Warrior Trading Blog

Day 80 of the $583 Challenge

Profit/Loss Ratio

Day 80 of the $583 Challenge

All right, so time for our midday market recap. Go over the trades for today. Today is the last day of the month, which is always kind of a day where you don’t really want to try to be a hero. You just kind of want to take whatever you’ve got for the month, and carry that momentum into next month. Now, me on the other hand, I’m hoping that the only thing that gets carried into next month is better luck because this month has not been really great for me. But in any case, I certainly didn’t want to do anything crazy.

Now, as many of you know, I put myself into trader rehab on Wednesday, Thursday had a little relapse. Anyone who’s ever been to rehab knows doesn’t always stick, the first time around. So I’m back in trader rehab today and following the rules, which I feel good about. Despite the fact that I’m down $185, my trades say we’re pretty solid. I traded more names than you typically see me trade. We’ve got, let’s see was it, two, four, six, eight stocks, SNCR traded both long and short. I’ve got two shorts on here today, and I manage my risk well on really all of these trades.

I came up a little on the wrong side, but with 66 percent accuracy the main problem was average losers, 14 cents, average winners only 11 cents. So a slightly negative profit loss ratio, and that right there is the problem. Need to have a positive profit loss ratio, and, of course, strive for that. But I’m definitely not beating myself up over losing $185 today that’s not a big deal.

What’s good is that today was a day where despite being slightly in the red, I was challenged to not break my rules. Of course, when I’m down, I was down $550 at one point because I took a trade on. Let’s say I took CCNR, made 550 on that one, but then I lost 336 on CNAT, and I lost 571 on TBBK, and then I had the PRAN trade. I had those like four losing trades or three losing trades back to back. It put me down about $550 on the day, and then I finished the day with three winners, recouping $450.

Now, my last trade on SNCR was actually up 750 on it, and I didn’t take the profit on it. I ended up only closing it with $56 in profit. A little disappointing there, and I’ll show you that entry in a second. But one of the things that I’m really trying to focus on, and then I’m going to try to continue to focusing on this through the month of May is to be a little bit more conservative in the way I trade.

One of the things that you’ll notice here is that my account is $70,000 smaller than it was yesterday. I started this morning with $31,000 because I decided to wire out $70,000. I paid myself for the first quarter basically, took some money out, paid myself for those gains, and I think that that was a good decision. I started the year with $583, built it up to about 122, lost about 20,000, and have decided to take profit and pull out 70,000 to sort of reset, get myself back to trading with a small account.

As I mentioned yesterday, I think most of you guys who are in the room, probably many of you that watch on YouTube and Facebook and stuff like that, don’t have six figure accounts, and you’re not striving for home run trades. If you think of this as kind of like the baseball player analogy, you’ve got those baseball players who are home run hitters. They are swinging for the fences to try to hit home runs. But a lot of times they step up to the play and they strike out. It’s kind of like they either strike out or they hit a home run. They strike out more often than not. But when they do hit a home run, it makes up for all of those strikeouts, especially when it’s like a grand slam.

Now in the month of April, I was really striving to get some grand slams. I set myself up a couple of times with $1200 of profit or $3000 of profit, and I was looking for the big win, the 8,000 to $10,000 winner. I was trading in a way that was very different from the way I traded with a small account. So obviously, I feel like that didn’t work out very well in April. Not because the strategy doesn’t work but simply because the market was not as strong.

I was sort of being a little stubborn about adapting my changing or adapting my trading to the changing market. The market simply was not as easy to trade in April, and I’ve heard this from long bias traders, I’ve heard it from short bias traders. I’ve heard it from lots of different traders that April was a difficult month. For me, it certainly was. In fact it was the most difficult month I’ve had in over two years of trading.

I finished the month down, $4178, the first red month in nearly two years of trading. Obviously, this is a big correction from hitting 25, $30,000 in the month, but it is part of the deal with trading that there are times where you’re going to step up to the plate, doing pretty much everything right, but the market just isn’t on your side.

My flaw this month was not being quick enough to adapt to this market. I kept stubbornly taking 10 to 15,000 shares thinking that stocks that were hitting the high day scanner would go another 20, 30 percent. You know what, that worked out really really well in February, it worked out really really well in March, and obviously, it worked out well in December and January as well. For whatever reason that was not working out as well in April. I’m glad that I was able to adapt my strategy at least here at the very end of the month to scale back, but, of course, it would have been nice if I had done it sooner.

Today is the third day of my self-imposed rehab, and I’m happy with the way I’m finishing the day, although I’m down 180 bucks. I followed all the rules and I can feel good about that. My goal for the month of May is to continue to cap myself at 2500 shares until the market shows me that we’re going back into one of those feeding frenzies.

That’s one of the things we’ve talked about a lot is the fact that when you’re in kind of a feeding frenzy, you’ll see stocks, like the stock NOVN that I showed you guys yesterday. I think it was February 12, or February 11. You’ll see stocks go from $5 to $8 without pulling back. They just go crazy and then they’re done. That’s what I call the feeding frenzy.

If you think of like whatever, a fish in the water, all these big sharks are going after it, they all jump in, they get their piece and then they’re gone. There’s nothing left. If you’re being the polite fish, saying I’m going to wait for a reasonable opportunity, I’m not going to push my luck, I’m just going to sit back and wait a while. Next thing, the meal is gone. There was nothing there. It’s all been eaten up by the fish or the traders who got in there first.

On this NOV this one from 5 to 8, and then all the way back. There was never an opportunity for a nice respectful, easy to trade pullback. The best way to make money on this was simply to jump in. It was to chase it, but knowing that we were in a market at that time where chasing was working. We’re getting in at $0.5 and full dollars and riding them up to the next level, was often the best way to get into these stocks because they would go from zero to 60, and then right back down to flat.

Now, in the current market, we’re seeing something a little bit different, which is in Ciena is another example of it. Even today, this stock you kind of got the pullback, and I got in this at 9:30, right here. For the first five minute candle make a new high, right, nice, easy, happy, good looking pullback, looking for the break of high day. We come up, we hit 9:39. It’s get rejected off that level, and drops down so low, it actually goes red on the day.

I lost, whatever, 300 bucks on that. I stopped out quickly. I got in at 9:30. I stopped out with 2500 shares like 9:20. So it wasn’t a big loss or anything like that. I did the right thing. But this is the market that we’re in. We’re not seeing these stocks continue higher and higher and higher. We’re seeing them hop up and then get hammered back down. That we see now. Let’s look at PRAN.

PRAN was a gap and go stock. It was gaping higher, and pre-market high was 372, it dropped as low as 305 or 304. Now, my entry on this was not the typical gap and go trade of buying pre-market highs. I bought the first candle to make a new high on the one minute, which was you’ll see it right here and entry at 337, 340. It popped up to a high of 45. That’s up 5 cents and then dropped back down to 330. I stopped out of that one quickly, only lost $160 on 2500 shares, which is good risk management.

This just as easily could have gone right back to high a day, it’s what a red to green move does. It just didn’t go from red to green, and went from red to up a little, and then just sold off more. So continued weakness on that one. This is the thing is that you have to be able to be a responsive trader where you respond to the market.

If you’re in a really strong market, where you’re seeing these feeding frenzies left and right, then it’s silly not to try to take advantage of it. Like when we had that huge move on DRYS. DRYS going from $2 to $100, and we had sympathy momentum on how many stocks was it, we had GLBS, also a shipping, we had DCIX, also a shipping stock.

These companies all do cargo container ships. We had ESEA, we had SINO. These are all shipping stocks, and every single one of them got that sympathy free feeding frenzy. Traders just jumped on, looking for opportunity. We don’t have any examples of that in April, really not one. We had a couple of stocks that were okay for one day but not continued multiple days of really clean momentum.

The responsive trader would say, I’m going to taper back my share size, I’m going to reduce my risk, I am going to step out of the market a little bit, maybe I’ll keep trading a little bit with small size, but I’m going to wait until we have those good opportunities, and then when I see that stock go from $2 to $10, and really prove that there’s momentum, then I’ll be one of the traders that comes in looking for that next move, expecting to see that sort of feeding frenzy. If you see it, then it’s working, and if you don’t see it, you get right back out very quickly.

That’s one of the challenges that … Trading is not necessarily something where you have a hard set rule that you take the same amount of risk on every single trade. You have to be able to throttle and taper your risk up or down based on the market, that’s a responsive trader. Now, a trader who’s just impulsive, or reactive will just jump from one thing to the next without having the presence of mind of what’s happening with the larger market.

I think that something that I’ve talked about is the fact that taking $500 and turning it into 100K in 44 days was awesome. I think that I felt that I needed to continue to have a really big trades, five, eight, $10,000 dollar days. The reality is there was a window where I was able to be that aggressive and make those kind of profits. Then that window sort of closed in mid-March. Since then we’ve seen just not as many opportunities for really big wins that could give me five, 10,000 potential.

While in the first quarter, it made sense to take what might have been a $10,000 profit and let it ride for that bigger winner because it kept working out. That was no longer the right strategy in March and April. A lot of you guys saw me in trades where I was up 2 or $3000, say, okay, guys, I’m doubling. You’d probably be like wow, he’s doubling. I double my risk, double my position, expecting that secondary move to take us from being up 2 or 3000 to up six or 8,000, and said, it’d come back to breakeven.

By the time I bailed out, I would lose with slippage and I’d end up being red on the name, going from up $3000 to breakeven. That happened more times than I can count, in the month of April. Obviously, putting the pedal to the metal and being aggressive and doubling up didn’t work well in April but it certainly did very very well in February, well enough that it was probably able to tide me over in terms of profits. But the point really is that I could have had a better month in April if I had been faster to respond to the market, and if I hadn’t been quite so stubborn.

I think that I felt like I’ve had … Last year was obviously fantastic, 12 consecutive green months. I’ve had a great first quarter. I’m just going to continue stepping up. My account’s bigger, I can trade with bigger size. There’s no reason I should be able to continue having big wins.

But the market was dictating whether or not you’ll have big wins. It has nothing to do with your account size, or what you did in the last six or eight months. It’s does the market today, this month, have the potential to give home run trades, and the reality was, this month it really did for me, for my strategy.

I’m going to continue, as I said, my self-imposed trader rehab through the month of May, trading with smaller size. Today was the third day of rehabbing. I’m happy with how it turned out. You can see a variety of trades here both long and short. My short trades were on CNCR. You can see this one here. Now, on this one I shorted off of this first squeeze here, because we saw two, four, six, eight consecutive green candles, eight consecutive green candles, I thought, okay, this thing is ready to pull back, and that was correct.

I shorted this right up here at, where was it, shorted right around this candle here at 44.68. We dropped down to low of … Sorry, of 14.68, shorting, dropping down to low 14.35, and then popping back up a little bit. I ended up covering for $100 profit, 107. It wasn’t a big win, had the right idea.

But I didn’t make as much on as I could have, ended up going back up to the highs. I flipped long. For the first five minute candle, making new highs. You can see right here, 4.18, I took 1200 shares, and then I doubled, which was risky. I doubled at 14.50 to 2500 shares. That gave me an average of 14.33 or 14.35.

2500 shares from 14.35, in this candle we spiked up to a high of 14.67, so I was up 750 bucks, but then we pretty much immediately came back down. I said I’m not going to let this one go red. That’s what I want to do. On this candle here as we broke down that’s where I stopped out and ended up getting $56 profit, which obviously was a little disappointing, considering I had just been up 750. But the reason I didn’t sell it there is because I thought this had a realistic target of hitting the high rate here 14.80. From 14.80, $15 was the next logical target, and I thought that was also possible.

Now, ended up having the right idea, hit a high of 15.40. My timing was just maybe not quite right. You needed to pull back a little bit, consolidate before that next move up. I certainly wouldn’t have held through that pullback because if I’d held through the low of this pullback, I would have gone from being up 750 to down 750.

It was right for me to stop out. It was just unfortunate that it didn’t continue, and give me a little bit of a bigger win. That was the last trade I took, and that one had the potential to put me back on green on the day.

Actually the last trade I took was RDUS. This is the second to last one. This, in hindsight, was an awesome trade. I shorted this right here at $43, 43.05, and I shorted it on this candle right here. Again on this one, the reason was because we had this big consecutive squeeze, and we were hitting the 200 moving average, right up here, at 43.15. I was like, okay, I’m going to short at 43.

It drops down to a low of 42.47. It pops up to 43, sideways, sideways. On this candle, where it drops down, I covered, and then, of course, it ended up coming here, all the way back up to 43.10, and I stopped out the rest, break even at 43. This only ended up being $289, now five or 10 minutes after it pops up to a high of 43.10, breaking through the high or breaking through the whole dollar and stopping me out, it ends up dropping down to 42, 41, 40, 39, $38 per share.

I for sure had the right idea, but look at that little fake out on the five minute chart. The first five minute candle make a new high and then that harsh rejection. One of the things that I would say is I would never buy a five minute candle to make a new high like this, especially on this price range, when the price is this high, and when it’s so extended off the nine moving average. You want to buy off this moving average when it’s floating, way up here. It’s a real indicator to extend it.

Obviously, a little annoying hindsight being 20/20. I could’ve just held my full position, and probably done a lot better. But at the same time, I took a low risk entry risking about 18 cents. Although I could have gotten back in here maybe around 11.15 or so, at that point, I wasn’t watching in.

But I think it’s good to keep an eye on potential false breakouts. This is the five minute false breakout, but it was somewhat predictable because of how extended we were, off the nine moving average. When you’re extended off this moving average, going into that, first candle make a new high, you really increased the chance of a false breakout. That’s exactly what we saw here.

Definitely a solid trade, still $289, though it could have probably been a little bit better.

TBBK, this one a little bit disappointing. As I mentioned before, on this one I took a one minute set up. We had this breakout on the five minute chart, squeeze up to 6.73, little bit of a pullback. I bought it, and we had this little consolidation right here under 6.50. I got in at 6.50, thinking that we would break the $0.5 and go back up to 6.73, and we had this little micro pullback, these two little candles with the same high.

We popped up to 6.60, and then dropped down to 6.25. I had to stop out, and that’s why that ended up being a loss, and unfortunately the biggest loss of the day. Of course, ended up going back up toward 6.60, but not before … Really, I probably stopped at the lows, but you never know whether it’s going to be the lows or whether it’s good to something like seen at where it goes all the way down. How do you know, you don’t. So you set a stop based on the amount of money you’re willing to risk on the trade, and you follow that stop.

Sometimes you’re going to stop out. It’s going to pop right back up. But other times it’s going to stop out and it’s going to drop in 20, 30 percent, and you definitely don’t want to be holding when something like that happens. Then CCCR was my biggest win of the day. This one was good on both the one minute and the five minute. Now I was willing to take the five minute set up on this for a long over 2.20, although I was nervous about it because of how extended it was over the nine moving average. But getting in here 2.20, 2500 shares, we popped up to a high of 2.40. So that’s a quick 500 bucks, see $550 right here.

It was a solid trade, but it clearly didn’t hold those levels, and ended up coming back down to about $2. Maybe this is an opportunity where short sellers would have seen this and tried to take shorts on the spike, but I’m not sure what caused it to drop down so quickly, but either way. It definitely got rejected. So a reminder to take profits when you have them.

Now I thought that SNCR was a little bit of a stronger five minute setup, which is why I was more inclined to hold it longer, because it had come down here to the nine moving average. I was a little concerned that it broke that level. But what I liked was that the volume on these red candles was light. The light volume on the red candles versus high volume on the green candles. I really thought this looks good. Breaking over 15.08 on the daily is a daily trigger that has room all the way up to 24.45. A lot of potential in that window but ended up not really capitalizing on it as well as I could have.

In total today, I’m actually only down $15 before commissions, took a bunch of trades, 10 stocks, trade each of them a couple of times. Today’s kind of a flat day, and that’s fine. Kind of treading water until the next green day.

When I’m back on Monday, my goal will be continuing with small size, 2500 shares max. Try to hit $500 in the first 30 minutes, if I can get myself up to 1000 a day, then that’s great. I mean that’s definitely back of my mind goal. But $500 is the minimum target each day, $500 a day, 100 grand a year. If I can keep doing that then that’ll be good. If I can keep doing that during a slow and choppy market then that will be really good. Then when the market does pick back up and we get back into that feeding frenzy, I can respond, increase my share size and capitalize on that opportunity. But then again be able to be quick to scale back.

I think realistically for the month of April, if I had been a little faster to respond, I might have been able to finish the month up. I was up 18,000 at the very beginning of the month in the first five or six days, and then obviously, dropped back down since then. I don’t know that I would have been able to finish the month with 18 or 20,000 because of the red days and the just general choppiness, but I think I probably could have finished with maybe 10 to 12,000, which obviously would have been better than being read and I would have needed to just take base hits when I had them and not try to go for the big win.

Now, by not going for the big win, I also wouldn’t have probably been up $3500 on some of those trades because the reason I was up that much is because I was being really aggressive on my share size. If I had tapered back my share size, if I’d been more responsive, I’m sure my average daily gains would have decreased versus the month of February or March. But I think I would have finished it in slightly better shape.

This is a month where I was a little stubborn. I chose to be really aggressive, and the result is obviously that the market wasn’t on my side and I gave back profits. At the probably beginning of next week or sometime mid next week, once I got my statement for the month of April, I’ll upload it to the website. I’ll get it posted there. It should reflect the $70,000 withdrawal of my account, and it will show my P&L for the end of the month. So it’ll probably be somewhere around $4000 in losses for the month of April, and then I’ll be able to show you guys my stats for the entire month, my profit loss ratio, my accuracy, percentage of success.

I know that my profit loss ratio will be negative. My losers were bigger than my winners. That’s because every time I stepped up to the plate for a home run, I got slammed back down. I only had one home run trade in the entire month of April, $6400, and it was actually the first day of the month. When you have one or two home run trades a week that greatly increases your average profits, your average win per trade skyrockets when you have one or two $10,000 winners. When you don’t have those then obviously your ratios are going to be lower, and then, of course, on the flip side, when you end up getting some slippage on your exits with big share size that increases the losses.

My accuracy, I’m not sure where it will land, probably somewhere in the 60s, but the profit loss ratio is probably going to be the thing that’s a little bit more concerning, the fact that I simply didn’t have any home run trades that were able to make up for those losses. I bet my average losses will be bigger than they were in March or in February, simply because I was being stubborn. I’ve got in so many trades, and just got slammed back down. I did sell them soon enough. I was frustrated, and I wasn’t adapting to the market, and so my metrics will reflect that. But any time you have a difficult week or even a difficult month it’s a good opportunity for you to sit back and reflect and look at your metrics.

For me this is certainly frustrating. It’s been a stressful month, and it’s been frustrating having three consecutive red weeks, but at the same time, I’ve gone through this before. I had one day where I lost $30,000, and that day felt like a day that I would never recover from. It was so upsetting, it was so disappointing. But the reality is I totally recovered from it. I’ve made hundreds of thousands of dollars since that day.

I will likely make hundreds of thousands of dollars in the coming months and years. So this month will be a little bit of a stumbling block, a little bit of a slow month, a little bit of a setback, but an opportunity to learn. I think the lesson here is to be more responsive to the market. It’s a humbling month because it reminded me that I need to be more conservative on my share size, when the market is not on my side.

Even for me, trading for years and years, weeks like this or months like this are an opportunity for me to learn and to hopefully improve my strategy. For me, coming on and trading everyday in front of you guys, and then doing these midday market recaps, despite some days that I certainly would have rather just not even talked about them were designed to show you the reality of being a trader that you will have some awesome weeks and some awesome months.

It is possible to take $500 and turn it into 100k, but it’s also possible to have a month where you’ll lose four grand, just a few weeks after hitting that goal, because that’s the way trading is. You have ups and you have downs. My hope is that you guys are able to learn from these, some of the things that I’m going through, even if I’m at a slightly different phase in the journey of being a trader than you guys are that you’ll still be able to see these as things that you can learn from.

Hopefully, if you find yourself in a similar situation, which I know many of you probably have had three consecutive red weeks or even three consecutive red months, and you’re probably having to ask yourself, some of these same questions what could I do better, what resulted in these big losses. That means diving into your metrics.

Obviously, we’ll do an entire recap of the month of April once I get my statements and everything like that. I’m excited to compare the month of April with maybe the month of February, where I did so well. It will be interesting to kind of compare those metrics. But the metrics are certainly a reflection of my strategy that I was trading, how aggressive I was being, and the type of market that we were in. Those are things that although they reflected in the metrics, you may not know on the surface that this month Ross was really stressed out, that this month the market was really choppy, or this month Ross decided to be really stubborn and not sell his losers too soon.

Obviously, the narrative is in the daily recaps, but we’ll do the monthly recap. My statements are usually available on the 5th, which is next Wednesday. But it sometimes take longer. So I don’t know, maybe five business days, could be the sixth, could be the seventh, might not be able to do them a day or the month recap until early the following week. But in any case, we’ll get to it when I have those statements and we can sit back and kind of look at those. As soon as my trades from today are logged and trader [inaudible 00:32:21] be able to see the big picture of my stats.

I’m excited for Monday. It’s the beginning of a new month with a set of rules designed to reduce my stress as a trader to focus more on those small gains, 500 here, 300 there. Because again, I know that that’s what most of you guys are looking for anyways. You’re not swinging, you’re not in a position where you can swing for the fence for a 10 or $15,000 trade. You’re trying to get consistency, base hits. Yesterday was a little bit of a bump, but today back to focus, and even though I’m closing slightly red, it’s totally within the parameters of this strategy, and with the new kind of rules of trader rehab.

With that, I’m going to go ahead, and let’s see, end this video and upload it to YouTube, so folks watching on YouTube can put comments down below. Those of you watching live you can ask a couple of questions, and I’ll answer them, and then we’ll go grab some lunch for today.

Dave, I think Jeff or maybe Mike can put up scanners. I’m not going to have my scanners up. I don’t think I’ll be able to have them up all day long. Mitch, I think that obviously shorting the higher priced stocks worked out well today on RDUS and on SNCR, and I wanted to be more mindful of watching them when they hit my scanners, or when I see when that does look really good. Today, we didn’t happen to see a lot, but we saw those too. Yeah, I think I will be more apt to trade those. That’s the interesting thing is that when you’re going for home run trades, trying to get five or $10,000, you don’t trade reversals because the high price reversals, $50 a share, you can’t take 10,000 shares of that. You take 5,000 shares, you’re putting a $0.25 million into the market.

You just don’t feel comfortable doing that. So inevitably you look at those trades, and you’re like, wow, best case scenario, like RDUS. You take a 1000 shares, maybe you make 500 or 1000 bucks. But even on RDUS, if I was going to make $5000 on this, I would have had to take some share size, and that would have been a lot of risk. When your motivation is to try to get big trades, big wins, you focus on the stocks that will deliver that, and that’s not reversals.

When your focus is trying to get maybe three $250 each day, so you can hit 750 bucks, then you start to become a good vehicle for that type of target. I will trade these probably more in the coming months, at least, or in the coming weeks at least, but, at least when I see them on the scanner.

The type of stocks you trade is definitely a reflection on the strategies that you’re trading. The scanner that makes noise is this scanner in the back, the low flow scanner. That’s the one that has an audio alert turned on.

No class today, Dave. No classes on Fridays, and next week we’ll have class on Tuesday, Wednesday, and Thursday.

My share total, actually I’ve not shown my total shares. I already turned off the laptop I was trading on, but it wasn’t a lot. I took I think nine trades, 2500 shares each, say 10 times 2500 is 25,000, 25,000 buying, 25,000 selling is about 50,000 shares, maybe.

J.C., usually when I’m trading with large share size, I don’t trade more than one stock at a time because I want to focus 100 percent on the one that I’ve got all the risk on. But when I trade with smaller size, I’m more likely to take a couple of trades at once, maybe two.

All right. So with that, I’ll let you guys go, and I’ll catch you all first thing Monday morning, and hope you guys all have a great weekend. All right. I’ll see you Monday morning.