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No Trades: A Week of Reflection

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.

The Wins

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 Wins

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.

The Losses

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.

The Future

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!

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