Day Trading Advice: Recovering From A Bad Day
Check out this video from Lightspeed Trading's Trader Talk Series. A real trader shares on how to recover from a bad day when money is lost and what to do in order to bounce back. Visit http://www.lightspeedtrading.com/tradertalk.aspx for more unfair advantages!
Step 1: Great Trading Days
Just recently, I met with a trader and I meet with them all the time and it happened to me a bunch of times. We're talking about recovering from a really bad day in the marketplace. I have this customer who makes a thousand, fifteen hundred dollars a day for five, six, seven, eight, nine days in a row.
Step 2: Trading Loss
The guy is a great trader and then he will trade the after-hours one night and he looses nine thousand dollars. The next day he's not the same trader that he was for day one, two, three, four, five, six, or seven.
He's the trader from last night who's trying to make back that nine grand. That's not the way it works. He has to work for nine days to get that back.
Step 3: Trading Mistakes
You made a mistake. You traded a stock that you had no idea about. You bought a stock that was down 12 dollars and you bought a thousand and then it was down 13 dollars and you bought another thousand and then it was down twenty and you realized that you were completely wrong and you sell it and you loose 9 grand.
Step 4: Small Steps To Success
It happens. It happens to all of us. Go back to basics. Go back to a hundred shares. Even a hundred dollars profit the next day is a winning day. If you start shooting for the fences and you start swinging for the fences immediately trying to make that 9 grand back, I guarantee you're going lose another 9 grand.
And the next thing you know you'll be out of business. And this is a great trader. He's lost complete perception of what he used to do. He was a tick trader. He was grinding. He was a grinder. He hit singles.
Step 5: Baseball Situation
I'm a huge MET fan. Jose Reyes is not a home run hitter. He's our lead off hitter. We want him to get to first base. He gets to first base by hitting singles. Then he steals second and then eventually David Wright comes into the play, Carlos Beltran and he brings them home.
Step 6: Back To Basics
So realize that everyone's going to have bad days. Everyone's going to make mistakes. We're human. But learn from them. Go back to basics. Go back to what you know. Don't increase your trading size. Don't go to five thousand shares if you're a thousand share trader. Go to five hundred. Decrease.
Step 7: Smart Trading
Play small. Really, really think defensively. The best offense in trading is thinking defensively. My guys who really worry about how much they can lose on a trade instead of how much they're going to make. These are the guys that make three, four, five hundred thousand a year consistently.
Step 8: Have A Game Plan
These are the guys that have been with me since 1997 and come in every day and have their game plan and they are not looking at what's above and where they can sell it hypothetically. They know where their support level is and then they're going to get out.
Step 9: Trading Characteristics
It takes a very honest person to realize that they messed up and what it took to start over. You don't just start running marathons.You got to walk first. You go to crawl before you walk and you got to walk before you run.
And I think that's very important. Self honesty, self reflection is huge in this business.
