Follow Your Rules! Plan your trades and trade your plan!

[jeremyjohnolson 19]

Follow Your Rules!  Plan your trades and trade your plan! - Truer words were never spoken.

I just have to share with the community a huge mistake I made which almost turned into a much huger mistake on 4/28/2021 in $AMD.  A few days ago I went hulk and ended up losing big time on $AMD.  Not so big that it destroyed my account, but big enough to hurt me badly, mostly psychologically...but don't worry, I am recovering now, I am not suicidal or anything, but it was very difficult.  The thing that made it so hard to swallow is that I should have known better, I do know better!

I hit my max loss for the day right at the start of the open, which was only $32, because I am still learning and proving out my strategies, seeing if they work for me or not, and thus trading with very small size right now, only 0.1% of my portfolio is my max loss/risk for the day.  But on this day, 4/28/2021, I got very frustrated because I hit my max loss so early in the day and then decided to keep trading anyway to win my money back in spite of hitting my max loss.  I knew that was a mistake, I knew I should have stopped, but I didn't care and so I kept trading anyway.  I didn't want to wait an entire 24 hours to be able to start trading again.

Sure enough, I ended up turning a small little insignificant meaningless loss of $32 into a big substantial loss that day when I started trading with full size, max amount of size even, including margin.  67% of my trades were winners that day, but it only took about 3 big loosers to wipe them all out because I was trading with such big size and my winners were small in comparison to the loosers.  In net I ended up losing $1,200 by the end of the day which represents 3.75% of my account, so that was bad.  It hurt.

I was trading $AMD most of the day (on 4/28).  I almost clawed my way back, I went up to a $900 loss at one point then got it all the way back down to only a $400 loss.  But then my last trade of the day on $AMD I tried to get a reversal and go long after it had been selling off the whole day (reversals are not in my playbook, none of the trades I took all this day were in my playbook since I am only focusing on opening range breakouts right now).  The reversal did not work out and I ended up with a big losing trade on $AMD to end out the day.  That last big trade I took on $AMD is what got me to a total loss for the day of $1,200.

At the end of the day, I decided surely $AMD will come back, so I was going to hold my position over night.  I had a huge position in it, virtually all my buying power.  I did a similar thing a little over a year ago with shares in $DIS, right before COVID hit.  I ended up holding onto $DIS through the whole COVID pull back from $142 all the way down to $79 and then back up to $187 a year later where I finally sold my position in $DIS for a pretty good gain, but I had all my cash tied up in $DIS for an entire year in order to get that gain and it was very nerve wracking to boot.  It was not worth the ride!  I almost made the same mistake with $AMD on 4/28.  That is, I almost decided to hold onto it over night and turn what was originally suppose to be a short day trade into a swing trade, that could potentially tie up my cash for another year, who knows?!  But ultimately I remembered the experience I had in $DIS and did the hard thing and took the loss, I sold all my shares in $AMD and took a huge loss.  It wasn't easy.  At that moment, there was still a voice in my head saying, "It will probably pop back up tomorrow and I could be sitting on a $2,000 gain and make back all my losses of 4/28 and then some and everything will be wonderful!   All the pain of 4/28 will be wiped out and replaced with the joy of winning!"  But I didn't listen to that devil on my shoulder, not this time around!  I hit the button and sold out, taking the loss.

Now, looking at $AMD today I am very glad I did not hold it!  Who knows when $AMD will come back, it might be another year, who knows!?  Maybe it will come back tomorrow.  I don't care anymore.  I am not married to it.  All I know is if I didn't bite the bullet and eat that loss on 4/28, which at the time was very hard to do, a net $1,200 loss, I would be holding an unrealized loss right now of about $6,000!!!  So yeah, I am glad I did not turn a day trade into a swing trade, again!

Maybe somebody will read this and learn from my mistakes and not have to make them yourself.  But even if I do not help anybody else, it's therapeutic for me to share this experience with the community.  It helps me to solidify it in my memory so I hope I never repeat it again.

Bottom line, if you hit max loss, STOP TRADING!  A small max daily loss is easy to recover from, the next day.  Walk away when you hit max loss and come back to trade another day, there is always tomorrow.  But, if you do make a mistake and keep trading, turning a small loss into a much bigger loss, then still never, never let a day trade turn into a swing trade, no matter what!  If I did, I would have turned a 3.75% loss of my portfolio balance into an 18.75% loss, yikes!  3.75% losses are bad and will destroy you if you do it often enough, but it doesn't take very long at all for 18.75% losses to ruin an account permanently.

Edited May 4, 2021 by jeremyjohnolson

[Bryan W 50]

Live to trade another day! Learn from this lesson.