I had a strong start into 2016 , the first two weeks of trading my SureTrader account was up 20% and TD Ameritrade account up roughly 3% after profiting $19,000 in just two weeks... I then took on the third trading week into 2016 Which was one my worst trading day of all, I decided to take some big positions and hold overnight, CDRB & BSI Were both morning spike plays, XOMA was a potential bottom play, and VHC was a potential short and fade play. I was 1/4 closed all of my positions before 10:00am I ended up losing $16,000 once the market opened, below will explain my trade anlaysis, where i went wrong and how I'll be moving forward and learned from my mistakes.
All trades were opened 1/19 and closed 1/20
CDRB - Long $3.01 sold 5,000 shares @ $2.80 -7% Loss or $1,050 loss.
I decided to buy before the close, expecting a morning spike to $3.50+ my stop loss was set at $2.80 Fortuantely i got stopped out before it went to $2.60s you see the problem with holding a stock overnight expecting it to spike is if there's no spike it will drop like a rock so it's pretty risky, if you don't get stopped out because the drop was so quick which does happen.. this happened to me on BSI (my largest sized investment i held overnight) so from the premarket it opened up at $2.90, once the market opened it was trading at $2.90 then spiked to $3.01 then bam crashed to $2.60s I immediately got stopped out at $2.80 taking a 7% loss. CDRB Didn't have a morning spike as planned, I did stick with my plan though which was to hold no longer past 10:00am I'm so happy i got stopped out it ended up trading in the $2.50s don't get me wrong 7% is a big loss, but it could've been MUCH more, the downtrend was due to the market crashing 500+ points and the volume faded once the market opened on CDRB going from 400K+ to now only 50K I was expecting to much from this one noticing the pattern it had already spiked twice in a row, (Friday and Tuesday) expecting another day was to much and I sure have learned from my mistakes I'm just glad it happend now rather than later.
BSI - Long 10,000 shares @ $5.61 Sold @ $4.80 -15% loss or $8,900 loss.
I hope this will be my biggest loss of 2016 BSI was another morning spike play, same thing that happened to CDRB the market crashing 500+ points and the volume went from 1.8 million on Friday to 200K opening up on wednesday. I was expecting way to much from BSI spiked Thursday, Friday, and Tuesday so i was expecting it to spike for the 4th day in a row (I don't know what i was thinking) This has been one of my biggest mistakes in awhile, It's bad enough i didn't realize my expectations was as high as my risk but the worst part was my position sizing, I invested way to much of my portfolio on this one, 50% to be exact i ended up paying the price for mistakes and have learned a lot from this experience but again I'm glad i stuck with my plan to sell before 10:00am because if you don't get the morning spike this will continue to downtrend especially when the volume fades, My entry was $5.66 ( pre market opened in $5.70s fell to $5.20s) Market opened up at $5.31 my stop was at $5.10 my stop was triggered at $4.80 it fell so fast I couldn't get out at my stop price which forced me to sell my shares because i knew what was coming another downtrend, fading pattern. It sucks that i had to take a bigger loss due to my stop loss not triggering however I'm happy i stuck with my plan to sell before 10:00am because this is now trading at $4.21
XOMA - Long 10,000 shares @ $0.901 Sold @ $0.92 2% Win or $190 Profit
The only win i had for the day, This was a potential bottom so i decided to buy at 0.901 PT $ stop loss 0.89 so as you can tel it was a great risk / reward I should've invested more into this as well. It reached $1.10 today i sold to soon but happy with a 2% profit and nailed the bottom!
VHC - Short 5,000 @ $3.71 Covered @ $4.10 -10% loss or $3,900 loss.
This took a hit on my SureTrader account, I was up 20% now up roughly 14% 2016 I was up in the morning opening up @ $3.55 I didn't take profits. I was expecting $3.20s to come unfortunately strong support held at $3.60 once resistance broke at $2.80 this spiked to $4.30 i got stopped out @ $4.10 the market was tanking but the volume kept increasing then huge spike formed out of nowhere stopping me out. I made a huge mistake with my stop loss, placed way to high giving me a terrible risk / reward ratio.
My mistakes/ what i learned from my worst trading day of 2016
1. Don't go against your trading rules, I may have stuck to the plan and sold by 10:00am but i did break a few rules on the positions i opened up Tuesday.
2. Don't have high expectations , I was expecting way to much from BSI & CDRB having confidence is good if you gives you an opportunity to invest more $ then you usual do, but high expectations is a different story, if you do ever have high expectations in a trade don't invest more then you usually would you'll only end up regreting it and taking a big loss like I did.
3. Buying and holding overnight for the morning spike, this is a strategy plenty of people use, however now that we're in a bear market I will not be doing so. It's to risky if pre market drops your screwed, if your stops dont go off your screwed, For This year if i have a morning spike play in mind I will buy in the premarket or at open.
4. Failed to adjust to the market, We're in a bear market, It's not worth buying and holding overnight for a morning spike play, if the market crashes you'll end up losing big if you aren't stopped out on such spike plays.
5. I didn't have tight stops, VHC, BSI and CDRB Should've have had much tighter stops i let my confidence, ego and high expectations get to me on these plays, Risk / Reward is everything if you use tight stops you'll take small losses and let the winners run. I don't care how confident you're in a trade you'll mess up eventually so always have a stop set between 2-4% loss depending on how much your willing to use, ESPECIALLY ON MORNING SPIKE PLAYS, Tight loss on spikes is key.
6. Timing was off - If you're buying a stock expecting a morning spike hold no longer than 9:40am you either get it or you don't if you don't get it by then you'll probably end up taking a loss.
I have learned a lot from losing 75% of my profits from the past two weeks in just one trading day, I haven't made a trade since 1/19 why? I trade for a living, people also follow my trades, Before getting back into the market I want to make sure I'm 100% ready and have learned from my mistakes so i decided to take the day off today and think about where i went wrong and how i can improve and move on from here. I'll be back at it tomorrow I'm ready! Iv'e learned a lot from this and I truly believe this experience has made me a better trader, People don't realize when the market hits you and takes a large some of your money it's a wake up call, if you learn what you have done wrong you will only improve from here on out and won't make the same mistakes that put you in this mess as long as you stick to the plan and follow the rules, It's sad though most people start investing huge when they lose big and end up losing it all, everyone needs to understand if you lose big it's a huge set back, BUT before going back into trading you have to understand where you went wrong so you can continue to move forward and become a better trader! This could take a few days or a few weeks for me it took two days, I'm happy this happened now rather than later, and I'm ready to take on this Bear market, I'm back and better then ever.