On Friday, I got into the ticker symbol EVLV…
It was a big earnings winner, which held its gains throughout the day and a pattern that reminded me a lot of AAOI, a stock that is up more than 680% year-to-date.
I got in at $7.69 and was out of the trade on Monday at $7.98. It reached the $8.30s…but it was a nice win nonetheless.
I’ve been dead on lately…
And while it’s encouraging, I’m kicking myself for a crucial mistake I made…a mistake I see many traders fall victim to, whether they’re just starting or have years of experience.
But there’s a way to prevent it.
And it could be the key to unlocking the trading success you’ve always dreamed of.
Table of Contents
Comparison Is The Thief of Joy
One of the worst things you can do during your trading journey is compare yourself to others.
Never compare your chapter one to someone’s chapter five.
But I see it all the time.
Newbie traders rush to make profits…when they should be focused on learning risk management, trading strategies, and market psychology.
And because so many new traders disregard the fundamentals, they endanger themselves.
For example, a newbie short seller can win 10, 15, or even 20 trades in a row.
It can give a false impression that they’ve mastered the strategy. So they then decide to trade bigger and risk more on their next trade.
Little do they know that it takes one or two bad trades to wipe out dozens of winners. And before you know it, they’ve blown out their account.
Risk Management Is The Key To Long Term Success
I haven’t been trading poorly this year.
Because in May, I had one BAD trade.
One stupid mistake destroyed my psychology. And wiped out nearly all of my gains at the time.
Since then, I’ve been trading smaller to build my account back up.
So even though I’m seeing the market much better, I still haven’t gotten to the point where I’m comfortable trading bigger.
Think about it, I’ve made over $7.4 million in trading profits and have been trading for over 20 years, and despite that, a big loss still bothers me.
So I’ve had to play small ball and chip away.
Here are some tips to help you avoid this situation:
- Always put risk management first. My number one rule is to cut profits quickly.
- No matter how hot you’re trading, stay humble or the market will find a way to humble you.
- You’re only as good as your last trade. Stay focused and trade with a plan.
- If you make a mistake, bail on the trade. Don’t try to add to a loser; be left hoping and praying.
Of course, I could have made things worse for myself. Some traders will try to revenge trade and let their emotions get the best of them. After taking that loss, I dialed it down, which is the smart thing to do.
I also reviewed and scrutinized the trade.
Because I wanted to be reminded of what it felt like. You will likely repeat the same mistake if you run away from your problems or try to forget the trade.
Own your mistakes.
I overtraded, was too aggressive, and didn’t want to admit I was wrong immediately.
If I didn’t make this mistake in May, I’d probably be trading a lot bigger and with greater confidence.
It has taken me less than three months to recover my losses from that trade.
And while that might not sound like a long time, it’s been a great exercise in my patience.
How To Recover From A Bad Loss
- Analyze your strengths and weaknesses daily. The best way to do that is by journaling. You always want to be transparent and honest with yourself.
- Size down. Forget about the revenge trade or doubling down. Slowly build your confidence up with one trade at a time.
- Recognize that trading is a marathon, not a sprint.
- Take time off or reduce the number of trades you take. Focus on your best setups only.
- Embrace the process, not profits. I celebrate my students who make $10 on trades because it’s not about the money. It’s about learning those first few years. Build up your knowledge bank first before your brokerage account.
Get Better One Day At a Time
Every single day my team and I are hosting live training sessions throughout the day. In these sessions, we discuss what stocks are moving, the opportunities we see, and the tools we use to take advantage of these plays.
Shame on you if you haven’t attended one of these free live training classes.