The week of April 27th I made a really great gain and thinking I would ride the high, I jumped into 3 stocks (one of which being the same one I gained with earlier) on the Thursday of the week. But due to lack of due diligence on my part mixed with some emotional trading, instead of repeating my win, I ended up losing money.
I spent an emotional 2 weeks trying to ride out the losses, holding onto the stocks thinking they would go up as oil prices started to rise, or maybe because the news was saying just hold on the economy is re opening.
Big mistake on my part.
When it comes to trading stocks never let your emotions make you stray away from your trading plan. Over the last two weeks I have been losing money but after initially being super anxious about it, I am no longer worried or concerned (or up all night binging Netflix with insomnia).
I am down about $2,000 across all stocks since that last week of April high and here is what I have learned through my losses.
Don’t Be Greedy and Get Out With Your Gains
The excitement of the win in April (which was a gain of roughly $3,200) led me to believe that I could replicate this win over and over again and “get rich quick” as they say without doing my due diligence. I got this stock tip from my husband’s friend and went into the trade not knowing as much as I should have, but got lucky as I was in before it rallied up and got out when I saw my gains.
This false overconfidence in my trading would set me up for some losses in the coming weeks because I didn’t take the time to analyze my win, figure out the pattern, research the company deeply enough or the news surrounding it. So when I jumped into 3 new stocks right after with the same mentality I ended up with losses.
The first stock I traded was the same stock I had made the $3,200 gain with. Clearly it wasn’t done growing so I got back in on a dip and was going to ride it all the way to $1,000.
I bought the stock on the Thursday; by the Tuesday the profit on my stock rose to $987!
But did I sell it. No! (insert face palm here)
Greed got the best of me and I thought surely it could rise .02 more to hit my $1000 goal. It didn’t.
Instead of selling and making $987, I held onto it thinking that it would spike back up and it ended up dropping instead. By the end of Tuesday I still could have sold and came out with a profit somewhere in the $900s but instead I held the stock to see if it would spike the next day. It didn’t. Over the week the stock kept dropping but my emotions pushed me to think it would bounce back up soon. I was scared to get out to early and see it spike back up again losing out on potential profits.
Eventually I sold it the following Tuesday for a profit of $495.
By holding on to the bag out of hope it would rally back up, I lost an additional profit of $492 simply because my greed and emotions wouldn’t let me settle for what gains I had.
This was my first huge lesson in why it’s important to establish realistic goals and get out according to your trading plan, even if it’s a little under but still close to what you want.
Be happy with the gains you have and live to trade another day!
Take Your Losses Like a Boss – Then Recoup Them On Better Trades
My second lesson was with the other 2 stocks I traded. Again, I bought into stocks that had good buzz, solid balance sheets and earnings, but I rushed into them and bought into both of them too high on the Thursday rally.
By the following week they dropped by .10 and I could have cut my losses there but didn’t, listening to traders on a stock chat saying they would be going up as oil goes up.
Another big mistake.
Had I set my stop loss or even manually came out of the trade at the .10 loss I would have walked away with a very minimal loss (couple hundred dollars or less). But instead again I let my emotions and fear of losing make me hold on to a stock that is now at $1,477 loss at the time of writing this article.
Over the last two weeks what I learned by using my stock simulator chart was that even when the losses were at $2,000 , had I sold I would still have $8000 to trade with and could have easily recouped that loss somewhere in the two weeks by making a better trades that were more calculated.
Once I realized this, my fear of losing is gone.
As I move into this new week of trading my goal is to sell off all my trades (even if they are at a loss) and recoup all my losses (and make some profit) by doing my due diligence over the weekend and creating a more informed trading plan.
I’ll let you know how it goes!
Even though I lost two thirds of my end of April win, I appreciated the lessons in losing. If I hadn’t lost I would have never had the experience that taught me that letting go of a stock (even at a loss) is better than holding on and digging deeper into the hole.
Tomorrow is always another day to trade.
Take the time to learn from your loss. Analyze it. Make a new trading plan and make back the money you lost and then some.
Don’t let the fear of losing a little money keep you from making a lot more over time.
If you want help navigating your own plan to recoup losses in your portfolio let’s connect.
Until then, happy trading!
P.S. Monday is a holiday in Canada which means the Toronto Stock Exchange (TSX) is closed, but American Stock exchanges like the NYSE are open!