Warrior Trading Blog

Day 113 Red Day Recap: My biggest mistake today…

red day recap

Day 113 Red Day Recap: My biggest mistake today…



All right, guys. We’ll do a little midday market recap here a little on the early side, go over the trades from today. Overall today we saw a lot of strength in Biotechs. IBB was very strong today, so far this morning at least, as you can see here. This is not something that we would trade, but use as a gauge for the sector strength.

We could look at specific stocks in the bio sector, but what was interesting today is that we didn’t really have any that were particularly low-float or really big movers. We had stocks like IMMU which is, let’s see, this one has a float of 88 million shares. You could see it made a move from 780 up to 840, but not no clean setups particularly. A little pull back here, false break, pull back, continuation, but nothing super clean.

AGEN, A-G-E-N, 45 million share float. Maybe a little opportunity here around 370, but only went up to 380, so not the biggest move. WPRT, this is actually a different one. What was another one? KITE of course, high price stock though and the challenge with this, what the spreads look like. Right now it’s 82 by 88 which isn’t horrible, but if we keep it on here for a minute you’ll see that the spreads have been getting fairly big on this one. So at times they’ve been 30, 40 cents which means as soon as you get it and you’re down with 1,000 shares, $400. Realistically, would I be able to make a couple thousand dollars on this stock? Maybe if I scaled in, but it wouldn’t be the easiest and there weren’t … the only obvious entry might have been this first five minute candle to make a new high. But at this time because of the spreads and the low of the pull back being 92.60, I didn’t feel comfortable taking that trade.

Consolidation here, but not a pull-back and then it just kind of started grinding higher. So this didn’t end up being one that I felt comfortable trading. Total volume today right now is 688,000 shares. So it’s not even a million shares of volume and with these 14, 15 cent spreads even right now it just becomes too difficult. And you know if this seller, or this buyer at 71 goes, the next one down is 60. So we’re going to very quickly drop to 60 and then down to 19 and then 99. So it can very quickly wash out and that’s obviously not good.

Similar to what we’ve seen in MYO. I didn’t trade this one today, you know at a certain point in the day I started thinking maybe I’ll take a trade on MYO and I was like, you know what? You’re grasping at straws. You do that with a couple thousand shares and you’re exposing yourself to a lot of risk. Look at what happened here on this pull back from $21.25 all the way down to $19.86. So that’s a steep pull back and you don’t want to be caught on the wrong side of that type of move.

So, the trades that I took today, I took one follow-through trade on ZN which is the stock that we traded yesterday and did pretty well on. I bought it on the first one minute candle to make a new high, right here. Pull back, one minute candle to make a new high, entry was 86. We popped up to 91, we didn’t hold that level. As it came back down, I stopped out with a $6.00 loss. So no big deal on that one. I took a one minute set up.

Next trade I took was on HIVE, same set up, one minute entry. Unfortunately on this one you can see that it didn’t work at all. I got in right here at 54 and we popped up to a high of 58 and then we dropped down to 36. I stopped out at 44 which was the tightest I could keep the stop, but I lost 800 bucks on 7,500 shares. I thought because it had just spiked up here that this might on the first one minute candle go back to the high. So my stop was 45, I mean 10 cent stop is fine. Profit target was 75. So 20 cents. That’s a two to one profit-loss ratio.

Now, if I’m right on that trade 50% of the time, I’ll be profitable. If I’m right on that trade 33% of the time, I’ll be break-even. I mean, so literally if I take 10 trades and I’m only right an average of 3.3 of them, I’ll be break-even with this two to one profit loss-loss ratio.

So it’s important that you always measure your risk against your reward potential. And sure, today’s a little bit annoying because I’m down $819 and I’m giving back some of the profit from yesterday. But statistically if I keep taking these same trades, as long as I’m right more than 33% of the time I’ll be making money. And statistically I’m right 68% of the time, which is why I’m profitable. Today is a slow day, today’s a day where I only took two trades and I happened to lose on both of them, so a little disappointing there, but it’s kind of a rest day while we wait for the next green day, while we wait for the next really good quality set up. And this is something that I’ve been really stressing is waiting for the good quality set ups.

Maybe I shouldn’t have taken one minute trades on either one of these. Obviously I was more inclined to trade on the one minute set up because of how well ZN did yesterday on one minute set ups. Waiting for the five minute set up on that one ended up costing me a lot of money. Today, well the one minute set up didn’t work, so what am I going to do tomorrow? I guess just continue to be a little bit cautious. Yes, I’d love to trade five minute set ups. Today I didn’t see a single five minute set up that I liked, so if I was only trading five minute set ups on small caps I wouldn’t have had any trades today. And that maybe the case tomorrow as well. So that’s why I end up being willing to take one minute set ups, to try and get an opportunity to capture 10, 15, 20 cents of profit. But again today was one of those days where I came into the market, I did everything I’m supposed to do and things just weren’t on my side.

So I’m not beating myself up for it, I don’t really care that much because I didn’t break any rules. And that’s the important thing. I measured my risk on all the trades I took, the two trades I took. I measured the risk versus the reward, justified the trades, took the trades, didn’t come out on top, but that’s part of trading. So today is part of the 32% of the time that I lose money and it’s not a big deal.

When your career involves being wrong 32% of the time, you kind of just have to get used to it and not go on an emotional roller coaster every time you have a red day or every time you lose money, because you’re going to be experiencing that 32% of the time. I just really try not to get myself beat up about it or bent out of shape. This month has been slower than I was hoping. The month of June, 2016 was fantastic. Made $32,000, that’s not going to be the case this month.

As I said yesterday through the early part of the year I had a fantastic first quarter. And second quarter has been very lackluster, it’s just been really slow. We haven’t had a hot sector. We haven’t had any really good parabolic stocks and so I’ve just kind of been in this holding pattern. Treading water a little bit and right now just kind of trying not to lose too much until we get the next really good setup. Make a little progress, give a little back and as long as I’m generally grinding up, that’s good and that’s what I’ve been doing for the last couple months, it’s just been a little slower than I would like. So I’m hoping that we start to see either a hot sector or we see another parabolic stock.

Today we had a penny stock that made a big move, DCTH. Some people ask me why I didn’t trade it. There’s a couple reasons. The first is that I’ve always avoided trading penny stocks. I’ve never actually been a profitable trader with penny stocks. In total. If you look at all the times I ever traded stock below a dollar, I’ve lost money on them. So, that doesn’t make me very inclined to trade penny stocks. That’s number one.

Number two, penny stocks as we know can be very kind of scammy and people, all the stuff that goes on with the penny stock promotions and all of that stuff and I just, I don’t want anything to do with that and I don’t think most of the members of our community want anything to do with that stuff either. For the most part we’re trying to trade small caps or in the case of Mike, mid caps and large caps. Real companies that are listed on the NYSC. Now, this isn’t OTC’s which is good, it’s a listed stock. But for those reasons I’ve always been more cautious when it comes to penny stocks and just not really wanting to take trades on stocks or put out alerts on stocks that I just don’t feel very good about.

So DCTH today, yes it would have been good to get in at, sure, this little one minute opening range or five minute opening range break out at 13 cents. Now, I pay ECN fees on every share that I trade. So if I wanted to trade this and I wanted to buy 10,000 shares, that would have cost me probably $45 to buy and another $45 dollars to sell, which is fine, that’s not a big deal. But with 10,000 … And in this case on 10,000 shares I would have been able to make $1,000 which is good.

A couple members in the room said they made $5,000, $6,000, $7,000 on this, which most likely means they had 30, 40, 50 or maybe even 80,000 shares. If I took 100,000 shares of this, my commissions would be like $300 to buy. And another $300 to sell, which is crazy. I just can’t handle giving $300 in commission to buy a penny stock.

That’s why penny stock traders usually will use firms that are per trade, like e-Trade or Ameritrade, because you don’t get charged per share. You don’t get the direct access routing, but you’re also, when you’re trading penny stocks, you’re not usually day trading, you’re more taking speculative positions and hoping that maybe this will open tomorrow at 60 cents and then go to a dollar. And maybe it will. Or maybe tomorrow it’ll be back at eight cents. You just never know. It’s speculative.

If this ends up opening up in the next couple days and getting above a dollar, well I’ll trade it at that point when I can actually take a decent position and where I feel like I can stand to make some good money. But for me anything under a dollar, the ECN fees make it a little bit more difficult. I start to feel like I’m getting into that, I don’t know, just those more manipulated stocks. You don’t really know what’s going on with them and I don’t feel super good about trading that type of stuff.

So sure, today’s a day where maybe I would have done better if I had just traded DCTH because it just went straight up, but most times I see people in the room calling out penny stocks, I’m very skeptical as to whether they’re really worth trading.

In any case, that’s my two cents, it’s not to say you can’t trade them if you don’t like them. You guys can do whatever you’d like managing risk, just should always be first and foremost. So if you feel like you’re able to manage risk on it and it’s worth the risk-reward ratio to take the trade then whatever, that’s fine. But for me it just doesn’t really work and doesn’t really feel right for my strategy.

So again, I’m not saying I’m the best trader out there. My strategy is decent, I’m up $150,000 this year. I’m happy with it. Could I expand and start trading penny stocks and maybe make more money? Maybe I could. Could I expand and start trading options and make more money? Maybe I could. Can I start trading 4x futures and large caps? Maybe I could, but I try to keep focused on the one thing that works for me. And that does mean there are some days where I’m just flat or I’m red like today. And the nice thing about that, for those of you that are in the community is that you can, if you would rather venture out and trade something else, you can check out what Mike’s trading or check out what someone else in the room or one of the moderators is trading.

So, you know … Yeah exactly. Being in your comfort zone and that’s the important thing. It’s hard to really know whether you’re consistent when you do a little bit of this and a little bit of that because you’re kind of all over the place. So staying with, following a strategy and sticking with it is hard, especially on days when you’re losing money. Because this is a day when I easily was starting to think maybe I should take a trade on KITE. Maybe I should take a trade on TESLA, maybe I should do this or that. And then I remind myself the very fact that I’m having those thoughts is an indicator that I should probably step away from the market a little bit.

Being disciplined has gotten me this far. Doesn’t seem like it’s a good time to deviate from that strategy. So anyways, that’s my two cents for today. This is the 113th trading day of the year and I’m at $150,000. So still averaging over $1,000 a day, despite the fact that this second quarter, April May and June has been extremely slow. But it wasn’t that much different last year. I had a couple of really slow months and then I had a couple of amazing months. That’s the way trading is. It’s just, it’s not something you can really predict.

It’s not like the seasons where if you’re a fisherman you know you’ve got seasons where you can fish. Or you’re, you do landscaping. You’re busy in the summer and slow in the winter. With trading it’s kind of hit or … You don’t know when you’re going to have an incredible hot streak, incredible momentum. When we’re going to have a hot sector, when we’re going to have a parabolic stock, and when it’s going to be slow. Last June was incredible, this June is slow. Last January of 2016 wasn’t that great. January of 2017 was incredible. So what’s the rhyme or reason? It doesn’t follow that logic. It’s really just based on the catalysts that are in play today at any given time. Today we didn’t have a lot of catalysts for the type of stocks I was going for and that meant it was slower.

And I’ve said this a thousand times, but we know the market is driven by collective trading mentality, collective traders. The collective group of traders all around the world, hundreds of thousands of us, maybe more. And when we start to see lots of opportunities, we start to get more excited. We start to take bigger size, we get more aggressive. That means more buying. When things are slow and choppy we scale back, we trade less. That means less buying. And so you see this ebb and flow in the market and you can’t force it. You can’t force huge momentum trades or great set ups when they’re not there. You just have to sit tight and wait knowing that these are part of the cycles of being a trader.

So today, yesterday was a great day, $1,200. Today I’m down $819. So yeah, I’m giving back 2/3 of yesterday’s gains and it seems like kind of in this step forward, step back, step forward, step back. But, I am making some progress so I’ll take it for now and my goal of hitting $5,000 this week is not out of the question. I just need one really good trade. Maybe we’ll have it tomorrow, maybe we’ll have it Thursday. Maybe we’ll have it Friday.

That’s it for now, I’m going to grab a little bit of lunch and I’ll see you guys a little later this afternoon. All right, bye guys.

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.