Bloody Tuesday, and Trading with fear and frustration

Trading stocks is like racing cars. It requires a combination of skill, ability to assess risk-and-reward, and the ability to suppress fear. And no matter how good you are, there’s always the possibility that once the race starts, something outside of your control can happen that could end or severely damage your outcome. And at some point or the other, it happens to every race car driver. It’s a certainty – a matter of when, not if. And it’s the same with stock trading.

When it happens, how do you cope with it? How much does it affect your ability to trust your instincts? Does the fear overtake your instincts? Does it help or paralyze you?

Let me share a recent experience, its fallout, and some lessons learned.

Bloody Tuesday? What was that?

I started the past week after a good run of 2 weeks of hitting my targets, managing risk, making responsible decisions, minimizing losses, etc. Did I max my earning potential? No. But it was a steady march of small to medium wins on the daily that added up to a good number at the end of the week.

Last Monday (March 30) was a strange day. While I exceeded my daily target, there was a sense of foreboding building in me throughout the day and into the evening that something was amiss. I was stressing out about my march to $25K, and it was starting to show.

Given that I only get 3 day trades in a 5 day period, I always pick and buy stocks today to swing into tomorrow. That tends to be very stressful unless there are some ongoing trends. The Discord group that I subscribe to has folks that share some good watchlists, but they usually come out with those well after the market closes at 7 PM Central. And I’ll be the first to admit that I have quite some way to go on screening and picking new stocks on my own that aren’t already on my radar.

Having hit almost a third of my target for the week, I decided I should load up on a bunch of plays based on weekly watchlists and Discord chatter. The idea was that even if I get some small wins on each, they’d add up. But the cardinal mistake I made was not spending any time looking at those stocks’ daily charts to look at overall trends.

I locked away that foreboding sense building in my head, played with my six year old daughter Monday night and went to bed with the alarm set to 3 AM Central.

And so began bloody Tuesday.

Mistake number 1: I slept late and overslept by 30 minutes.

I had taken a large position in TOPS with the hopes of getting a 5-10 cent uptick for a nice profit. By the time I woke up, it had hit my target and come back down. To avoid an accidental day trade, I hadn’t set a sell limit the night before. Webull doesn’t allow queuing of orders when the market is closed, so I have to wake up just before pre-market hours and put those orders in minutes before markets open. Oversleeping meant I didn’t get to do it.

I decided to continue holding that position instead of locking in a very, very small profit. Unfortunately for me, TOPS announced a direct offering during that pre-market session and the stock price tanked from a session high of $0.63 to $0.20. Usually this doesn’t happen until the market opens. I sold in a panic, and needless to say, I took a massive loss.

That set the tone for the rest of the day. Panic set in as more and more of my positions were in the red. I also held a sizeable position in another shipping company CTRM, which I held into open and that stock tanked. Time and time again, I have to remind myself that if I do hold a position into the open of regular trading, I need to hold on to it until things settle down about an hour in. This time, I didn’t heed my own advice and panic sold as it started to crash. As it turns out, had I held my position, I would have been able to sell at break-even or at least get a small profit.

One by one, I sold positions either prematurely fearing they’d collapse or unwilling them to hold into the following day. By the end of the day, I had only one positive trade for a profit of $4.50, while I lost upwards of $1,500 with another $500 in unrealized losses. Combined, that was north of 17% of my net assets in Webull at the time.

Some of those unrealized losses were eventually recovered, but that day was the single largest day of realized losses I’d ever experienced. In another ‘lessons learned’ post, I will discuss other mistakes I’d made during my early trading days where I lost nearly $7,000 of profit because I failed to lock them in, but there was never a day as bad as this.

Over the rest of the week, I was able to make up for the losses, but each day, I made uncharacteristic mistakes and made progressively lower profits.

This has continued into this week, with today, where I could have potentially exceeded my target by a large amount but by midday, had only two profitable trades totaling $30. Yep, just $30.

The aftermath: Trading with fear and frustration

And as I assess why, there are two themes emerge:

  1. I am trading with fear. The fear of losing big again. This isn’t just making me cut losses early, but it’s also making me fearful of holding on to a position long enough for it to develop during the trading day. What am I afraid of? Short sellers, direct offerings, and any kind of bad news that could slash a stock price significantly.
  2. The damn day trading restrictions…. So many plays have developed during the day in front of my eyes, but because of the volatile nature of those stocks, most of them are lather-rinse-repeat scalps, but at most, I can afford to do it once per day. So I overthink it. Either miss good buying positions wondering if the stock could be bought lower, or sell too soon as soon as there’s a dip about to form because it may never come back.

On Monday this week, for instance, I had a large position in TOPS which I’d bought Friday at $0.204 right before it crashed to $0.16 and later closed at $0.18s. Even though I knew that there was an SSR in effect and it would not be subjected to another short-raid, I sold as soon as I hit break-even because of the fear that it may never return to the price. Never mind the fact that I know there’s good news on the horizon with an 8-K coming, and pending news of sale of two more vessels. So I sold at $0.205 for a $15 profit. The stock traded as high as $.25, walking away from a potential profit of $700.

I had one day trade available, and looking at XSPA performance and pending good news, I bought into a small position at $0.31. Right away, I realized I should have bought more, but as the stock traded all the way up to $0.41, I kept hoping for a large enough dip to increase my position from 2,000 to 10,000-15,000 shares. When some dips came along, I was fearful that those were too high to be real dips and when the stock hit $0.41, I didn’t sell because that would execute the only day trade I had. Eventually, by the middle of the pre-market session the stock started to drop to my purchase price but then I started to panic that the ride was over and didn’t buy those additional shares. I finally closed by position at $0.32 for a mere $15. For a while, I felt vindicated when XSPA dropped to $0.28, but it opened back to a high of $0.39. Had I stuck to my plan, there was a potential profit of $1,300 to be made.

Just one week ago, I would have trusted my instincts and taken some risks when the reward opportunity was greater. But I’ve found that I’m doubting my instincts, and operating out of fear of that-which-I-can’t-control, and the fear that I have to make it or break it on my scarce day trades.

Lessons Learned: Where do I go from here?

I’ve suffered losses before – some of my own making – and some due to circumstances out of my control. And I’ve always bounced back. In fact, I’ve always had confidence in my resilience.

But right now, there’s this combination of FOMO and the fear of losing it all mixed in with this up and down market that seems to have a mind of its own.

I have to consciously remind myself to accept the risks I’m taking and trust my instincts because it has served me well. I have to accept that there will be times I WILL lose money, but the goal is to make more money than I lose.

The other thing that is clear and reinforced through all of this: my brokerage balance HAS to get to $25K. I’ve begun to consolidate my assets from my Robinhood account into Webull, and per my plan, I will continue to periodically add a certain amount from my salary into my brokerage account. But the bulk of my brokerage account growth HAS to continue to happen through trading profits.

There is a finite window with COVID-19 test, vaccine and mask plays. Oil markets and futures are unpredictable. My FOMO seems to come from the fear that in two months, there may not be enough for me to trade and win. It may be partially true, in that it won’t be as nuts, but the market has and will grow with time.

I just need to stop and re-focus my energies. I’m glad Monday ended in the green, but when you’ve been up since 3 AM Central, you expect to rake in more than $30 in profits.

What do YOU do?

I suspect every new and experienced trader goes through these situations periodically. How have YOU handed it? What works for you? I’d love to hear your feedback.

Share your comments below.

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