Warrior Trading Blog

Day 21 of the Small Account Challenge: Day Trading is like Fishing | Ep. #23

Day 21 of the Small Account Challenge: Day Trading is like Fishing | Ep. #23

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Day Trading Analogies: Day Trading is like Fishing


Why Day Trading is like Crab Fishing & Daily Recap

All right guys. Time for a mid-day market recap. We’re gonna go over the trades from today. Today was a tricky day. Today was February first, the beginning of the month. It was also in the shadow of the worst day of the year, which was yesterday for me. This week has been tricky. On Tuesday, well let’s see, it was on Monday I had the biggest winning trade, the biggest winning day of the year. I made about $16,000.00 and then yesterday I lost $13,000.00. So my biggest winning day and then my biggest losing day back to back. I think that that is the type of thing that is really common for me, that I will have a great day and then the next day I try to repeat that same success and it just doesn’t work and I end up having the biggest win and the biggest loss on the same stock.

It was true last week on CATB, I think it were … What was it … I can’t remember what it was last week, but it true last week on FFHL, that’s what it was, and it’s gonna be true this week on $RGSE and I think the cause is that that one stock is the most volatile. So it has so much potential to either do really well or do really badly. Fortunately today I was able to stay focused. I traded three stocks and I made $4,343.00, which puts me back up above $20,000.00. I opened today at $16,596.00 and all yesterday I was feeling annoyed with myself because I had put together such a fantastic month for the month of January and then on the last day of the month I screwed it up and ended up giving back a bunch of profit. It’s just a very annoying thing to do.

When you have your goal and then you give it back, very very frustrating. In any case, today I was able to rally and have a good day. I was being aggressive today. I was mindful as I was sitting down this morning that I would be feeling that revenge trading, that I would be a little bit of a real aggression to try to get back what I lost and that I had to be careful not to allow that emotion to get me into a bad trade. On the other hand, that emotion can help me in a certain way be more aggressive. It’s like getting pumped up before game day and getting yourself into the zone and really ready to attack the market is not a bad thing. And so if you imagine the day this, or last November when $DRYS went to $120.00 or when $GLBS squeezed up, if the day before that I had had a red day, then that day where the market went insane, I would have been aggressive and I could have just destroyed it.

I could have had an amazing day because my mindset was just to get in there and be really aggressive. You can harness that emotion in a positive way as long as you channel it on only taking good quality setups. The problem is that as a beginner trader, it’s really easy to let that emotion get you into anything where you just start trading Apple and Facebook, and Twitter. You start totally trading outside your normal zone and then you just end up getting back profit. So I’ll show you guys who are watching on Facebook. This is my PNL for the day, $4,343.62. Commissions today a staggering $350.00. I mean really really ridiculous and I’ll be the first to admit that I may have over-traded a little bit.

I was taking bigger size. I started on $HMNY with 5,000 shares and then I added 5,000 so I had 10,000 shares of that one, which means basically that trade between one buy, two buys … Actually I bought in 2,500 share blocks so it was four orders. That’s $16.00 to buy plus scaling out, I think in four pieces. It may have even been five, it’s four. So that’s $32.00 right there on that one trade in commissions, but then I have ECN fees and those ECN fees are based on every share that I trade. It adds about $40.00 to the 10,000 shares to buy it and another $40.00 to sell it. So that’s $80.00 in ECN fees or maybe $60.00 in ECN fees plus the $35.00. It’s like $100.00 in commissions for that one trade. Fortunately on that first trade I was able to make about $2,800.00 and then I got in for the second pullback or the first pullback for the second trade and I made another $750.00.

So $HMNY was a good trade and then I took a trade on $PULM, 5,000 shares, eight cents, $400.00 and $ETRM 4,000 shares, $779.00, about 15 cents or 20 cents or whatever that was. So generally speaking I was a little more aggressive today but I was only trading setups that I felt were strong. As I was saying in the room, there were a couple of opportunities to just jump in stocks that were running and I said, “No, I’ve gotta wait.” Even though I would have actually made money if I had jumped in it I said, “I have to wait for the first pullback because I just need to have a good day.” My goal today was, I had two goals. The first goal was to just close the day green. I mean, just close the day green, just kind of like clean the slate. And then the second goal was to only trade A quality setups and the hope was that by only trading A quality setups, I would end up having a decent day and the other hope was that was that we would have some A quality setups.

So let’s breakdown the trades that I took today. I’ll move this out of the way. The first trade was $HMNY. This was gapping up 9% on news. There was a headline that was on Market Watch, so saw the gap, saw the headline, and you can see this pre-market, how this was consolidating right under $5.00. So I’ll show you this chart here. Consolidating right under $5.00 and so I looked at this and I was like, “This is what I wanted $RGSE to do yesterday, to hold under five, well it was to hold under six in that case but, you know, to hold under this level, so as soon as the bell rang I was like, “I want to get in this and I’m gonna get in under five and ride it. So right here is the break over the 200 moving average right down here and I knew as soon as we broke over that level we had potential. $HMNY is a former runner. It’s a stock that has a history of making big moves.

It also has a low flow. So when we have an imbalance between supply and demand it can move very quickly and there’s a day here when we went from $5.00 to $13.00. It’s not uncommon for this stock to do that type of thing which is one of the reasons it’s on my watch list as a stock to keep an eye on anytime it’s gapping up because we have these opportunities. All right. So market opens and it ends up actually opening just a little lower. It opens … And it’s surprisingly low. It opened at 4.72 and so I saw that and I was like, “You know what? That’s fine. That just gives me a better opportunity to get in this trade at a lower price.” So let’s see. I got in at, let’s look at my orders here, so I started adding at 4.77, .80, .85, .89, and .90. So I added into that push and then we got the pop over five up to 5.25.

So we got this first opportunity here and this right here is the same thing we saw yesterday. We saw it on two stocks yesterday. I can’t remember their names right now, but that same push right out of the gates. We even saw it a little on $RGSE. I just got in it too high. All right? So we popped up here, we pulled back, had the first trade here. I got in, I got out, I got back down here and then sold again through this push up to the high of 533. So two trades right in here and I thought this one had the potential to really open up today and $6.00 was kind of like my mental target. $6.00 above there, $6.50 above there, $7.00, $7.50, $8.00, but it just couldn’t really get the momentum so it didn’t end up really working out as well as I wanted.

Despite that, I still made $3,500.00. So closed up that trade and then I’m looking for the next one. $DRYS was on my radar because it was gapping up, but I expected it would be choppy and that’s exactly what it was. The biggest candles of the day are all red. Big red, big red, big red. Three huge red candles. Not an easy stock to trade at all. So no trades on $DRYS. I said, “I’m gonna leave it alone.” Even though pre-market this looked like a decent flag right in here, I just felt like it was too risky and yesterday it traded 165 million shares of volume, which was pretty crazy. All right? Let’s see. Then we had $PULM and $PULM just popped up on those scanners out of nowhere it squeezed up from 220 up to a high of 283 and I feel a little annoyed on this one because my entry, let’s see, I jumped in this one, where was it? We had the high right here, first candle to make a new high.

I got in on this red candle, as this red candle dropped down I got in at .65 and .67 and .70 and then we popped up here up to .80 and then we kind of dropped down. We popped back up to 80 and that’s when I sold. I was like, “All right. This things not holding.” .83 was the high and there was a big seller. There was, I think, a 20,000 share seller sitting at 2.80. So I got in, it didn’t hold. I got out. And then I wanted to get back in, but I was nervous because of that big seller at 2.80. We came back up to 2.80 here. Again, that seller was still there. We dropped back down and then we came back up here and we kind of broke through that level and that ended up being the first five minute candle to make a new high.

The break over 2.80 and that moved back up. So I’m a little annoyed that I missed that pullback opportunity because I could have made another maybe $500 or $600 on that, but in any case I made $400 on it and was content with that. At that point, I thought I was probably done for the day and I was up around $3400.00 or $3500.00 and I was like, “Well, you know, that’s probably it. We’re kind of getting into the lunch hour or getting close to lunch and I’m not seeing a lot and $DRYS is selling off so the shippers are selling off as well so maybe this will just be it for today.” And then $ETRM spiked up. So $ETRM is another one of those stocks history of making a big move very recently. Kind of down here and curling up. Today was the first green day after a couple of red days and when I saw that I was like, “Okay, well, if this can break above this moving average, we’ve got lots of room.”

Unfortunately, I wasn’t able to do that, but what I did do is I jumped in and rode that momentum. So let’s go back here. This is the one where I was tempted to buy it at 6.70 which was, let’s see. Where was it? I was tempted to buy it, yeah, kind of like right in here at 6.60 as soon as it hit my high day scanner. As soon as I saw it hitting that scan I was like, “This looks good. I want to jump in it.” People in the room were mentioning it, but I said, “No. You need to wait. Wait for a good opportunity.”

So it ends up popping here up to a high of 6.95 and then pulls back. And I was like, “Okay, this one minute pullback is my opportunity to get in.” So I got in right there at 6.95 and 4,000 shares, rubbed the momentum here up to 726, pulled back, popped back up over 7.26, 7.34 and we went all the way up to a high of 7.78. And then up here at 7.80 we had a 40,000 share seller and that guy kind of put the cap on the move today.

During the five minute consolidation I was watching for a possible pullback here for a five minute setup, but what I said is that we’ve got one doji candle, two doji candles, three doji candles. That’s showing us that there’s a lot of indecision, that there’s a lot of kind of tug of war and I said, “I don’t think this is gonna be a good one for a move up. I think I’m just gonna leave it alone,” and I’m glad I did because it ended up selling off. Today I’ve recouped all but about $1,000 of my loss from yesterday and that’s good. And even with the loss yesterday I was kind of like, “Well, you know, I guess I gave back most of my profit from Monday, but I was still green on the week.” So as of yesterday, let’s see, between my two accounts I was up about $3,000.00 on the week so this gives me a nice boost forward and for that I’m happy.

I also traded in my Speed Trader account today, but I didn’t do as well. I only made $2,200.00. I broke even on Plum, made $1,100.00 on $ETRM and made $1,300.00 on $HMNY. So I didn’t make as much there because I was looking for bigger moves and we just didn’t get the bigger move, so total profit on the week, right around $10,000.00 and that includes a $13,000.00 loss, so that’s good I guess. I would rather be a little higher than that, but you know what, this is part of the deal with trading. It’s really hard to not kind of count your chickens before they hatch or whatever because you see yourself making these gains and you’re like, “Oh, my account’s up, up, up. It’s getting higher and higher.” But you know that it goes up and it has to come down so it’s kind of like, you have to budget for that.

One of the things I was thinking about last night is the fact that one thing I talk about during kind of the, I guess, spring or summer when The Deadliest Catch is on is the fact that having a day where you give back $13,000.00, it obviously is not fun. Nobody enjoys that. I certainly don’t enjoy it, but I kind of think about it the way I watch The Deadliest Catch. When you’re watching The Deadliest Catch, those of you who have watched the show on The Discovery Channel, it’s the crab fisherman up in Alaska. It seems that sometimes when they set their crab pots near the icepack, the ice pack is always kind of moving. When they set their pots near the icepack they can do really well.

They get full pots and they can collect a lot of crab and basically reach their quota really fast, but there’s a risk there with putting the pots that close to the icepack and I would sort of say that day one, Monday, was me putting the pots really close to the icepack. I went, picked them up, $16,000.00 and it was a big win and I was like, “Set ’em back. Let’s do this again.” I set them back and went back in for $RGSE day two and that’s when the ice came over the pots and instead of being able to walk away with profit, I’m trying to minimize my loss and what happens when the ice comes over their pots is it kind of pulls the buoys, it buries the buoys and sometimes they lose all their pots. That’s an example of kind of pushing your luck, getting a little greedy and, you know, it is what it is.

So at the same time, it’s kind of part of business. They know from time to time they’re gonna lose a period of time and they’re gonna have one that breaks or the line breaks or whatever it might be and there are times they, for whatever reason, are gonna decide to set back in the place that they think is gonna be really good and they all come back up empty. You know, something changed. Or they sit back and then they got greedy, the ice came over, and there you go. You end up with a big loss. And so I think that’s kind of similar to what happened with me on Monday, getting really aggressive on $RGSE, really nailing it $16,000.00 and thinking that history would repeat itself and that we would see the same type of follow through on $RGSE on day two that we saw last year when it had a two-day breakout and it went 400%.

I really thought it looked almost the same, that we would have that same follow through, and maybe we would have if it weren’t for $DRYS catching so much of the attention yesterday, but I ended up getting overly aggressive and maybe a little greedy, pushed my luck and I gave back some profit. So a lesson learned yesterday and today I was able to regroup. I took good quality setups. I didn’t chase. I didn’t have the issue with getting partial fills and then buying much higher. I took my entry, took my trade, had my stop, and able to walk away now with $4,300.00. That’s good. I feel really good about that. Getting to $25,000.00 in this small account has been something that is really important to me. I really want to get there as quickly as I can and the risk with trading aggressively and using margin and kind of like stepping up and trying to swing for the fences every time you’re up at bat is that you will have some losses.

So when we break down my PNL for the month of January, we’ll see it’s steady up, steady up and at the end we had some big green days and then I had no red days until I had one giant red day. And I think that’s kind of the luck of the draw with being this aggressive. It’s gonna work until it doesn’t and then it’s gonna be painful. But fortunately having accuracy in the low 70’s or whatever it is, we’ll find out when I export my report or do my trade report, but fortunately the losses have been kind of few and far between and it’s been the results of focusing on A quality setups. All right? So that’s where we’re kind of finishing today. I’m hoping Thursday and Friday I can continue some really strong trading and help build up this cushion on the month.

One of the things that I’ve struggled with in the past, and I’ve talked about this, is how in the beginning of the month I can get a little overly aggressive in an attempt to try to get myself into the driver’s as quickly as I can, I sometimes get too aggressive on the wrong setups and I was very mindful of that this morning that if I wanted to be aggressive that was okay, but I could only do it on the right setup. So I did it and it was a good day and hopefully tomorrow and Friday we’ll see good quality setups as well and I can inch closer to $25,000.00. So that’s the spot that I’m really excited to get to. Once I’m over that level I can switch back to my Speed Trader account and not have to trade in two accounts. I can just trade in Speed Trader.

I will have a slightly different strategy for this challenge even though I’ll be in my Speed Trader account. I’ll have a slightly different strategy because I’m not gonna want to take as much risk. My Speed Trader account right now is at $55,000.00. So I can afford to be a little bit more risky with that one. I’ll have to taper things back again, but that’s okay. Hopefully I’ll be able to get started in that big account within the next couple of weeks and make my way right towards the next threshold, which I guess will probably be $50,000.00 and then $75,000.00 and then $100,000.00. All right guys?

Question & Answer

Let’s see. I want to make sure we answer any questions that you guys have. For those of you watching on Facebook or who are gonna watch the recap on youtube, you can post comments and I’ll make sure we answer them. I started the year with about $27,000.00 or $28,000.00 in Speed Trader so I’m up about 100%. Let’s see. How many trades do I take at once, Orlando? I only take one trade at a time. Very rarely will I do more than that. I just feel like if I am taking 10 trades, each trade has 10% of my focus. It just divides my attention. I do better if I can focus on one at a time. Obviously, if I had 10 trades, I’m gonna be focused mostly on one, so I’ll probably have 80% of my attention on one and then very little attention on the other ones which isn’t really a good strategy for me for the way I trade.

So one trade at a time. One trade, get in, get out, and then look for the next one. Now, $RGSE for a swing trade, that’s not one that I would be swing trading now. I might have considered it for a swing trade if I was a swing trader for the first daily candle to make a new high, but we got such a strong resolution right away I wouldn’t still be holding it. Mohammed, yeah, when you see on the level on the time and sales, you can see here this time and sales has red. Those are orders that go through on the bid, green is on the ask, and white is usually an order that goes between the spread. All right? So it’s neither on the ask or the bid, it’s somewhere in the middle.

Exit strategy on $ETRM, well I wanted to see it get up to $8.00 and when we saw that heavy seller at 7.80 I was kind of like, “This is gonna be an issue.” We dipped down, we came back up, we tried to retest it, I was ready to even add to my position over 7.80, but we just didn’t have enough buyers wanting to buy out that order so I threw in the towel. Graham, in terms of getting the best entry, the safest entry is almost always gonna be based on the five minute chart and if the best entry to you would be the safest, then you would focus on the five minute. If the best entry is one that gives you the most opportunity to profit, then you may want to use more of the one minute chart, and I use a combination of the one minute and the five minute.

I use the one minute at the open and in the first 30 minutes because of the level of volatility. I know that there’s opportunities right here where you see this candle go from 2.20 to 2.83. I mean, there’s a lot of volatility there. There’s a lot of opportunity for profit, but you have to get in and be quick. All right? But if you’re having trouble with accuracy of chasing, then I would focus on the five minute timeframe. All right guys. Again, if you have questions, put them in the comments. I’ll make sure I get those answered and we’ll be back at it first thing tomorrow morning 9 a.m. This afternoon at 4 p.m., Jeff is gonna do a Warrior Pro session so he’ll be talking to you guys about his swing trades and some of the option and trading strategies that he’s using. So Warrior Pro students, you can stay tuned for that and everyone one else, I will see you first thing tomorrow morning.