Even the most seasoned traders can slip up and make costly mistakes.
Last Friday’s $22K loss in EFTR is my most recent reminder.
Now, I’ve climbed back from losses bigger than EFTR.
Sick to my stomach over my $EFTR stupidity…I'm still green on the year but now -$20k on the month…retweet this if you realize that all it takes is 1 bad trade to ruin sooooooo much hard work, please never forget that & stay safe! Remember https://t.co/0HhPp6CC1v ALWAYSSSSSS!
And the way I plan to do it this time is by following these 3 rules.
There’s nothing fancy or overly complex about them.
But if you’re constantly finding yourself on the wrong side of your trades, you probably need to hear this too.
Table of Contents
What I’m Not Doing…
My loss in EFTR is an absolute embarrassment.
Not only did I botch the entry, but I also botched the order size and then completely forgot to watch the news. The company announced an offering while I was long the stock.
Everything that could go wrong did.
This is a problem.
Because I’m typically making anywhere between $400 to $800 on my winning trades.
I need potentially several dozen winners to make up for that one loss.
And that’s simply how you DON’T want to play this game.
But that’s what you get when you break the most important rule.
#1 Cut Losses Quickly
When a trade goes against you, it’s crucial to exit the position quickly before it can get any worse.
Doing so prevents a small mistake from turning into a potential disaster.
You see, I had the best intentions with EFTR.
But instead of buying 8,000 shares…I accidentally bought 80,000 shares.
I should have immediately closed out my position.
Instead, I was adding to my position as the stock kept declining.
Now, I’ve, in a way, screwed myself.
I have to be extremely careful of my risk management. One more bad loss like this, and I will be down on the year—something I don’t want to be.
I can’t break this rule going forward.
#2 Controlling Mistakes: Discipline Is Key
Only a small percentage of my students go on to become millionaire traders.
Now, I have several theories on why this is…but I won’t get into it here.
But one of the key factors is discipline.
My top students and I constantly outperform most traders because we’re disciplined.
Of course, I lost my discipline in EFTR, and I’m now wearing a giant stain.
But the show must go on.
What will I do to get better, come back from these losses, and take my account to new highs?
Well, I need to focus on trading A+ setups.
One way I can do that is by reviewing my trades and ranking my top setups. If I’m finding success with a specific pattern, I should focus on that pattern.
Your entry is probably even more important than your stock selection.
I’m often trading some crazy and volatile stocks. That’s why I need to be careful not to get whipped around.
To improve my odds, I often look for moments of weakness in the stock, specifically sharp panic sell-offs in the morning.
From there, I’m finding it easier to manage my trades.
In the case of EFTR, my entry was awful. I did not wait for a big enough sell-off.
That didn’t matter because I was also in the trade when they announced an offering, which gave me almost no chance to make money being long.
For me, the key to staying disciplined will be to constantly remind myself of my best setups and entries that give me a good risk vs. reward profile.
#3 Consistency Occurs When You Focus On Singles
If you’re like most traders, you want to make those losses back quickly.
And if you let your ego get the best of you, you might find yourself in an even worse situation.
In the grand scheme of things, I can easily trade bigger to get my losses back.
But that would be dumb.
Because I’m not trading that good, and the market isn’t amazing.
You want to max size when you’re on top of your game, and the market feeds you opportunities.
Neither is true for me.
So I have to grind.
Focus on one trade, and try to make small wins.
It requires patience and discipline.
Most don’t have it.
Remember, it’s not about how big your winners are. It’s about keeping your losses in check.
When you have more winning trades than losing ones, there’s a strong likelihood your account balance will steadily grow. I know that’s how it’s been for me.
It’s time to get serious.
My last two months of trading have been forgettable, to say the least.
But I’ve been at this for over 20 years…and I know this is part of the game.