For the week of 5/14, I decided to slow down. I’m taking some time to reflect on the journey I began one year ago. I have no trades to report this week but will be explaining my strategy changes.
As I reviewed all the trades I made over the past year, I began by looking at the profitable trades and small losses. Even though some trades did lose money, I made a quick exit with minimal loss so I still consider those to be winning trades. Any trade in which I have no more than a 1% loss up to any profit is considered a win in my book. My strategy is, after I choose a stock to trade, I remember that neither myself or any other person on the planet knows what will come next for that stock. Being that I don’t know if a stock will go up or down, I must develop a game plan that allows me to make money, in the long run, during my trades.
The plan is to set a “stop,” a maximum loss I am willing to take on a particular stock. Typically I set the stop around 0.5 – 1% below my entry price. This will allow the price to move around a little and give it a chance to move upward. I set this stop using a Stop-loss order so it happens automatically and I don’t have a chance to overrule myself when a stock moves the opposite way I want it to.
When a stock moves in the right direction, I target a 2-3% profit. If it goes further I am happy to take additional profits but I’m trying to be realistic and not get greedy. As a stock moves up I will move my stop up, protecting any profits I make from a sudden downturn. When the stock reaches a 2% profit, I will set the stop at 1% profit. When it reaches 3% I move the stop to 2%. I will watch stocks very closely and if the price seems to be stalling in a profitable area I will not hesitate to sell in order to protect the profits I have made.
Penny stocks are extremely volatile and require a different strategy to capitalize on. For these stocks I have been the most successful buying and holding for the right moment. That means holding the stocks even when they drop 50% in value. My most profitable trade was buying about $800 worth of SGMD. After riding the roller coaster as it dropped to less than $400 in value only to cash out a few months later for more than $5,000 in value.
Right now I am holding UITA which is down nearly 50% in value. The $8,000 I invested is worth around $4,000 right now. As the company makes announcements I expect the price to spike up dramatically. I have no idea when this will happen, though. It could be next month it could be next year. I placed a big bet so I could reap a large reward if I’m right. In the meantime, the company could go bankrupt, get sued or shutdown by regulators. So it is a very risky move but no risk, no reward.
I have taken some sizable losses that have directly harmed my bankroll and ability to move toward full-time self employment through day trading. The losses have almost always been when I went against my own strategy. I would let the price fall below my self imposed stop then end up losing 4-5% instead of the 1% I have set in my strategy.
PLAY is one example of this. In order to stop this from happening, I am setting a Stop-Loss order to take myself out of the equation. However, I did review all those large losses and noticed something interesting. Almost all that I sold for a large loss could have cashed out a profit if I held them for 2-3 weeks. So for the current misstep I made in PLAY, I am holding out for a profitable exit. I have decided to see it through for a month or so and see if I can get back positive.
I have carved out my basic strategy and will seek to become a full-time day trader as soon as my bank roll will allow. In the meantime, I will continue to learn and teach. I hope you have learned something through my experiences and will continue to follow me on this journey.
The website is being redesigned to better accommodate new traders and investors.
I have new lessons in the works including a 600% profit trading options. What does that even mean? I’m learning that now and will explain as soon as I can.
Feel free to ask questions in the comment box below. Until then, thanks for reading and happy trading!