Warrior Trading Blog

Day 31 of the $100k Challenge -$1,849.72 | Ep. #34

Day 31 of the $100k Challenge -$1,849.72 | Ep. #34

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Max Loss!  Frustrating morning, but I ended up doing something I haven’t done in over a year….I traded past my max loss.  This ended up helping me recover $1600 and close the day down $1,849.72 instead of down over $3k.  In the video recap I’ll break down the reasons I violated my important rule about max loss.

 

Mid Day Market Recap

All right guys. We’re going to do a little midday market recap. Today is a red day recap, but a little bit of an unusual one. Finishing the day down $1,849, which on the surface would seem like that’s not a very good day, which is true. It’s not. It’s my max loss, but at the same time, this was the first day that I chose to trade even though I was below my max loss. I went down as low as, right around -3200 or 3300 and that was sort of the point where typically, I would’ve said I’m done for the day. I’m not going to keep trading. I’m below my max loss. I’ve just got to throw in the towel.

But, I started to think that I saw a good looking setup forming. I waited on the five minute chart. Then, I said you know what? I think this is a setup that’s worth taking. I took the trade and I made back just under $1,600. I wasn’t being aggressive. I was being conservative with my share size. I only took 4,000 shares instead of 5,000 or 10,000. I was able to make $0.40 per share. Now, obviously, if I had taken 10,000 shares of that trade, I would’ve made $4,000 and been back to green on the day. But, if I had lost, then I could’ve gone down -5,000 on the day and I didn’t want that to happen. I figured that I would take a stab at this setup. If it worked, I would potentially add and maybe I would get myself back to green, but really I just wanted to take the opportunity to take a good quality trade. It was a quality trade, a good setup, and a good winner.

Trading Beyond “Max Loss”

This is, for me, sort of interesting, because it’s the first time in over a year that I’ve taken a trade after hitting my max loss. Typically, when I hit my max loss, I’m just like well, I’m done for the day. That’s it. I’m kind of bummed out. I end the day on a red note. I spend the rest of the day feeling kind of annoyed with myself. But today, I’m ending on a green trade. Like I said, the first time in over a year where I’ve had a day where I’m closing red this much, but the last trade was green. It’s kind of an interesting feeling because I don’t really feel like this is a bad day. I’m red, but it almost feels like I’m green. It’s kind of weird.

The challenge of course is for beginner traders, and the reason to have a max loss is because for me as a beginner trader, when I would be down more than $1,000, I would start just thinking I want to get back to break even and I’ll just trade anything that moves. I see a stock starting to pile up on the high disk scanner, I buy 5,000 shares. It doesn’t go up. It drops $0.10, now I’m down 1,500 bucks. Now, I look for the next setup. I do the same thing. The same thing, the same thing. I get myself into this downward spiral. That’s exactly.

The risk of blowing up an account, most of the days, my worst days ever, the worst day that I ever had I was down $4,000 and I should’ve just been done for the day. I think I was actually only down like 1,100 and I kept trading. I got myself down 2,000, 3,000, 4,000. Took that final trade and lost $25,000 on it like that. It was so fast. You know, that cost me $30,000 and it’s because I was trading from an emotional standpoint. I was emotional. I was frustrating. I was angry. I was revenge trading. I wasn’t calm, cool, and collected. I didn’t have composure. I was being really aggressive and really angry. I wasn’t in the place to be trading with big size, but today was different.

Obviously, this is years later, but today was different. I was able to look at my account down 3,600 or whatever it was and say you know what? Obviously that’s not great, but at the same time, it’s not that big of a deal. I hit my max loss at 10 AM. I hit my max loss and I’m like all right, should I throw in the towel and walk away? Normally I would, but there might still be some opportunities and then, this setup started to run and that’s when I thought okay. That’s something I can trade.

Today’s Day Trades

Let’s go over the trades from today. It started a little interesting, because we had two stocks on the gap scanner EVOK and FNCX. Both of these were gapping up between 50 and 70%. These were big gaps. EVOK from 280 yesterday all the way up to 460 pre-market. On this one, the bell sings. It starts to pop up a little bit. Obviously it had pulled back. I said all right, I’ll go in this for a scalp, but I’m really not sure it’s going to be easy. I think it’s already gone parabolic pre-market. I get in. It pops up from 34 up to a high of 44, a high of 40, 44. Small win, made $267 on it. 5,000 shares. In, out. Done. Small win. Didn’t work the way I thought it would.

FNXC, sorry, FNCX. This one similar, really strong pre-market. The bell rings. I got in for a scalp over the half dollar of 450. Pops up to a high of 475. Drops back down. I stop out. $477 and 7,000 shares. I just didn’t get the follow through. There are two small trades and then I took a trade on XBAK. This is one of those ones that was fairly annoying, because I put out my order to get into the trade at 480. Out of a 10,000 share order, I only filled 1,000 shares. It pops up to 560. I’m sitting there feeling pretty frustrated that I only got a partial fill, but I said you know what? That’s okay. I’ll get in here on the first one minute pullback. I got in here for the break of 540 and I added 10,000 shares.

We popped up to a high of 58. I was looking for the break of 58 and 65 to go to high a day, and then, in this candle, we dropped down to 24. Immediately, I went from being up whatever it was $0.18 to down $0.16. I kind of held for a second. I was like okay, let’s just see what this is going to do. Then, in this candle. We dropped down to 486. I had to stop out and I lost $0.44 with 10,000 shares. $4,400 loss. It happened pretty fast, so I went from being up a thousand on the name to down whatever it is, 3,600 on the name. That’s when I went from being up on the day to at my max loss. At that point, this was literally 9:45, 9:46. Now, I’ve hit my max loss.

I was feeling frustrated because I had said out loud before I took the trade that I should be cautious on this because of the fact that I didn’t get a really good profit on the first move, so I should be more conservative with my second trade. But, I got in with 5,000 shares and then as we popped over the half dollar of 550, I was like it looks good. I’ll just double up. I’ll have a 544 average, 545 average. Looks like it’s going to go to high of day. $6 possible target. It just didn’t work. Stopped out. That’s the luck of the draw. Was I too aggressive? I was too aggressive relative to the fact that I didn’t get a good fill on my first trade. If I had had my first trade work out, then this would’ve been fine, but I was risking too much considering I missed that first big breakout.

This one has a headline this morning. Squeezing up on the high of day scanner. That was that one. Then, traders in the room started mentioning NOVN was running. I looked at this one as it was starting to squeeze up. I was kind of like oh, it looks interesting. I can’t trade it. I’m not going to buy on a one minute setup a big position. It’s already pretty extended. I’ll wait for the five minute pullback. Meanwhile, it runs all the way up to $8. Another time when I decide to sit out and I would’ve actually done just fine if I had chased it, but whatever. I sit it out. I wait for the pullback. We get the pullback and it ends up being a pretty sharp pullback here. All the way down to 636. We pop back up, pull back for a second, and this is where I decided to get in. What I thought here was a break over $7 would get us back up to $8.

I got in with 2,000 shares and then doubled to 4,000 at 680, 688, or 690 average. My backup of my target was I move back up to $8. If that had worked, would’ve been a $4,000 winner. But, what I was thinking is that I’ll let it come up here, it’ll probably hit some resistance at 750, which it did. It popped up to 7.50, and then it pulled back. That’s when I was thinking okay, I’m going to add potentially over 7.50. We come up to 7.40, we pull back, we pop up to 7.46, and it started to feel heavy. That’s when I said you know what? I wanted to see this above 7.50. It doesn’t seem like it’s happening. I’m just going to take my $0.40.

Hitting the Max Loss

I took my $0.40, 1,600 bucks and that put me from down 3,600 to down 1,800 which is a little bit more respectable and does feel a little bit better. I think it was a good trade. I was calm. I was trading the five minute setup. I wasn’t being overly aggressive on the one minute trade. I wasn’t chasing. I was waiting for the pullback, and this is the type of trade where if we had gotten a pullback here and we ended up breaking over 7.50, and let’s say I added 4,000 shares. Now I would have 8,000 shares but with an average at about 7.15. Now, the 7.15 average with 8,000 shares, if this had gone up to even 7.65, 7.70, I’d be up $4,000. It goes up to 7.80 to $8 to 8.15. Now I’m up eight grand. That’s how you can turn a small winner into a big winner by adding to it when it’s working.

At the same time, that’s the way you can take a small winner and turn it into a break even trade. Because if it came back down to 7.16, I’d be out break even instead of having a $1,600 winner, which is what I have now. You know, pros and cons. You kind of measure that against the potential strength of the setup. Is this the type of setup that could realistically go back to eight or even higher? I think it was. It just didn’t work. I’ll be more aggressive on those types of setups. In hindsight, it sure would’ve been nice to capture some of this move here on the one minute chart. I think the reasonable entries would’ve been this one minute pullback at 6.17 and possibly this consolidation at 5.59. When I see a one minute stock hitting my scanner and all I see is this first squeeze, that’s when I start to think this has potential. Sometimes traders will say look, I don’t see what you see there. But, I’m looking at this and I’m looking at the daily chart and I’m recognizing that if this works, it really could.

There’s a whole lot of potential and it has what we look for. It’s a low flow stock with volume and with a catalyst. You’ve got one, two, three of the criteria. This is a stock that I’m going to try to be more aggressive on. Today’s the day where obviously I’m giving back a little bit of profit. I made about $16,500 in the last two trading days before today. Up 16,500 and then, back down 1,800. That’s down about 12%. I can handle that. That’s a very reasonable and healthy pullback. My account right now is at $62,147. Tomorrow it’ll be at 60,300 bucks, something like that. That’s fine. I’m fine with that. I was feeling a little bummed out when it looked like I was going to open tomorrow below 60,000, because I was feeling like ugh. Just kind of crossed over this threshold and now I drop back below it, but you know.

Whatever. It is what it is. It’s fine. I got back above it now, so that’s good. Hopefully we’ll have some good opportunities tomorrow to get a nice little bounce back trade. All in all, even right now, if I stopped trading this week today, this has been a great week. Last week, I only made I think it was $5,000. Let me just double check. Yeah, I think it was only 5,000 because I lost 9,000 on Thursday and Friday. I only made $5,000 last week. This week I’m up 14,600 roughly. I’d say that’s a pretty good week. If I can have a good day tomorrow, good day on Friday, I could get myself up to maybe 18,000. Maybe 20,000. Or, maybe we’ll have a couple days that are slow and I’ll just finish the week in the 15, 16,000 range, and that’s fine, too.

But, I want to make sure I’m mindful of the fact that I just had a couple big steps forward and I don’t want to get complacent or do something that’s overly aggressive. I think today I was pushing it a little bit. Of course, this is one of those things where I was pushing it on the wrong stock. QBAK on that one minute pullback didn’t work, but NOVN sure did from 5.62 to 6.16, all the way up to $8. That’s kind of a thing where it’s like huh, what is the deal with that? These are two very similar stocks, and one just totally exploded three points and the other one could only go $0.50 and then it pulled back.

It’s kind of like look, even the best traders are only right 65, 75% of the time. QBAK good looking setup, just didn’t work. Not necessarily any fault of my own. I don’t think it was a bad trade. It just didn’t work. NOVN, great setup. I didn’t take it, because I was kind of just off of a big red trade and I kind of wanted to just cool off for a second. Then, I ended up taking the five minute setup which was good but not nearly as much range. It is what it is. The one that works is the one I miss. The one that doesn’t work is the one I got, but over the long term, I know my metrics are solid. I know my accuracy is pretty consistent.

I’ll have a trade where I get in the same as I did on QBAK and it works and it ends up being a big trade like NOVN. It’s just a matter of time. Hopefully we’ve got some good trading tomorrow and Friday, even though I could trade this afternoon to try to get myself back to green. I don’t want to do that. I think that that’s pushing it. That’s forcing it. I already kind of broke one of the rules that I’ve had for a long time, which is to not trade below $1,000, but sometimes rules are meant to be broken. In this case, I think that it’s always a good idea to consider why you have the rule and the purpose it’s serving, right?

New Rules for Max Loss

Now, the rule for me with not trading below $1,000 was because I knew I had a hard time maintaining self-control and discipline when I was really deep into the red, and I would start doing things that were a little bit reckless and that were sloppy. I think that this process of conditioning myself to experience loss and to not get stressed out about it has allowed me to have a day where I’m down 3,600 and I can still focus. I can still think clearly. I can still make good decisions. This is a really good sign for my own emotional development as a trader, that I can now have a day where I’m down 3,600 and I can still trade myself out of it. Even if I do have another loss and I go a little deeper into the hole, I know that I can maintain composure.

That final trade I took, I took smaller size so that if it didn’t work, I wouldn’t go down much more into the red. I knew I was right kind of at the edge where I would have to say I’m done, but I said look, this is a good setup. I’ll take a stab at it. If it works, it’s great. If not, I’ll stop out for a 500 dollar loss at this point, that’s not going to be a big deal. It ended up working and because there was the type of setup that could’ve given me an $8,000 winner if it really went the right way, it was absolutely worth $400 a risk. 100%. Regardless of where my PNL was standing on the day.

A lot of traders say you should manage your trades and don’t even look at the PNL, but at the same time, you have to be mindful of the fact that if you have a day where you’re down 6, $7,000, take the hint. Walk away, right? You’re having a bad day. Today, I was having a pretty good day. I had three winning trades, and then I just had a fourth one that was a big loser. I was able to just kind of put that to the side, keep trading, and get myself a little bit out of the hole, which is fine. What I’ve done is I’ve changed my max loss on my account to -5,000. If I’m down more than 5,000, I’m done for the day. I will be done for the day. I won’t keep trading, but I think that if I’m down 1,000 or 2,000 or 3,000, that’s within a range where I can probably still, as today shows, continue trading and bounce back.

But, definitely if I’m that far in the red, I’ll be a little bit more conservative with my share size, just recognizing that obviously I’m not having the best day ever. If I see something really good, I don’t want to stop myself from taking it. I just need to be a little bit more cautious. I may have days where I’m down a thousand bucks and I say look guys, I’m done. I’m not going to push it. I’m not having a good day. I’m not feeling it, and that’s fine. Ultimately, it shouldn’t have to be the broker that makes the decision for me to shut off my account. It should be me, right? It should be me who says look, I’m not in a mental place to keep trading. I’m annoyed, I’m frustrated. This orange dog over here keeps barking. She’s driving me nuts. I’ve just got to take a walk. Whatever it might be.

Emotional Composure

I, for a long time, delegated that responsibility to my broker, because I was having a hard time following the rules essentially. I was having a hard time following that max loss. I’d have a day where I was in the hole, I would keep trading. I’d get more and more frustrated. I’d just start swinging at the fences for anything that moved, and just not good. I think that this is one of the challenges that a lot of traders have. A lot of our students are men, which is maybe not surprising. Of course, we have women in the room and we love having you guys, but a lot of the students are men. A lot of the young men, I know like myself when I was in my 20’s, I would get so frustrated, because you’re trying so hard and you’re just not seeing results. That frustration can kind of get you a little emotional. You’d be hard-pressed to find a day trader who hasn’t thrown a computer or slammed down his desk or something like that.

You get to this point where you get frustrated, but you can’t take that frustration out on your account. Right? Because the market, it’s like fighting the ocean. The market is always going to be stronger. You can’t bully the market. You can’t market order in with your entire account and think you’re going to be able to get the trade to work. The market is always stronger. That can be very frustrating when you’re having a day where you just feel like you keep coming up short. I think for me getting a little bit older, that emotional composure and emotional development has really been in my favor. Some of our students who are coming into the classes who are retired, in their 40’s, 50’s, 60’s, or even older, they may even have a bigger advantage of that ability just to take things in stride a little bit more.

I think that might be one of the inherent challenges with trading and one of the reasons that a lot of day traders fail. Men can be hot headed, can get frustrated. This is a job that a lot of men, predominantly men, are trying to do. We may not always emotionally be the best for this job. You have to be willing to take risk, and I think that willingness to have a high risk job maybe is more attractive to men and less so to women. It’s so important at the same time to be able to maintain composure. That’s something that takes time.

Some of the things that you can do to help build that composure in yourself and strengthen that muscle, which is essentially the ability to maintain composure is like a muscle and you can strengthen it. You may not have it naturally, but you can build it. A couple of things that have helped me in the past, meditation and exercise. Both of those things are things that I don’t like to do, right? For me to force myself to do something I don’t like to do is showing, that’s composure. That’s discipline. That’s self-control. The more you practice forcing yourself to do something you don’t want to do, the easier it will be when you have to force yourself to stop out of a bad trade or to throw in the towel on a bad day, because you just get used to exercising that level of discipline on a daily basis.

Becoming a BETTER Trader

Any other way that you can practice it will I think improve you as a trader. Something that I’ve said before is the fact that when I was kind of working through this process, I would write down my emotional state after I would take a trade. I’m angry. I’m frustrated. I’m about to throw this computer out the window. Wherever I’m at, or I feel great, and start to recognize when if you look at a series of trades that went red, red, deeper red, deeper red, super red, max loss, then that’s when I would start to realize okay, well, what was the trigger that led up to that loss, right? Was there something I can trace back as being the trigger? And now, start to have that sense of mindfulness that look, when you have a day where you’re at your daily goal and then you hit your max loss, that’s a trigger for you that often results in this kind of downward spiral. It’s different for everybody.

Some people maybe are fortunate enough that they don’t even have to deal with this, but most traders, trading the market is not something that comes naturally and I think that the natural human emotions of fear and greed do not always help us as traders. They encourage us to buy way too high and then to sell as the stock is dropping back down. That’s something that we have to learn to over come. All right, guys. I hope that that’s helpful. I’m definitely not trying to be sexist in any way. From my experience working with students, these are some of the observations that I’ve made, so I hope no one takes it the wrong way. In any case, you know, here we are. Wednesday. Finishing the day. A little bit in the red, but at the same time, today feels like a victory because it was an opportunity to trade out the red, to show composure, to maintain that calm, cool, collected state of mind when I just as easily could have continued to trade and gone deeper and deeper into the red and really made a big mistake.

All right? Any questions that you guys have or comments, you can of course feel free to ask in the chatroom. For those of you watching on YouTube or Facebook, you can post them in the comments below and I will make sure I get to them. All right, guys. I will catch up with everyone first thing tomorrow morning. Okay. Thanks guys.