I’m back on the wagon with a Green Day!

All right everyone, let’s do our midday market recap and go over the trades from today. Remember, today I had one goal. That goal was to finish the day green. The last thing I wanted was another red day. My goal was just look for easy trades low risk, get a couple of decent setups, take the trades, finish the day green, don’t push my luck. So, that’s what I did today, and I’m finishing the morning up $792, which although it seems like it’s almost like, “Who cares? Only $790. Yesterday I lost seven grand,” that doesn’t really matter.

When you think about how much you lost, and relatively this seems like a small amount of money. That’s when you get yourself into that aggressive mindset of, “I need to try to make back the losses, and I’m not going to be satisfied with small winners.” But, what are the odds that I would make $7,000 today? I mean, they’re pretty slim considering that I’ve probably only had maybe 20 days this year that I made $7,000 or more. Odds are maybe one in ten maybe a little lower one in twenty. They’re not super, super great. I should be perfectly happy with this relatively smaller winner.

One of the things that … I’ve been in this situation more times than I could possibly count where I’ve made some really good profits, and then I fall back. So, this position that I’m in right now is very familiar to me. It’s nothing out of the ordinary, nothing unusual. Something that I kind of compare it to is … I do a fair amount of rock climbing. When I’m climbing up, I’m making my way up, and then sometimes I’ll slip, and I’ll fall. I’m on a rope, so I fall back down. But then, I’ve got to get myself back up. Sometimes getting up five feet or ten feet can take time, because these are hard climbs, and it’s hot, and you have to take breaks. Sometimes even just getting up three feet is hard for whatever reason just the way it’s setup.

So that moment you fall back and you’re like, “Ugh, I have to do this again. I’ve got to rebuild. I’ve got to go back up, because I’m not going to get back to the top in one jump. It’s not possible. The only way to get back to where I was is one step at a time. Inevitably, I will make it back to that breakeven point, and I will make it further up. But inevitably, I will also fall again, and I’ll fall back a little bit. I’ll have to rebuild and get myself back into the focus of one step, one step. Sometimes I take a little break after I fall and whatever, just catch my bearings and then continue on.

So, with trading it’s kind of similar, because we all have setbacks. Granted, some of the setbacks I’ve had this month were related to issues with my broker or just not getting executed. That cost me $4,000 this month. Having a couple of trades that just totally tanked on me … That doesn’t happen a lot. It’s only happened a few other times this year where I’ve been in a trade and it dropped more than a dollar or eighty cents per share. Usually if a stock really tanks, it’s dropping thirty cents, and I can recover from that. Even with some size I can get out of that. When a stock drops seventy-five, or eighty cents, or a dollar in basically one push and I’ve got 7,500 shares, it’s a hit, and it’s going to take me some time to recover from it.

That’s like if you’re doing lead climbing and you clip in and then you’re climbing up to the next place that you clip in and you don’t … From that point where you clip until the next place if you fall, you fall not just back to the place you clipped but plus the rope that you’ve extended out higher. So, the fall is twice as much. Then once you clip in again at the top, now you’re back to flat. If you keep going higher … Again, if you go up three feet, now you’ve got six feet to fall, because you’re going to breakeven and down the three feet because you’ve got your rope.

So, it’s kind of like that with trading where you have what sometimes feel like these bigger setbacks. The only way to recover is just one trade at a time. So, my goal today was to close the day green. That was my goal yesterday also. I didn’t think that stock would get me so badly twice in a row, but it did. So, just unfortunate there and I learned my lesson on that particular stock. I won’t be trading it again. Now, I’m not placing blame, but I will say that there was an [SEC 00:05:23] filing last night that showed around 200,000 shares sold at 686, which was right around the open price.

The stock only hit 686 twice yesterday. It was at the open and then two minutes later. So, an insider sold like 200,000 shares. That certainly wouldn’t have helped me with my long position at 690 or whatever it was. But at the same time, those things can happen, and it’s just the way it is. So, the goal is not to place blame or whatever. I’ll take responsibility. I was too aggressive, and I didn’t [stop 00:06:06] out soon enough. So, the goal today after a couple of red days was just to rebuild one trade at a time not to try to make it all back, not to try to do anything crazy but just to finish the day green. And, I’ve done it. $792 is a perfectly respectable day. $792 a day would be $198,000 a year, which would be a perfectly respectable year.

So, one of the things I’ve been thinking about is the fact that this month if I close the month red, this will be a month where being aggressive and trying to get that thousand dollar daily goal has actually gotten me … I’ve actually made less than if I was focused on just $200 a day. I mean, it’s kind of crazy, but it’s true. Even though I had a day where I made $8,000 and another day where I made $4,000 or $5,000 whatever it is, I have these days that being that aggressive just got me knocked back down. Maybe it’s better for me to focus instead on smaller goals and being consistent.

Now, the only other month this year that I closed red was in April, and April was the first red month I’ve had in like 18 months or longer. It had been a really long time since I had a red month, so it was a little strange for me. I was down like 6,000 in the month of April. So, for the month of … Not to go off on tangents, but I’ll also say that at the end of April I was really aggressive, because I wasn’t happy that I was up only like $2,000 on the month. I tried to get really aggressive to get myself up to $10,000, and I had a big loss.

So, in May I decided to put myself into trader rehab, which was restricting my share size and that was basically it just restricting share size and focusing in on [A-quality 00:08:01] setups. I finished the month with around $17,000 or $18,000 of profit. Then, in June, July, and August I wasn’t in rehab. I was being more aggressive, and through those months there were days where I just had some pretty big drawdown. That was for sure disappointing.

My goal for October isn’t really so much about how much I make. It’s more about preventing really big drawdowns, having days where I lose $3,000, or $4,000, or whatever it is. The best way to prevent that is to reduce my share size. Now, the thing … Robert, that’s a great question. “What’s my daily loss limit?” In some ways, I guess I haven’t had one, because when I get into a trade with 10,000 shares and then I suddenly lose 50 cents, I’m down five grand. And, it can happen like that. It can happen so fast. So you may not be planning on risking 5,000, but simply because you took that amount of size that was a possibility.

So if I reduce my share size to like 5,000 shares, or 2,500, or something like that, then realistically, even if I did lose 50 cents per share, my max loss isn’t going to be probably much more than $1,000 or $2,500. Hey, Heather. So, that’s more in line with what I’d be comfortable with, $1,000 max lost. Earlier this year, I increased my daily max loss to $5,000. I increased it, because I had had such a great hot streak. I felt like losing $1,000 in the first 10 minutes didn’t necessarily mean I couldn’t continue to trade and couldn’t continue to have good days.

But now in the summer and here as we get into the fall, I’ve brought back the $1,000 max lost. So if I’m down more than 1,000, I won’t take a new trade. But, I haven’t really imposed a daily max loss, because being aggressive one trade … I mean, one trade with 10,000 shares you can lose $1,000 in a fraction of a second. You can be down $1,000 just in the spread. So deciding on that max lost, I guess, would also require a real conversation with myself about position sizing and my max share size. So, that’s something I’m thinking about for October.

As we get ready to start a new month, it’s like clearing the slate and starting over, starting fresh. It’s a good opportunity to think about things that you want to do differently for the month. This is true for all of you guys. Maybe there were some mistakes you made in September, and you want to try to be more focused in October. Create that set of rules. Set the intention, “This is what I’m going to do in October: I’m going to reduce my share size. I’m going to follow a daily max loss, and I’m only going to trade A-quality setups.” Whatever your share size is, you follow that rule. If you break that rule, you’ve got to do something as punishment, because that’s how you keep that discipline.

So for me, it’s been either running five miles or riding my bike ten or fifteen miles. That’s been pretty good. In the last two days I’ve ridden my bike forty miles, so I’ve paid a little bit on that. But, it’s good, and it feels good to get out of the office a little bit and just clear my head. That whole time I’m riding I’m thinking about, “What did I do wrong? Why did I get so aggressive? Why did I do this? What’s different about this month versus last month or the month before?” It’s all part of that self-reflection that I guess I do with you guys everyday, but it is really important for you to do it for your own trades as well.

So, I haven’t decided what my max share size will be for the month of October or how long I will enforce it, but I am aware of the fact that what I did in September didn’t really work that well. I allowed myself to be really aggressive. I allowed myself to take up to 20,000 shares. We just didn’t have the follow through at my back to give me really big wins out of those trades. Like I said, I would have made more if I’d focused on just $200 a day with a max share size of 2,000 shares. I might have been a little less stressed out also, which wouldn’t be a bad thing.

So, that’s something that I have a couple days to think about. But, I will be putting some restrictions on myself going into October, so I can really stay focused and try to finish the last quarter, October, November, and December, with some good trades. I know I can make $100,000 in a good quarter, but I need to be disciplined, and I need the market on my side. Now, the market hasn’t been on my side very much in the last couple months, and I haven’t been as disciplined so that’s kind of two problems there. So, I’m going to focus on the discipline side of it since I can’t control the market. So, that’s what I’m going to work on.

Okay, so let’s look at the trades from today. That was a long intro here. First trade was AXON. Now, AXON was a stock someone called out in a chatroom. It wasn’t on my watch list, but someone mentioned, “Hey, take a look at it. It’s looking like a daily reversal setup.” I looked at it, and I thought, “Yeah, that’s true.” Yesterday’s high was 740, so over 740 would be the first [inaudible 00:13:58] to make a new high. Now, I got in at 697, 698, and 699 7,500 shares, which is probably at the top of my risk tolerance right now, but I didn’t really feel like I was exposed to probably more than a ten cent pullback.

So, I got in at 98. Let’s pull that back. So, I got in at 98. We pop up to a high of 707. I start selling some at 702, 700, 704. Again, on this one I was only looking for a quick little pop. I wasn’t expecting to make a ton on it, and I was a little disappointed that it fall as much as it did on this [candle 00:14:42] here. But by that time I was out with my final exit at 694. Let’s see … Where was that? 694 … Yeah, which was kind of right in this consolidation. It’s gotten up to a high of 712, but it just hasn’t really done too much so kind of an uneventful trade. A small [scalp 00:15:04] for the break of the whole dollar but just not the biggest winner. So, that was AXON.

Second trade was DCIX. DCIX, this popped up and hit our scanner at about $1.10, $1.20, and then it was halted on a circuit breaker, halted for a moving more than 10% in basically a one minute candle, halted at 1.20. Now at the time that it was halted, I was like, “Okay, this stock has just come up from about $1.60 … Or from 60 cents, sorry. It’s very cheap. It’s also a shipping stock … Same sector as DRYS and it’s also done these reverse splits. It’s incredibly weak, so I don’t really like it for a long setup. However, anyone who short this stock and doesn’t have a good cost basis … Right now the stock is up like 70%, at that time. So, I was like, “Obviously it’s moving quickly, and that may be enough for people who are short just to cover their position. That is what could create that pop. That’s what can create the move.

So, we resumed at … Let’s see … Sorry … $1.27 and squeezed up to $1.42. I was considering getting in there, but I was kind of a little iffy. I wasn’t sure. It was halted again. It resumes at $1.55. It squeezes up, and I decide this time to take 2,500 shares at $1.70. My target is $2.00. So, I was in this on the high side basically just riding the momentum, and that’s why I took only 2,500 shares. That was my biggest winner today. I took 1/3 of the size of AXON, and I got twice or three times the profit, showing you that you don’t need huge size to get profit if you’re focused on the right setups. AXON was only a so-so setup. It was okay, and there was nothing on the scanners. The first trade I took was at 9:50, so I basically sat for 20 minutes, and then that popped up and I was like, “Okay, I’ll take a trade.”

Anyways, so this hits a high of $2.00. I tried to sell at 2.00. I didn’t get filled. I sold at 1.95 and 1.91 on the bid, $584. With that, I closed up the day. So, two trades fairly low risk … You can see here total executions. 10, so 25 in commissions plus 16,000 shares. So, 16,000 times .003 or whatever it is … Probably $40 in ECN fees or something like that. So, not a bad day. Probably around $700 profit after these commissions come out, but overall this is pretty decent. Hopefully we just see good opportunities on Thursday and on Friday. That’s what I would love to see. Up $792 today on the 177th trading day of the year.

All right, so we’ve got two more days left in the month, and I’m hoping that we see some nice little opportunities. We’ve been doing really well on Fridays, so maybe we’ll see something good on Friday. We’ll see. We’ll just take it one trade at a time and build that account back up. But, the goal is not to try to make $10,000 in one day. It’s not to try to be a hero. It’s just to focus on those small wins, because those add up. I’m sure for every single one of you watching here in the chat room, or watching on youtube, or Facebook making $500 a day consistently and $100,000 a year with two hours a day trading would be life changing.

Yeah, it’s obviously nice to make $8,000 in a single day, but the risk required to make those types of gains is that you could potentially lose $7,000 on a bad day. That’s a lot of volatility even for me. I’ve made a lot of money trading and I’m definitely not tight on cash, but it’s still not a good feeling to lose $7,000 in a day. To scale that back a little bit, focus on some of the go-to setups … 200 here, 200 there, $1,000 a day at best. $500 is maybe more of a realistic goal right now, and that will get me disciplined.

Now when the market picks back up and we’re seeing really good follow through, then I can probably … Well, see that’s the thing. Then, you can start to get away with not being as disciplined. Even if you chase stuff, it continues to go higher. Even if you take way too much size and you have to hold through a pullback, it ends up going up higher. That’s part of a strong market. We just aren’t in that right now, so I’ve had to kind of retrain myself to be more disciplined versus the way I was able to trade in the late winter and the early spring.

So, Charles, to answer the question, “How long will I hold on the [ask 00:20:18] before bailing out?” It depends. If I really think the ask will break, then I’ll just leave the order there. But in the case of DCIX, I knew that the tide could change on this really quickly. I didn’t want to get stuck in a halt going down, so that’s why I was quick to bail out when it couldn’t break $2.00. On another stock I might let it come back up and retest that level, but on this one I just didn’t feel like it was worth waiting. So, it kind of depends on the stock, but typically I’ll give it enough room to break.

All right. Anyways, that’s it for me today. Students, we’ve got our Warrior Pro session at 3:00 PM Eastern in the Warrior Pro classroom. Then, everyone else, I’ll see you first thing tomorrow morning. All right, so first day green, back on the horse. It feels good, and we’ll hopefully make it two green days on Thursday and then three green days on Friday. All right, I’ll see you guys first thing tomorrow morning.

Oh, hey. I didn’t see you there. Well, I was just working on the dream board for my next home run trade. Hopefully it comes soon. Until then, make sure you subscribe to get email alerts anytime I go live or upload new videos. Until then, happy surfing.