This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I blew up 30% of my account today. I made some trades earlier in the day, a few -1R losers, you know, my usual.
I tried to scalp some BIDU after the close, making the spread. It was working pretty well–I had one good win and one scratch. I was long 30 shares when the earnings news came out, and BIDU collapsed. I tried to sell, but my platform’s servers apparently stop at 5:00 ET, and my order was stuck, unfilled, but I couldn’t cancel it either to try to sell.
I finally reached someone by phone, and they sold my shares around 319. That’s a $450 loss on my $1700 account.
It was dumb of me to be holding into the earnings report. It was not my fault that the order server screwed me. Still, I am responsible for my trading results, and I don’t blame anyone but me.
I look at this hole, and I think that it will take me years just to trade back to where I was when I started, and that assumes that I’m profitable from here, which doesn’t seem too likely from my past experiences.
On the other hand, I could re-fund to my original level fairly painlessly by adding more cash to my account. I even got a cash award at work recently for $300, which almost offsets this loss. But if I can turn a $2000 account into $1300, I could also turn a $200,000 account into $130,000, and that would ruin me. I’m playing small deliberately so that mistakes don’t ruin my life. But a loss of this % is still devastating.
I feel, again, like quite a failure. I have no discipline, because I keep trading when I should be following my dumb 7 step plan. I hate my job, and so I force trades to have something to enjoy during the day, something to put my heart into. But this isn’t what I want. :(
Maybe now this pain of losing will be greater than the pain of change, and I’ll finally get my head together, start from the beginning and get discipline, a system to follow, and have a chance at success.
Thanks for reading.
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
October 25th, 2007 at 7:29 pm
Pro, everyone trader learns by experiences like this. Think about it. Make the changes necessary to provide greater safety in your trades, and move on. Check out my blog today. I talk about a similar earnings experience in HANS and CSCO. I haven’t made an earnings “play” like that since. I also think it’s wise to place a stop loss IMMEDIATELY after placing the trade, and sticking to it. It’s too easy to get emotionally committed to a trade without a stop. It’s better to take a loss sooner than later rather than bleed. Also, if you have a SL in place and your power fails, there is an unexpected announcement (fraud, accounting issues, buyout, etc.), or whatever, you’re protected.
One other thing. It’s good to get feedback and plays from others on Wallstreak, but make sure you’re using your own independent judgment, every trade. I’ve seen you call out some good trades, so you have the ability. Keep at it!!
-BlueDog
October 25th, 2007 at 8:13 pm
“But if I can turn a $2000 account into $1300, I could also turn a $200,000 account into $130,000, and that would ruin me.”
For that to happen, you’d have to be trading an earnings announcement, after hours, with a position size of 3,000 shares/$1mill. Even assuming you thought there was liquidity to move this many shares, I can’t imagine you’d do something that foolish. Frankly, I doubt you’d even consider moving that many shares in BIDU during the regular trading hours!
The thing is, when you have a $2,000 account, you’d never break out into the cold sweats if you risked 5% or even 10% on a trade because you know you could make it back in a couple days at another job. But risking even 1% of a $200k account would probably give you pause. Look at some of the big traders around here. They probably have accounts much bigger than this, and when was the last time that they risked that much on a day trade? Sure, when you have a big account it’s harder to make the same %age gains, but you’ll never take the same %age losses either.
So don’t go forecasting too much of your performance here into some great life plan. Making a dumb decision and losing a very large %age of your account and enough dollars to hurt does not mean you’re doomed to do this forever. You’re learning and your account is still small enough that it won’t be life changing if you blow up (and maybe you know that). If you want to keep trading, bite the bullet, make sure you learned your lesson, and feel free to toss in a few hundred dollars. As long as you learn, it’s a cheap mistake.
But since it’s a small account, there’s always going to be the temptation to take bigger risks in the hope that you can turn $2k into $50k in a couple months and maybe some people manage that, but most just disappear quietly, their accounts gone. I hope that won’t happen to you. You’re not going to make much money, but hopefully you won’t lose much either.
And just so it’s not all supportive & pallsy wallsy, I gotta ask what the hell you were thinking! China has been nutso for the last three months and you must have seen AMZN get screwed over even though it was American and had good earnings! In the last hour of trading, BIDU lost 10 points with no problem so you must have known it could move far and fast. Imagine if the earnings caused the same reaction as AMZN! With the kind of leverage you were using, you could be wiped out or worse. You’re damn lucky that you don’t owe your broker any money.
Jesus Prospectus, I’m rooting for you to succeed so don’t go around scaring us like this.
October 25th, 2007 at 9:58 pm
i’m sorry to hear that…my biggest loss in one day was 15 grand…it happened on the day of the london subway bombings (july 7th)…i loaded up on google puts that day, because i also hate my job…the only thing it did was guarantee that i would be there that much longer…however, after that i learned my lesson…i’ve done as bluedog suggests, and always use hard stops
from what i know of your trading, you always use stops…the only difference here, was holding into the earnings announcement..i think its wise that you use a small account…i can’t imagine the roller coaster you would be on, if you lost even 10% of a 30,000 account in one day
and for tyro to even mention Jesus in any context is a victory…i would have thought he would have said Darwin Prospectus
October 25th, 2007 at 11:48 pm
So, you walked away from your 7 step plan again, and things did not go so well. Back to the 7 step plan now?
October 26th, 2007 at 12:45 am
Hi Pro - Was sick when I read your post on WallStreak because I, and everyone else, has felt that feeling before. Trading into earnings is sooo risky - Jan 2007 I a huge bet on Apple for the earnings. I had been trading them a long time and had done so much research and was SO sure of the results. They blew out the numbers but had soft guidance, and the market reacted, and took $28k from me before i could stop the hemorrhaging.
I remember I was on a work trip when this happened and afterwards I left the office without saying anything to anyone and just walked aimless out in the streets in a total daze. I called a friend who had lost $70k in a day of fully margined money because he was the only one I figured could relate. I was also angry with myself - I broke every rule and knew the risk was ultra-high and absolutely knew better than to do what I did.
The amount of money lost doesn’t matter, it’s the disappointment and discouragement that stings so badly, but don’t give up. As hard as you are on yourself, every day you are getting better, even if you don’t always want to believe that. I can make suggestions about maybe doing some options and swing trades to slow things down a bit and get a few wins back under your belt so you aren’t so discouraged, and you are always welcome to email me and I’m always glad to help, as are any of the guys on Wallstreak.
It sucked that your broker didn’t process the AH trade, and that is the real crime in all this and turned what should have just been an “oh well” into a really crappy day.
Hang in there.
October 27th, 2007 at 6:06 pm
I’m doing exactly the same thing as you are. I have a $2k Roth account that I play with. It seems like a really great idea to learn your lessons that way. I intend to take over the reigns of my $150k IRA at some point but not until I’ve learned enough lessons in the Roth.
I’m still down 5% for the year but made back a nice sum by risking only $65 on a CELG call option (tip on the condoroptions.com blog Friday morning). I’ve become a big fan of risk-managed options plays.