looked at my profit/loss ratio and realized my average losers were twice my average winners, this was not going to last. I had to do something fairly drastic to make a change.

So, that’s when I flew to Italy. I flew to Italy and I said, “All right, what I’m going to do is I’m going to go into trader rehab. I’m going to make a game plan for how I’m going to get out of this trading rut.” Because the reality is, in the month of April … Let’s see, let me switch here to the overview and the calendar. In the month of April, I closed three weeks red. I had three consecutive red weeks. I mean, that for me, is almost unheard of, to have that happen. I was like, “I need to do something different going into the month of May. I need to change my focus.”

My focus through the month of April was looking for home run trades. I was trading with pretty big share size. Let’s look at my average number of shares per day. 53,000 shares per day. All right, so I was trading with … That was on a total of 66 trades. In the month of May, I created a rule. The rule was that I wouldn’t trade with anything more than 2,500 shares. Instead of trading with 20,000 or even 25,000 shares, I was limiting myself to 2,500. I said that the problem here was that I wasn’t getting the big winners so I needed to reduce my risk. I can’t control how much a stock is potentially going to up. I can’t control that but I can control how much I’m willing to lose.

So, I said, “I’m going to take 2,500 shares and I’m going to stop out $500 max loss. I’m going to keep my stops really, really tight.” Those were my two rules. Small share size, tight stops and then, the third rule, I guess, was that I would focus on buying pull backs. Buying better quality set ups and not chasing stocks that were squeezing up. Making … Oops. Let’s see. Applying those three rules, let me show you the stats for the month of May. What you’ll see is that my statics are much, much healthier.

So, in May, I finished with … Let’s see detailed here. As you can see this is a trader view report. $16,965. My average winners, $445. Now, my average winners were actually smaller than the month of April but they made my money. How is that possible? My average losers were only $213. So, from $1,364 down to $213. I tightened up my risk. I mean, my risk was like 20% of what it was through the month of April. Much, much better. Small losses and even thought I wasn’t getting any big trades, my profit/loss ratio was two to one. Two to one. $200 average loser, 450 average winner. My accuracy was 65%. Okay?

This right here is … These are the metrics of a successful trader. These are sustainable metrics. Now, my average trading volume is 47,000 shares and that’s because towards the end of the month, I allowed myself to come out of rehab. I said … I think it was for the first two weeks I was in pretty strict rehab and then, I started to say, “Okay, you know what? You’re doing a good job. You’ve kind of reset things a little bit. Confidence is building. I’m going to start graduating out of rehab, increasing to 5,000 shares per trade. Then increasing to 7,500.” I think I topped out at 10,000 shares by the end of the month. But, I was also trading a little bit more. I took 78 trades versus, I think, 60 something for the month of April.

The interesting thing here is that, this for me, it … My success in May was not about finding home run trades. I didn’t, in fact, hit really … I hit one. My biggest winner was $4,636. I had one home run trade in the month of April, or yes, month of May, sorry. But, my largest loss was only $700. That was really the big difference.

So, what did I do to get out of that trading rut? I had three consecutive red weeks and I lost, over that period of time, I was up 12,000 and then I lost about 16,000 because I closed the month down four grand. So, over three weeks losing $16,000 I realized, this was not something I could continue to do. I needed to make a change. So, I reviewed my metrics. My metrics showed me that my average losers were twice as big as my average winners and I knew that that was the source of the problem. That was not sustainable.

I understood the reason that was happening was because I wasn’t getting home run trades. But, the reality is, I can’t force myself to have home run trades. I can’t … I mean, the market is what it is. I get into a trade, looking for whatever I’m looking for but I never know exactly how much I’m going to get. But, what I can control is how much I’m willing to risk and that’s what I decided to do through the month of May was conscientiously make the decision to not risk more than $500. I had one trade that exceeded that where I lost 771. It happens. I got a little bit of slippage. That’s fine, I’m not going to beat myself up for that because overall, the big picture is that I created a plan, I followed the plan, and this was the result, $17,000.

Now, although this was my second worse month of the year, because $17,000 is a fraction of 70,000 in the month of February. This was a month where I cleaned the slate. I created a plan for how I was going to get out of the rut, and I executed the plan.

Now, one of the challenges that a lot of traders face is, if you’re able to make the plan, which a lot of traders aren’t even able to make the plan. Being able to make the plan requires understanding what your metrics are. If you don’t know your metrics, and a lot of traders might not, you’re definitely at a disadvantage. But, when you’re at the point where you understand your metrics and you’re able to sit down and make a game plan for how you’re going to get out of this rut, what’s the biggest problem that most of you guys face? It’s following the rules. It’s sticking to the plan and I get that 100%.

In fact, my first day of rehab I relapsed. The first day of rehab was the day I lost $7,000 because I remember I was … I took a trade and all of a sudden I was down like two grand and I just got frustrated. I was like, “You know what? I’m not going to get myself back to break even by trading with 2,500 shares. That’s just not going to happen. So, I’ll take 10,000. 10,000 shares, 20 cents, I’m back to break even.” I didn’t go back to break even. I went to being down $4,000. I lost another 20 cents. Then, I said, “You know what? I can get myself out of this. Next trade I see that looks really good, 15,000 shares. I’ll bounce right back up.” 15,000 shares, 30 cents. That’s all I need back to break even. Is that what happened? No, of course that’s not what happened because now I’m getting emotional. I’m getting frustrated and I’ve had traders on YouTube say, “Ross, you’re pathetic. Why am I even looking at your mid day recap or your Behind the Trades episode. You’re trading emotionally. There’s nothing to admire there.”

And I can appreciate that criticism but the reality is, even for myself, a trader who has been doing this for years and years and years. I can be profitable. I can do really well but I can still fall into the habit of getting emotional. It’s very hard to completely disconnect yourself from that. I’ve talked about this quite a bit. With trading, when you make a mistake, you lose money and you get that immediate feedback from the market that you were wrong. Seeing that cost is like $4,000 or $5,000. It’s difficult to not get a little emotional in that response.

Now, I watch reality TV shows and stuff like that and one of the shows that I love watching and of course reference this a million times is the Deadliest Catch. One of the things that you sometimes see, and I saw this on one of the recent episodes. One of the boats decided to go up towards the Russian boarder and he said, “This is a gamble.” I think he sat all his pods way up on the Russian boarder and he didn’t know if they were going to get anything in return. Now, as it turns out, he was right and he came out with a lot of crab, which is awesome. But, if he’d been wrong, he would have spent, I think they said, $40,000 in fuel and operating cost to get all the way up to Russia. Only to set all his pods and then, pick them all up and have them be empty.

So, the net loss there could have been 70, $80,000. Now, would he feel the same way that I feel on a trade where I lose $7,500? I’m not sure that they would because there’s a little bit of a disconnect. You’re not having that immediate response from the market that you just lost 5,000. So, how do you react when you have that immediate loss? Well, the first thing is just maybe to revenge trade and swing for the next thing that pops up. Well, you can’t really do that with crab fishing. You just inherently, because of all of the time built into, “All right, we got to refocus. Where’s the next place we’re going to set this next stream?” You have hours and hours to think about it and that gives you that kind of down time, to slow down, to kind of regroup and come up with a logical game plan.

It helps disconnect that emotional response that traders can execute instantly. With a press of a hotkey we can have an emotional response and be along 30,000 shares. I mean, it can happen so quickly. So we trade in that momentary lapse of judgment, which is sometimes caused by a quick loss and an emotional reaction. It can be devastating. I can’t help but, on a day where I lose $5,000 or $8,000, feel like a jerk. Like, “What is wrong with you? You just loss more than most Vermonters make in an entire month. You got to be kidding me.”

I wonder if I beat myself up more because it’s, that loss, is so directly connected to … When you have a bad trade, you lose money. When you lose money, you don’t feel good. Whereas with some of these other jobs, like fishing, you set a string, it comes up empty. Yes, there’s a cost connected to that because there’s the cost of fuel and this and that but, it’s not like you’re going and trying to pick up dollar bills. It’s just a little bit more disconnected and I think that that might help not maybe feel as emotional or as frustrated when you have a bad string.

I could be wrong. It may be just as frustrating. It may be even more frustrating. I could be wrong. But, I know for me, for sure, one of the things that’s challenging is the fact that if you have a bad trade, you can jump right back into the market two seconds later and you can just keep doing that. You could do that all day long until your down $100,000. Usually, with most other careers, there’s some type of built in mechanism of time where you simply have to wait and that allows you to cool off, collect your thoughts and then come back a little bit more composed.

So, as we started the month of June, I couldn’t help but feel frustrated that through the entire month of April and the entire month of May I really didn’t have any home run trades. I had this one $4,600 winner in May. But, it’s been so long since I had an 8,000 or a $10,000 a day. My best day of the year is $22,000 and I had set this goal that at some point this year I would have a $30,000 a day because the worst day I ever had was losing 30 grand and would like to be able to match that with an equally good green day.

At the end of the day, in the last 18 months, I’m up like $350,000 so, if I don’t have a $30,000 day it’s not the end of the world. It sure would be nice but it’s not the end of the world. When I had that $30,000 loss, I was definitely in the position of I don’t know if I’m going to be able to keep trading. This is so devastating. When I talk about Jessica’s story in a few minutes, she has a really similar story and it’s relevant to what we’re talking about today. That ability to bounce back and get back on the horse.

But, having gone through the month of April and the month of May without any really big home run trades, I couldn’t help but start to feel a little impatient. Earlier this week I started getting more aggressive on my trades. I started taking 10,000 shares right out of the gates and I even took 25,000 shares of a trade on Wednesday. Only made 680 bucks on it but I started to be a lot more aggressive. Traded with 15,000 shares again on Wednesday. On Thursday I traded with 20,000 shares and I lost 30 cents. Three times two, oh, I guess I lost 25 cents. Well, 30 cents times 20,000 shares is $6,000 and I lost $5,400.

I let impatience get the best of me. Was it the right set up to be super aggressive on? No, it wasn’t. I was just feeling impatient. I was feeling like it’s been so long since I had a big trade and I felt that I mismanaged a trade on Tuesday where I made only 1,900 bucks because I felt that that was the type of trade I should have made four or $5,000 on. So, when I saw a similar setup on Thursday I jumped in with big size and as a result, I took a pretty unnecessary loss.

Here we are at the very beginning of June, it’s June 9th now and I’ve already gotten myself into a hole for the month. It was, essentially, due to a momentary lapse in judgment. Now, today’s trades are not factored here into the month. This is literally just this week of trading. So, as of right now I’m down probably $4,600 on the month. So, this is essentially right now looking like I’m red equal known as the month of April. The good news is that I still have three weeks to redeem myself.

So, how am I going to do it? How am I going to redeem myself? My average winning trade, so far, is $484 and my average loser is 1,070. Now, that’s a little unfair because a $5,000 loss when you’ve only had 25 trades severely draws down your average. But, right now, my average is only $500 average winner and $1,000 average loser. That’s not a good ratio. My percentage of success on 25 trades is 56%. 14 winners and 11 losers, which is also, not impressive. This is a small piece of data so, it’s not as … You can’t draw as many conclusions as you could from a larger string of data but, right now, this is not very good.

What am I going to do to get myself out of this little rut that I’ve kind of gotten myself into here? I’m going to do the same thing that I did in the month May. I’m going to focus on base hits. Now, I’m going to reduce my share size a little bit, maybe down to 5,000 shares but, I’m perfectly willing to take 10, 15, or 20,000 shares if we see an A quality opportunity. But, the reality is, we haven’t seen a lot of those in the last two months. The smart thing for me to do is just to scale back. To focus on the base hits.

Let’s think of this, my kind of trading account or even the month of June as a wall. A stone wall. Well, that wall just got knocked down by 5,000 stones. There’s a couple ways I can rebuild. I can rebuild one little pebble at a time, which is $50, $100 winners. That’s going to take me a really long time to build back up. What I’m going to do is just focus on base hits. 2,500, 5,000 shares, capturing 20 cents a profit. That’s $500 to $1,000. Even though my average winners right here are the same as they were in the month of May, I allowed my average losers to get too big. My accuracy dipped probably because I was being too aggressive. Scale back, tighten up the stops, focus on A quality set ups and what I expect to see is a shift of the average losers getting much smaller. My accuracy going up and even if the average winners don’t increase a lot, because the losses are smaller and accuracy is better, I’ll finish the month in better shape. That’s the way to do it.

I’ve been here before. I’ve been here at the end of April but I’ve had individual days where I had a big loss, I had to regroup and come back into the market with a game plan and then, most importantly, follow the rules of the plan. All right, so if I scroll back here through January 1st, you can see big picture, broad stats, $113,000 and this is only for the account that started with $583. So, from $583 up to $113,000. Average winners, 974. Average losers 998. My profit/loss ratio, right now, is about one to one but my accuracy is 67%.

If your ratio is one to one. If you lose 100 on average, you make 100 on average, over 100 trades. What’s your accuracy need to be to break even? 50%, right? 67% is profitable. So, this is fine. These are good stats. If I looked at a student who had these metrics, I’d be like, “It’s good. Your accuracy is fantastic. Your profit/loss ratio could be a little bit better but your accuracy is good.” Best way to improve the profit/loss ratio is to tighten up the stops. That’s the best way to do it. So, that’s my goal here for the month of June as I work my way out of this small rut.

This rut is not as bad as the rut that I had in April because April was three consecutive red weeks and it was emotionally kind of just draining. Since then, through May, I had one, two, three, four, five consecutive green weeks and now, this right here is my first red week since those five green weeks. So, my goal for the end of next week, close the week green. Even if it’s only by $1,200 or $1,500 or $2,000. Just close the week green. This is a marathon. It’s not sprinting, marathon.

If you can focus on these small consistent base hits, keeping your stocks tight, then inevitably you will get a trade that ends up being that home run trade. Or, we’ll get into a market where we’ll see a stock like DRYS that goes from $12 to $50 and you’ll be able to really capitalize on it. You’ll have that one day where you make $22,000 or maybe I’ll have that day where I make $30,000 but in the mean time, I’m going to focus on rebuilding this wall one brick at a time. At a certain point, I’m going to get up to the level where the wall has never been this high and now, I’m making new ground and I’ll just continue to do that one brick at a time.

Now, what I want to do is switch gears here and answer some of the questions that students submitted this week at WarriorTrading.com/Show. This is a picture here of me over at our inner circle session and working with a couple of students. We’ve got a bunch of pictures that we’ll be showing over the next few weeks. All right, so the first question. And again, if you have questions you can submit them on WarriorTrading.com/Show and I’ll answer some of them next week. Alternatively, if you guys want to put in questions in the comment section of YouTube or Facebook, I’ll come back through during the week and answer some of those questions. I love the questions, the thumbs up. Those are really cool.

Okay, so first question was from Mark. Mark said, “What is the safest entry on a stock that just hit my high of day momentum scanner?” I get this question a lot. A lot of our students are using high of day momentum scanners. Of course, I have my proprietary scanner set right here that I share with a lot of our students but, a lot of traders all over the place are using these types of scanners. When a stock hits the high of day scanner, the first thing I look at is the details, before I even pull up a chart, I look at the details of the alert.

Now, I’ve filtered these alerts so I actually have one, two, three, four, five, six, seven, eight different scanner sets all searching the market and giving me the results in this same window. Now, I can tell by reading the strategy name, which alert is being triggered. My favorite alert is massive volume on the low flowed stock because that’s a massive imbalance between supply and demand and those types of imbalances can create parabolic moves in the range of 100, 200 or even 300% in a single day. Now, that doesn’t always happen when I get one of these yellow alerts but that’s the potential. I’m really quick to check those ones out.

Now, in the case of MOSY today, this didn’t hit the scanner until 164. Now, I was already in it at 150 because a student in the chat room called it out and said, “Hey, take a look at this. I think it’s a good set up. I think you’d like it.” I pulled it up and I was like, “Yeah, you’re right. It’s great. I’m going to jump in.” Of course, that’s the value of being in a community of thousands of traders all looking for, basically, the same type of stocks because for the most part, we all trade the same strategies.

MOSY, it hits at 1006 and the first thing you see is that, okay, it’s high volume and low float. The float is 5.26 million shares. So that has some good potential. Total volume of the day, 370,000 shares of volume. It’s a little on the light side but it just made this big move. It’s up 16% on the day. So, the first thing I would do is look at the one minute chart. I’d look at the five minute and the one minute and I would check the daily. Are we running into resistance? The answer is no. This one has lots of potential. It doesn’t have any resistance until the 200 exponential moving average. So, what I would look for is the first pull back.

Now, if by the time I’m getting the alert, the stock as already had a good one minute pull back, I have to wait for the five minute set up. In this case, we basically just squeezed up from 140, all the way up to 170. Then, we started to pull back. So, I would have said, “Okay, this looks good right here for the first one minute candle to make a new high on this one minute micro pull back.” The entry would be 164 in the case of this stock. In fact, even though I was already in from 150, I added 5,000 shares at 164 because I felt so confident in this one minute micro pull back. I ended up selling as it squeezed up to 175.

Now, if you’re in the case where, let’s say, it doesn’t hit your scanners until it’s hitting 175 right here, maybe it didn’t have enough volume to hit the scanner before, for whatever reason you didn’t see it. Then I would say, “Okay, it’s already had the first one minute pull back. I can’t trade on the one minute chart at this point until it has a five minute pull back.” Then, I would wait for the five minute pull back and that would be a pull back down to our nine exponential moving average or maybe the [VWAP 00:39:31] and I would say, “Okay, I’m going to take an entry for the first five minute candle to make a new high.” And I did. I also took that trade. I got in at 168 and I sold on the move … It went up to a high of 180, I sold at like 173. So, in total I made like $1,200 on this trade and it was a good, easy trade by focusing on the right entries.

One of the biggest mistakes for beginner traders is they see the stock hitting the scanner and they just buy it. Let’s say when it first hit, he just bought it at like 170, way up here. Well, now, he’s in high. He’s bought it high and it’s going to pull back. Now, as it pulls back, he’s red. So, the safest way to trade these is to wait for the first pull back. Whether it’s on the one minute or the five minute time frame and that really just depends on your probably personal trading preference.

Okay, so that answers Mark’s question. Let’s see, next one. Andrew, he said, “I keep struggling with selling winners too soon. What should I do?” This is … I mean, this is for sure a very good question. I’ve struggled with both, selling winners too soon and not selling them soon enough where, I end up being up … Even, in fact, the stock that I lost $5,000 on this week. I was up four grand on it and I didn’t take the profit. Then, I also didn’t stop out when I was at break even and I ended up losing $5,000. That’s a $9,000 swing top to bottom.

Now, one of the things when I talk about Jessica, she’s the student that submitted a story this week. One of the things that she talked about is the fact that upon taking a really big loss, say in the instance of losing $5,000, she realized that just as quickly as you can be on the wrong side of the trade, you can be on the right side of the trade and you can be up $5,000 or 9,000 or $10,000. The market has that potential. It’s about you positioning yourself on the right side of the trade.

So, Andrew, for me, there’s a couple things you can do. If you’re in the habit of selling your position too soon and a lot of our students have gotten into this habit, one of the things that I’ve done that’s helped me get out of it is instead of selling the whole position when I’m up, whatever it is, $300 or $400, I only sell half. I sell half my position and I hold the rest with a stop at break even. So that way I kind of give into that instinct to take profit but, I keep another piece for the bigger move. That works really well for me because I like to say that I’m an incoming trader. I’m not training speculatively in a long term retirement account that I can’t touch for 30 years, right? I’m trading in an account that if I make money I can draw that money out on Friday and go do something fun if I want to. Go down to Rhode Island or I don’t know, do something fun.

So, for me … or even just pay a bill right? So, for me it’s important that I take profit when I have three, four, $500. That’s why I sell half. I sell half and then I hold the rest with my stock at break even. If it comes back down to break even, well, that’s fine. I’m out the rest but, more often than not, if you have good set ups, if you have good entries, you’ll sell half and then you’ll sell the other half as it continues moving up. The way I usually do is I sell half and when it’s up 20 cents I sell another half, when it’s up another 20 cents. So, now I only have a quarter left and then I sell another half and I keep doing that until my share count is so small that I might as well just sell the rest. All right?

Last question from Jared. What’s your opinion on trading in an IRA account? Well, that’s actually like I just sort of mentioned. An IRA account, I think it’s awesome because you know, you don’t pay taxes on the gains at the end of each year. So, I certainly love that idea. You can build up the balance of your IRA and for me, what I would probably do … I’m not trading in an IRA but what I would probably do is, I would build up the balance, whatever, have a 25, $30,000 IRA. Every time it got up to $50,000, I would take out 15, or 20,000 of that and put it into mutual funds. I would just keep building it up and then putting away into mutual funds. Building it up and putting it away.

Because all that money you’re putting away would compound interest over the next … Well, depending on your age. Until you can retire, will just continue to grow. You don’t need 150 or $300,000 in your day trade account. You just don’t need that. You’re fine with 30,000 for the majority of us. That’s what I would do. I would just keep building it up, taking the gains, putting it into the long term. But the fact that you can’t take that profit out at the end of each trading day, or at the end of a really good week, could start to make you a little bit more speculative. Where you’re like, “You know what? I’ll just hold this for … I’m [inaudible 00:44:39] but this is in my retirement account. I’ll just hold it. It’ll probably bounce back.”

You just have to make sure you don’t allow that to encourage you to form bad habits. Holding positions too long or starting to just be more speculative with your trades. You have to follow a set of rules and you have to continue to be in touch with your current trading metrics. Are you trading at a level that’s sustainable long term? Or, are you starting to be a little bit aggressive. That’s basically my feedback on trading in an IRA account. I think it’s a great idea. You just want to make sure you’ve positioned yourself in a smart way and that you continue to follow a certain set of rules.

Okay, so those were the three questions … We had a ton submitted but those were the three that I thought would be the most relevant to other students and traders who are listening. So, again, if you want me to answer one of your questions next week just go to WarriorTrading.com/Show and I’ll answer a question.

Okay, now, the viewer submitted story of the week. All right, now I got an email from one of our students, Jessica. Actually, she’s not one of these students here. This is picture from our inner circle seminar in Las Vegas, which was a lot of fun. I’m looking forward to the next one, so anyone who wants to fly out and trade side by side with me for a couple of days, definitely check out the inner circle.

Let me pull up this email from Jessica. She’s a student who’s in our warrior pro class and she did something very typical. She took a trade as a beginner trader and she was almost instantly down like four or $5,000 on it. She got into the trade, she was instantly down. She didn’t know how to react to being in the red. She hadn’t planned what to do when she takes a trade and it goes the wrong way. So, what she ended up doing was holding it and hoping that the trade would bounce back.

Now, many of us have been there and what ended up happening is the company did a secondary offering over night and in total she ended up losing over $25,000 on that one trade. I’m sure that many of you have been in a similar position. I know that I have. So, she ended down $25,000 and for a beginner trader, losing 25 grand, I mean, it’s devastating. It’s happened to me. I know how devastating it is. I mean, it’s really an awful experience. The natural reaction is to say, “That’s it! I’m done trading and I’m never trading again. I’m done with this.” Right? That’s the natural reaction. That’s why 90% of traders fail.

It’s because they come into the market, they get burned and then, they’re out. They’re like, “That’s it. I just tapped out. I blew my account. I’m done. This is hard.” Whatever. That’s the typical reaction that most traders will have. Jessica had a different reaction. Her reaction was, if can lose $25,000 that fast, I can make $25,000 that fast. The problem is, I was on the wrong side of that trade. If I had been short, I would be up 25,000.

So, she saw this as an opportunity. She saw this as a indicator of the tremendous amount of potential that the market offers. She realized she needed, if she was going to capture any of the opportunity, she needed to refocus. So, she stepped back and that’s when she emailed me, originally asking if joining warrior trading would help her with her education and stuff like that. She was a little timid about getting back into the market because she felt like she had just had this really big loss and she just wasn’t sure.

So, I said, “Yes, this is a good opportunity for you to learn. What I would want you to do is trade on a simulator. Don’t trade with real money until you’ve proven in the simulator that you can be a profitable trader.” She went through the warrior pro course and she traded in the simulator during that period of time. Over the course of the next 90 days or so, she graduated from our simulator and she went back to trading with real money.

One of the things that she did is she forgave herself for the loss that she had had before she was training with an education. She said, “You know what? It’s not going to be my focus to try to make back $25,000 in just one trade.” Instead, even though she knew that was maybe the potential, once she became really successful trader. Instead, she decided to focus on building her account back up one brick at a time.

So, when she emailed me her story. She’s now six months out from finishing the class and she’s adjusted her daily profit target to $500 a day. She’s been consistently making it. Although that may seem like $500 a day, that’s not a lot. The reality is, that if she’s able to maintain that level of consistency, over the next year, she’ll make a 100 grand. She’ll more than pay off that initial loss that she took or the cost of her education or anything like that. She now has a skill set that she can count on for the rest of her life.

Basically, what she did is she made that leap from being part of the 90% who fail to being part of the 10% who succeed. She could have just as easily taken the fork in the road where she said, “You know what? I’m done with this and she would be a statistic of the 90% who fail. She decided to do some thing different than what most traders do. She decided to take this as an opportunity to dive in, to learn, to understand how she could have been on the other side of that trade and finished those three days up 25 grand instead of down 25 grand.

So, I wanted to share that story with you today because to me, it’s really inspiring. It’s student who could have just as easily been a failure. I mean, a failed trader but instead, she made the decision to be successful. I like to say that … Well, this isn’t always the nicest thing to say but, I like to say that success is a choice but by saying that, I’m saying that failure is a choice. But, I think that people choose to fail when they either give up and walk away, which is … I understands the reasons for doing that and sometimes that is the best thing but, I think that when you choose to trade from a place where you’ve been educated, where you’ve trained, you’re positioning yourself for success. You are choosing the path for success.

That’s what Jessica did. She’s been able to totally turn things around from being a trader who lost money to now being a trader who’s consistently profitable. All right, again, I just wanted to share that with you guys today because I was really inspired by not only her story but just the fact that she’s one of the students who came in to warrior trading having already lost $25,000. She was already beaten up and we were able to give her the skills and put her back on the right path. So, if you have a story that you want to share with me, again, you can put this on … Submit it to WarriorTrading.com/Show. It doesn’t have to be a success story. It could be a story of a bad trade you had or whatever it could be. I’ll go through those and I’ll share them next week.

Now, I said that I would be giving away the warrior starter course to one of our viewers today. So, what I’m doing is, from all the viewers that submit questions and stories, out of all of those viewers, I’m choosing one to give a gift to. It’s randomly chosen, one person. So, even though we only did three questions, there were dozens of questions submitted on the website over the last couple weeks, since we did our last Behind the Trades episode.

So, today’s winner is Christopher [Lumberg 00:53:11] and I’m going to email him. I’ve got his email so, I’ll email him and just let him know that he’s going to have access starting tonight to the warrior starter course. He’ll be able to trade in the simulator. He’ll be able to trade in the chat room. He’ll be able to take classes one through four of the day trade course. All right?

So, if any of you guys want the opportunity to win a warrior starter course, just be a contributor on next weeks episode of behind the trades. Again, I want to thank you guys for all hanging out today. This has been a fun Friday afternoon and we’ll end it here. Hope you guys all have a great weekend. I will see you all first thing Monday morning. All right, so remember to put in comments on YouTube and on Facebook. Be a contributor on the show. It’ll make it more exciting for the next episode. Okay, so that’s it for me. I hope you guys all have a great weekend.

Oh, hey, I didn’t see you there. I was just working on the dream board for my next home run trade. Hopefully it comes soon. Until then, make sure you subscribe to get email alerts any time I go live or upload new videos. Until then, happy surfing.