Did you know that our recent episode about Stephen blowing up his account was one of our most popular to date? Either this means that traders are interested in hearing stories of loss and recovery, or that you’re all keenly interested in Stephen’s mistakes. Perhaps a bit of both?
This week, it’s more bad news: Stephen loses $5k. But there is a silver lining for our listeners: you can learn from Stephen’s mistakes so that you can avoid the same fate as Tim helps him evaluate what went wrong and how to proceed moving forward.
Stephen’s terrible, horrible, no good, very bad day. In retrospect, perhaps Stephen should have seen it coming. Not only did he suffer a 3k loss in January (though he made quite a bit of that back), but he also accidentally left his laptop in a cab.
But then, in early February, things really hit the fan. It started out a classic trader love story: boy meets Biotech stock, does his research, looks at the long-term chart, and considers the current state of the market. He decides to go for it, and to go big.
Stephen was so sure of his imminent success that he went about double the size of his normal trade. Things started out on a positive note, but when the pattern deviated, even when Stephen began to see signs that it wasn’t going to work out, he held on for too long and ended up losing big.
What went wrong? As Tim is quick to remind Stephen, sometimes bad trades happen to good people. Truthfully, Stephen did everything right at the start. But then he broke a few pretty important rules and ended up losing. Among them:
Holding on too long. Holding on over the weekend is often a recipe for disaster. In the episode, Tim and Stephen discuss the hows and whys of this phenomenon and offer examples of warning signs that you should just let go so that you don’t have a rude awakening come Monday morning.
It was too good to be true. Have you ever heard the saying “if it looks too good to be true, it probably is”? When Stephen saw what looked like the perfect trade, he went in bigger than he normally would, which changed his emotional reaction when things started to go wrong.
He didn’t stick to his plan. Perhaps one of the biggest fatal flaws in Stephen’s trade? He didn’t stick to the plan. Basically, Stephen learned the hard way that going in with a larger position makes it even more important to stick to your plan.
Tim and Stephen add that many of these mistakes can act as powerful learning experiences for listeners. If you’ve decided on this trade, for whatever reason, and this trade is not working, you have to be even more rigid about sticking to your plan!
Stephen’s stages of trading. Following this trading fiasco, Stephen begins to have some big realizations about the stages of a trading career. In his opinion, it goes like so:
Stage 1: You lose all the time and can’t seem to win. This is when you have to focus on learning how things work in trading.
Stage 2: Now, you know how things work, but you battle more with discipline; it seems like the moment you get overconfident, you start losing again.
Stage 3: Profitability.
Stephen observes that he’s stuck in stage two, and this recent event has made him feel like he’s backsliding and just “giving back everything I’ve made”. However, in that, he has the motivation to continue strengthening his base of knowledge so that he can continue on his trajectory as a trader. He and Tim discuss some specific tools that he can use to begin working his way to stage 3!
Ultimately, on some level, Stephen knew that this could happen. This experience has been unfortunate but it has reminded him to go back to basics and stick to patterns.
Every long-term trader has been there, and probably more than once. If you’re a new trader, you’ll probably find yourself there at some point if you haven’t already. However, in the scheme of things, it is just a speed bump. Even Stephen’s parents agree! Tune in to the episode to hear the advice that they offered Stephen which leaves Tim speechless!
Thanks for tuning in to the new, serial format for the Steady Trade Podcast! Stay tuned for weekly episodes covering every aspect of how to be a steady trader with long-term, reliable success!
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Thanks for posting and being upfront about your trades keep on keeping on and #WEWILLNOTFAIL.
I love all your shows. This one was great. I took a small loss today – nothing compared to my biggest losses. But I actually cried a little about it becauase I traded poorly, didn’t stick to my plan, and I knew better. I felt ashamed because turning that winner into a loser was so avoidable. Maybe the underlying problem was that i had some beer earlier… I wasn’t drunk but it couldn’t have helped my judgement or reaction speed. Thanks guys
Haha,dont follow in Stephens foot steps!! no drunk or buzzed trading 🙂
good video, too big too soon my friend. I lost $350 today but it should have been $150, I couldn’t take the loss either so watched it squeeeeeeeeze
actually my first problem was the wrong stock. we learn learn learn.
You either “earn” or you “learn” good attitude Charles!
Thank you guys, great podcast again. Awesome for being so transparent as Tim Sykes tells us all to be. Really gutted for Stephen listening to him but the fact that he was big enough to come on the podcast and discuss the mistakes he made in the trade is a great lesson for all of us newbies to stick with the plan, cut losses quickly and to not rationalize when the trade is going against your plan. Even if just one person (I am 100% sure there will be more) benefits from listening to you guys then you will have helped and saved someone blowing up their account.
Great podcast as always guys.
Mick
Very nice comments, Mick, thanks!!
actually Stephen there was news. they released good news from 2 ongoing trials. on yahoo finance. only mentioning it because you said there was no news and that was part of your thinking.
Great…. Great… Great lesson: “Stick to the plan” I’m an aspiring trader trying to pick up on every little tid bit that i can. I’ve also lost on trades. Not quite ghat much but I’ve lost. And what I’ve lost felt like $5,000.00. at the time. The only complaint that I have here is it would’ve been even greater learning lesson with charts to show the thought processes involved in the decisions that were made.
Great suggestion Timothy, we are always looking to improve!
I absolutely love the idea of having Stephen’s parents on a show. It would be a terrific example of how someone’s family is thinking about their son/daughter/sister/brother going through the learning process. That’s something that would be of value to us all.
I have to tell you, I love the yin/yang of Tim, being a seasoned trader, and Stephen, being an up-an-coming trader. We all are learning from these awesome podcasts. Keep ’em coming!
Thanks John!!
As I said on Twitter Stephen, OMG…Ewh!!!
Great content, everybit of it helps me learn, thanks guys!
Great lesson for all of us. I am sure Stephen will turn around again with your help Tim, you know what to do and you are a great mentor. I do enjoy your webinars on Sykes Challenge when you are covering for him. Good Stuff. Thank you 😉
Thanks for the comments on the podcast and webinars Clovis!
I feel like I really related to this episode. I had originally tried trading about 3 years ago for 2 months. I failed and lost 2 grand. It was tough and I had gone in without studying. At this point I study everyday I make money and I seem to lose it. I’m basically holding about 300$ of profit overall in about 4 months. I find myself revenge trading even when I know I should get out of a trade. It’s hard and frustrating. Thank you guys for the podacasts they help me remain calm and keep trying knowing that it’s part of the process and training.
Great comments Jose, remember as a new trader your number one goal is “To stay in the game.” Keep grinding!!
Tough way to learn Stephen, but thanks for the lesson. Stick to the plan. I will nail that message on the wall.
Agreed!