A losing trade

This is my story, and I am writing it down so that you do not ever have to make the same mistake that I have made. This is also the biggest loss that I have taken in a single trading day, and I have zero intention to commit the same mistake ever again. I have decided to pen this down to remind myself that that trading is not a bed of roses, there are ups and there can be downs. One must always understand that the stock market is bigger than any one and every trader must give respect to the stock market for what it is. One must stay humble and not be too big headed. To be honest, I have come across this wise saying somewhere but to personally experienced it, happening right before my eyes is a different level altogether.

We have seen posts of winning trades with huge profits but not many are keen to show the losing end. And this is what it is… On the first day of December 2021, as usual, I have decided to take a day trade. As per other trading days, I will usually single out a stock to be traded. Firstly, I would check on the 3 major indices, Dow Jones, SPY500 and Nasdaq and all turns out to be green given a previous day sell off with saw the market tanked hard. This could be the first tell-tale sign which I have totally missed as a strong red day followed by a strong green day is almost unheard of. Usually the market will recover slowly, another slow day before the market regaining confidence and back in the green. However, this wasn’t the case on that day. It was too good to be true. The market started bullish except for Salesforce (CRM) and Moderna (MRNA) in doing down for poor earnings and the emerging of new variant Omicron. One starts to wonder why is the market doing well when there is a new mutated variant going around the world? For what it is worth, not many countries have reported their sighting of the new variant.

I chose Facebook as the ticker of choice for it has touched the 200 Exponential Moving Average (200 EMA) with a sharp fall and RSI touching the lower band with signs of a reversal. The plan was to execute a quick trade and exit on a 1 to 2 dollars upside on a perceived “very” green day. I entered a buy call option on an 80 cents delta on the second RSI reversal and that was when “hell” began. Throughout the entire night, it just went down, down, down, down, down… My heart sank along with the numbers as I shut down the computer leaving it to “hope and faith”, big mistake. 

I woke up the next morning to an unrealized loss of slightly over 4 grand. I felt disgusted with thoughts running through my mind constantly asking what exactly went wrong. I have decided to pen down my thoughts as a constant reminder to better my thought processes on what I could have done from the start:

1)      Set up a reminder script which I will recite before taking any trade

-          Trade only strong stocks

-          Trade on sight of an up/down uptrend

-          Set a stop loss and target price

-          Never leave a trade hanging

-          Never revenge trade

-          Cut a losing trade FAST

2)    Bullish index does not matter in the eyes of a new variant. The market reacted mid-day with US reporting its first known case of Omicron. The stock market slumped on news. I was “hoping” for the market to recover before it the bell ends. It didn’t happen. To make matters worse, I went to bed leaving a trade hanging and down it went.

While the stock market will have its ups and downs, I must always give respect to where it is due. Today’s losses will be a learning lesson. Rules and consistency make one a better trader. Rules must always be followed regardless.

This is a heavy lesson that will never be forgotten.

About The Contributor

Ben is not financially trained. He is not a certified financial planner and he does not sell any insurance or investment plans. He is not financially motivated by any entities to produce this blog. He just want his friends to know more about money management and not have anyone fall between the social cracks. Nope, he is not a millionaire though he aims to be financially free before 50 years old.