As traders, we all go through stretches which are not-so-fun! But as they say in other realms of life, it’s not how you fall down that counts – it’s how you get back up.
One of my biggest losing trades came in EPIC a few years ago. The stock had some good momentum and lots of activity one particular day, so I bought some for a day trade. I went pretty big to begin with, and the more I watched it the more I liked it. It was moving my direction and I was feeling pretty good, so I added some more. Well, out of nowhere about an hour after my entry the thing went into freefall. Too late to check the news, the damage had been done!
I decided not to panic, and I also decided not to add….2 things I’m very glad about. Anyway, the downside slowed and the stock bounced back slightly, but I still closed it out for what was a big loss to me at the time. I went home that day from the trading office pretty disappointed that the previous couple of weeks’ gains had been wiped away with that one loss. It bruised my ego, dinged my account, and most importantly, it confused me.
Choosing How to Respond
As traders, we can’t control the news flow or what happens to the stocks we’re trading – only how we respond to it. I had gotten into a trade in size which I was confident in, and I got blindsided by an avalanche of selling. Sometimes it’s a headline, sometimes it’s a downgrade or a warning, but it’ll happen from time to time if you trade long enough.
Using Pain As A Positive
After mulling it over for the evening, I finally decided it was an isolated event and out of my control. I also decided the next day to pick up where I had left off 2 days ahead…making money. By the end of that month I had recovered fully and put my account back to new highs, which put my confidence even higher. What had felt like a major negative in the short term, ultimately turned into a great positive and a source of strength going forward. I became a better trader because of it.
So the next time you take a hit that isn’t the result of a poor decision or blowing your stop, don’t freak out. Don’t add just because you’re down. And don’t decide you’re a bad trader! DO look for a good spot to exit, take your medicine and clear your screen. It’ll help you clear your head, and you can come back when you’re ready to resume with the right mentality.
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]