Before I talk about the not-so-fun losses some traders have experienced the past few weeks, please wish this great trader up $1+ million in 2014 a happy birthday today, we’re having a special 72 hour blowout sale HERE on annual and 50% off DVDs HERE in his honor!
Please wish my friend @paulscolardi aka Superman happy birthday today, we’re having a blowout sale http://tim.ly/super56 & http://tim.ly/super60 on newsletters & DVD study guides in his honor as he went from sleeping in his car to owning a penthouse with a view, sitting courtside at #miamiheat games and speaking at #harvarduniversity a true rags to riches story, he’s made $1 million this year while teaching others & several of his students have made $200,000+ in 2014, tag people who will be inspired by Paul’s story! #dailyinspiration #ragstoriches #friendofthejews
I’ve had a pretty steady few weeks of trading as in the past 30 days I’ve profited nearly $40,000 and in the past 90 days, I’ve made $140,000, see every trade detailed HERE, and while that sounds good, I’ve left TONS on the table mainly because my position sizes have been so small due to spending the majority of my time planning my annual conference, and now dealing with all the new students who have found me due to this great Men’s Journal feature article and this pretty embarrassing TV show on Bravo (I’ll live…I do everything, whether it turns out good or bad, to find more dedicated students)
Download this case study in a PDF form.
Now onto discussing and learning from roughly $2 million in losses, 2 great traders have suffered the past few weeks. I absolutely HATE seeing big losses so I’ll be giving a free webinar this coming Monday night, register HERE on October 27th, 2014 on how to adapt to this crazy market right now.
First is up is my topstudent Tim Grittani, who despite his recent $300,000ish in losses has still turned $1,500 of his own money into $2.1 million in less than 4 years since becoming my student, a remarkable achievement indeed, see his profit chart and understand that while his recent losses are hurtful, he’s come a loooooong way in a very shooooooooort period of time:
See his roughly $300,000 loss shorting LAKE too early (even though he’s eventually have been right for roughly $5/share a few days later)
Tim wrote a MUST READ blog post “Lessons From My $290,000 $LAKE Loss”
1. Before we get into some of the specific mistakes I made with LAKE, we need to examine the underlying problem. This underlying problem was present in my trading all summer, ever since I started transitioning over to listed stocks. What was this problem? My unwillingness to cut losses when I shorted momentum runners too early.
2. As far back as July, I knew that I was playing with fire. I even went so far as to predict that my stubbornness would badly burn me eventually. Yet despite knowing this, I refused to make a change. I’m not sure whether it was due to pride, fear of exiting at the top of a spike, or perhaps just the thrill of turning a loser into a winner. Whatever it was, the problem only got worse.
3. While in the back of my mind I kept thinking, “Eventually this won’t work out,” my bad habit kept being rewarded with narrow escapes and sometimes even solid profits. Link I knew my trading style was broken, but the results never showed it. In fact, I was even rewarded with my most profitable trading month ever in September! I continued to play larger and larger as the gains poured in, refusing to address the underlying issue. Then LAKE came along, and the wheels came off.
4. To push for a break-even or better month when I know I’m not mentally right would do nothing more than put more of those gains in jeopardy, and I refuse to do that. So I will take a much needed break from trading, my first vacation in quite awhile, and I will come back refreshed in November for a fresh start!
I’m proud he recognized he was breaking these key penny stock trading rules and while I HATE seeing big losses, it’s better to lose, sometimes even lose big, if it stops you from breaking rules as rule-breaking will crush a trader longterm while losses, even this size, will only keep you down in the short-term.
It’s only been a few days into Tim Grittani’s vacation, but he can’t help but trade and he took a good trade just yesterday so his mind is back on track:
Onto the larger losses of roughly $1.7 million from this great and somewhat unknown penny stock trader who also likes to short sell penny stocks and pumps just like the rest of us…like this veteran trader he makes several million dollars per year on this strategy.
He wrote a great post on his losses HERE, but the contents are FAR too valuable to just be on Twitlonger, they must be posted again and again for all to see and learn from as David had a $1.3 million drawdown and then another $400k drawdown, altogether $1.7 million in losses on undisciplined trading…little different from Tim Grittani’s $300,000 in losses (hence where I get the blog post title regarding $2 million in losses)
Here are these great lessons you MUST memorize…mainly over-trading and taking too big position sizes:
What went wrong and what I’m doing to get out of this hole
On Friday, I actually hit a brick wall and froze which is a sign I hit rock bottom and compounded my losses that day. After I came too, I decided to liquidate all my positions. I also calculated my PL and looks like I back near the lows of my draw-down. To recap, around mid August, I was up around $4.6 million for the year but then my trading took a turn for the worst and in September, my accounts went from UP $4.6 million on the year to only up $3.3 million ($1.3 million draw-down). In late September and early October, I started recovering slowly and my accounts grew to up $3.7 million on the year but since then, I’m back down near the lows around $3.3 million. Although I thought I was making the necessary changes to my trading, my PL showed different. This has lead me to start analyzing myself and get it right this time around.
Here are some thoughts on what I was doing wrong…
1) My position sizing was way off. I got use to trading bigger and bigger but when I went cold, I still wasn’t able to adjust and kept trying harder and harder to make it back so was sizing into all my trades instead of trading the “fun” trades small and waiting for good to great setups to size in.
2) I am very competitive and strive to be the best at anything I have a strong passion for. Because of this, I am always comparing myself to others and putting my self-worth on my trading performance rather than who I am as a person. When my trading was going good, I become over-confident and start taking more risky trades which leads to inconsistency and eventually lose money and creates this downward spiral that I’m in. By trying way to hard to recover, instead of trading getting better, it actually gets worse and causes me to be more stressed, emotional, and frustrated.
3) Instead of going back to what I’m great at, I started trying anything and everything. For example, I normally don’t go long stocks and I almost never buy bounce plays. This month, I believe most of my losses came from going long instead of shorting penny stocks which is my core strategy.
When you are in a trading slump, you should do the following….
1) Trade smaller and slowly size up as profits grow
2) Don’t compare yourself to others
3) Take only the best of the best trades (must be part of your “best” strategies)
4) Liquidate all holdings and start fresh to reset
5) Analyze, study, and analyze some more on what went wrong
6) Go back to your best strategies
7) Don’t try new strategies until you have fully recovered emotionally
8) Don’t try harder to make the money back, instead, trade less and wait