It’s a slippery slope…
When you start breaking your trading rules.
One mistake can wipe away days…weeks…or even months’ worth of gains.
I know because it happened to me on Wednesday—leading to my biggest loss in 2023.
And while it sucks…I want to share with you what I’ve learned.
There are three critical mistakes I made while losing my discipline.
Table of Contents
What Happened?
If you’ve been following the market over the last few months, then you’ll already know that AI-related stocks have offered some of the best trading opportunities.
And after a master run-up…they began to get whacked on Monday.
The “leader” in the group is the ticker symbol AI, which went from $34 last Friday down to $21 on Wednesday.
The sector got rocked on Wednesday following a short report from notable short-seller Kerrisdale Capital.
Now, I wasn’t trading AI, but I did trade sympathy plays like GFAI and BBAI.
In fact, I traded GFAI last Friday, getting in at $6.60 and out at $7.46.
It was part of my weekend strategy play. And boy, I was really conservative with this trade. The stock traded as high as $21 on Monday.
I’ve found dip buying in hot sectors to work well with me…so given Wednesday’s bloodbath, I am looking at potential dip buy plays.
My Biggest Loss of the Year
There was absolutely no love for AI stocks on Wednesday. But I figured there would be a potential for a dip buy if there were a panic.
I played BBAI because it was less volatile than AI or GFAI.
It seemed to be bouncing nicely from the morning lows…so I decided to play the breakout.
Of course, the opposite strategy of what I said earlier worked best for me.
More on that later…
What Was I Thinking?
I felt like I left money on the table with GFAI. I underestimated how large the spikes could get…so I didn’t want to repeat the same mistake.
The Trade In BBAI
If you look at the chart below, you’ll see that the $2.60ish area acted as strong resistance.
Old support becomes new resistance. So I thought it would break out once the stock got back up to the $2.60s.
However, as you can see, it briefly traded above $2.70 before it dipped below $2.
How I Played It
Source: Profit.ly
Mistake #1
I let my emotions from previous trades impact my decision-making. I felt let like I had let a big opportunity in GFAI get away from me, and I was determined to make things right.
However, trading doesn’t work that way.
Moreover, my weekend strategy for GFAI was a completely different setup than in BBAI.
To put it bluntly…
I had no business trading BBAI.
The overall AI sector was weak…and BBAI struggled to overcome resistance.
Mistake #2
I was stubborn.
Not only was my timing way off. I was in denial that the stock could dip lower.
I didn’t initially start with 32,000 shares long. I grew the position to that size, trying to average a better price.
Dumb.
I was adding to a losing position…something I never tell my new students to do.
My stubbornness leads to overtrading and sizing too big.
Do you see what I mean by a slippery slope once your discipline is gone?
Mistake #3
I knew I was in the wrong trade, oversized, and still had a chance to take profits but didn’t.
The crazy thing about this trade is that I was actually up on it at one point but didn’t get out.
That’s right…I knew the setup was wrong…I knew my entry was bad…and I had a chance to take profits and didn’t.
I knew I was breaking the rules…but it didn’t change my behavior.
That’s a very self-destructive mindset.
So what can I do better next time?
- It’s okay to miss a trade…but not to substitute in another play because you missed the last one.
- Put safety first. Mostly, I’ve kept my losses small before this trade. It may take several solid days or weeks to compensate for this loss.
- Size on A+ setups, not subpar setups.
- If I know I’m wrong…get out.
- Trade scared and be conservative
This was a totally unnecessary loss for me. But I hope you find it to be a valuable lesson. Even after +20 years, I’ll catch myself doing something dumb.
Now, it’s time to refocus, trade smart, and try to make up for this loss.
If you want to learn more about my coaching program, check this out.
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