Slowly Moving Forward one step at a time, one trade at a time

Moving Forward One Trade At A Time

Trading Blog


October 20, 2020

Every day provides valuable lessons if you’re willing to learn. For example, one can view the breakeven days as wasted time because no opportunities have been harnessed, and no new goals have been reached. But since I do day trading for the love of the process and not just for the instant gratification of the monetary gain, let me share the lessons I learned one day almost a year ago.

That day I traded MYOV stock. I held it overnight, and I was comfortable holding it pre-market because the setup looked great. The resistance area was shown as $13.13. But as the market opened, the resistance area moved to $12.40.

I was determined to follow my trading strategy and stay until my risk got hit. However, I went around that plan by adjusting my risk too soon.

MYOV opened at $12.40 and soon tanked to $11.60. Since I got in at $12.45, that would’ve been a great time to cover. Unfortunately, I was too busy multitasking, and I missed it.

Surely, it was an upsetting experience, and it did affect the way I felt about the trade. On the one hand, I wanted to wait because I was sure that MYOV could flush even further than $11.60. On the other hand, I was feeling a bit on edge due to the previously missed opportunity. At that point, I was afraid to lose this trade altogether and end up with another red day.

Meanwhile, MYOV was moving back up to the pre-market level. When it reached $12.40, my stop was hit, and I incurred a small loss.

After it happened, MYOV moved up a couple more cents, got rejected at a level just below $12.50, and bounced back down into an $11-something area. 

MYOV trade of November 22, 2019 by Alex Bustos of B The Trader
MYOV trade: learning the lesson about setting risk around key levels

This is why I’d like to talk to you about the key levels. As you can see, I was right about the general direction of MYOV price. However, my mistake was setting the risk too low.

When it comes to big price stocks (or any stocks that are over $1), key levels start playing a role in how these stocks get traded. Round numbers ending in .50 or .00 act as magnets for prices, and they tend to gravitate towards those levels. The price often spikes up to hit round numbers only to move away from them in the next moment.

 In this particular case, the stock almost hit $12.50 and tanked back down into $11s. But since it hit my stop on the way up, and I lost 5 cents a share instead of covering my position with a solid gain.

I got out with a relatively small loss, but it gave me something to think about. The first lesson I took out of that trade was that if the risk is too close to a round number, I should round it up. That’s true for key levels and any even numbers in general (i.e., $6.30 as opposed to $6.27).

Another lesson was that I should commit to my strategy with all seriousness. The only reason why I adjusted my risk was that I missed the first opportunity to cover. I was scared to lose money now that I haven’t made any. Yes, the resistance level has changed as well, but it didn’t shake up my belief in the MYOV trade as much as the missed opportunity did. 

So here is the paradox of day trading: I lose money whenever I focus too much on not losing money.

A negative trade at the beginning of the day can make you question yourself even more. Nevertheless, I ended that day with a small gain. Thanks to my experience and discipline, I managed to pull myself together and finished the day on a better note. The best part, I didn’t revenge trade, and I didn’t let myself feel defeated. Instead, I went on with the other stocks that I’ve been monitoring, and I turned my day around very quickly.

I traded an EYEG stock that resulted in a small win. It wasn’t my prime setup, but I’ve been experimenting with it for a while. Because I was still testing it, I took a very small position. Despite that, the gain from it covered the MYOV trade loss and then some.

And again, this is where I gained an appreciation for day trading as a process. Figuring out how things work, understanding the psychology behind day trading is truly amazing.

EYEG is a microfloat (i view any float that’s smaller than 3mil as a small float), and they tend to squeeze. The best way to trade them is to think about the supply and demand part of it. Basically, you have to consider where all the short sellers will get squeezed and where the long sellers will chase.

EYEG trade of November 22, 2019 by Alex Bustos of B The Trader
EYEG trade: a win with a small position

It went from $8.80 down to $8 really quickly, and then back up to $9.50. At the time, the top was $9.40. So you’d think that EYEG would skyrocket because it’s already rotated its float three or four times, so it was going to squeeze shorts, which it had already started doing. That would have been the time for traders who go long to jump in and break the high of the day. And when it happens, you have a catalyst to launch the stock to a new level.

But instead, EYEG stopped out, bounced to $9.47, and failed. This was the moment when everyone started to get worried. At that point, I was just looking for a clear sign, and I got it. It happened on a bounce when it created a lower high at $8.50. 10 minutes later, it went down to $6.60. I covered at $7.50, making a quick 90-cent per-share gain.

At the end of the day, it’s great to know that I’m improving. All day traders have red and neutral days, but the biggest challenge is to find something to take away from it and something to look forward to.

For me, these small green days simply mean that I’m doing better than I did before. I managed to overcome my fear of losing after making a mistake. I didn’t make rushed and emotional decisions, and I went into the EYEG trade with a clear head.

Thanks to yesterday’s mistakes, I keep on getting better as a day trader. And because of the lessons I’ve learned today, my tomorrow will be even more exciting. Isn’t that a great way to look at things?

 To sum up the lessons of the day, let me repeat this:

  • Don’t adjust your risk too quickly. Believe in yourself and your strategy.
  • Round up your risk when it’s close to the key level or a round number.
  • Look out for the opportunities where a predictable sequence of events should unfold, yet nothing happens. Look for a huge support area; sometimes, it breaks with no follow-up, and the price just sits and recovers quite quickly. These are the signs that other sellers may get worried. This is a great moment for you to come in and go long.
  • No matter if it’s green, red, or breakeven, every day provides new opportunities for growth and learning. Day trading is about continuous improvement. Rapid growth happens, but most people advance 1% at a time. As long as you do it consistently, you will do great.
  • When you go after what you want to do, things start happening. Persistence is the key, and so is knowing your true goal.

In your experience as a day trader, have you had a memorable day that taught you valuable lessons? Do share it in the comments, I’d love to hear from you!


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