an iceberg in the ocean; a day trading loss teaches more than can be seen at first

Competing With Myself: The Lessons Of The 0.5R Loss

Trading Blog


October 9, 2020

When you are a day trader, advancement can mean something different each day. Some days, 0.5R loss can make you happy.

It may sound crazy, but to me, it’s all about doing better than yesterday. And sometimes, your yesterday can be pretty rough.

Since I’m narrating my journey as a day trader, it’s important to give you a bit of context on what I do.

I typically short stocks that are between $1 and $10. I dip into penny stocks once in a while, but not every day or even week. I also have a paper account where I practice going long.

So that one time, I wanted to trade SAEX. I wanted to short it, but there were no shares to borrow. 

If you’ve never gone short before, let me explain how it works. Before you start the trade, you have to borrow shares in order to sell them. And once you short them, you actually have to buy them back to return to zero. The difference (less the cost to borrow) is what you make. Ideally, you buy them at a lower cost than what you’ve borrowed them at.

So when I saw that the cost to borrow was 25¢ per stock, I decided to pass. It is very high since your typical cost ranges between 1¢ and 5¢. However, my good friend Karl went ahead with it (he got in pre-market), and he won big on that trade.

Instead, I decided to go with GNPX, which is a penny stock. It looked right to me at the time, and it could have been a good trade, but it got squeezed. I started at 80¢, and I got out at 85. A little bit later, the stock went up to $1 and just a bit over. Then it went back down to 74¢ and hovered there for a while, so overall, I was right about its general direction for the day.

GNPX stock, day trading
$GNPX stock

That was another lesson for me. I need to pay more attention to the float size. Additionally, GNPX is a penny stock, and they tend to trade in a different manner than my regular $1-$10 stocks that I understand and know much better.

If I’m being honest with myself, the only reason why I even got into GNPX was that it was the only interesting trade with the shares to borrow. SAEX didn’t work out for me due to the high cost. And once I missed that opportunity, I didn’t want to be done for the day.

In a way, this was a mistake. But instead of beating myself over it, I chose to approach it as a lesson and new experience. Time and time again I have to repeat the simple rule to myself: have the discipline only to seek out the proven setups.

However, this is where the win of the day comes in. Typically, I get very eager to revenge trade and reshort my losing trades. In this particular case, it would’ve been fine in terms of the math, but that’s the kind of behavior I’d like to avoid. The golden rule states that you should never trade the same stock once you’ve been wrong.

It might work out for you once or twice, but this is a terrible habit to develop. At this point, the monetary aspect of it doesn’t matter anymore. Your impulse is to prove that you’ve been right all along. This is why revenge trading is rarely rational. It’s based on emotion, on the feeling of disappointment and shame that you got it wrong the first time. 

I’ve learned how to beat the frustration over the missed opportunity and a small loss; it’s easy once you trade for a year or two. However, seeking redemption through the second trade is much harder to halt.

As a trader, you have to learn to cut your losses and not engage in revenge trading. Unfortunately, there’s no easy way to get it; mistakes will be made. However, it gets simpler once you’ve done it enough times.

Another remedy that works for me is paper account trading. On most platforms, it comes free with your registration. It is a practice account with real data that you can use for testing out strategies. There you can practice new setups without the risk of losing money. Some say that it doesn’t give you that authentic feeling of risk and reward, so you don’t act there the way you would in your real account. There’s some truth to that. I think.

But I believe that day trading (when done right) is all about learning and gaining more experience, and a free paper account is an excellent tool for that.

A graph of GNPX stock trading over time
GNPX stock trading over time

The next day, I had no trades at all. And that was a proud moment for me too. I’m learning not to force things because actively seeking them out doesn’t typically lead to green days for me. I pushed the GNPX trade, and I lost.

Lately, it only takes me 30 minutes or so to see what’s going on with the market that day. I don’t need to stare at the charts for hours now or study the market as intensely as I used to. Day trading has been about recognizing the patterns and analyzing the relevant information (float size, trends, news) as it comes in. This way, I don’t have to be stuck at the computer screen all day. I can do other things, such as my Youtube show, and be productive in multiple ways.

It turns out, a higher amount of trades does not always lead to increased revenue. If you spread yourself too thin, there’s a higher chance of making a mistake. Also, more trades often mean lower standards. I’ve been making an effort to trade ideal setups only. And as long as you are patient and willing to wait for the right conditions, this strategy will pay off.

And when you look at your profit charts, you have to learn to see the big picture. You can have a green day and still have a red week or a month. Likewise, you can have a bad day and still have a decent week. That’s why one loss of 0.5R shouldn’t put a damper on your experience; you’re just going through the motions and gaining new feedback on your strategy.  

The biggest takeaway from the years of day trading is learning not to compare myself to anyone else, not in my field, not anyone around me at all.

Don’t get me wrong; friendly competition can be a huge driving force for some of us. Comparisons have helped me in life a lot. That’s how we grow and get better. However, they have a time and a place. In trading, comparing yourself to other people from Twitter has no use; it’s demoralizing.

There are a lot of reasons why you shouldn’t beat yourself up over someone else’s success. But the biggest reason, I think, is that you never know the whole picture.

Everyone wants to tout a big win, yet many will hesitate to tell you how many losses it took to get there. Being honest and vulnerable like that is not easy, and it’s often ego-crashing. This is why I keep on telling myself that I’m not here for my ego.

The main question that I constantly ask myself is if I’m improving and learning. And if I am better than I was yesterday, I’m happy. Making zero trades because the right setup didn’t come along is an improvement compared to the day before when I traded just because I felt like I’ve missed out.

Losing 0.5R is better than losing 6R. It’s still not a win, but it’s not that huge of a loss either, and that’s really all that counts.

When you start looking around too much, it can start feeling like everyone else’s trading is booming, and you’re left far behind. But remember that it’s so much harder to see your own improvement. This process happens slowly and gradually, and it is stretched over a long period of time.

So I’m choosing to call it a learning curve and keep improving day after day. I’m perfecting my setup, getting better at recognizing it, and looking forward to improving my discipline.

What are the challenges that you are dealing with when day trading? I’d love to hear about your experience!


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