My First Stock Trading Loss Doing The Millionaire Challenge
“The only thing to do when a person is wrong is to be right, by ceasing to be wrong. Cut your losses quickly, without hesitation. Don’t waste time. When a stock moves below a mental-stop, sell it immediately.” – Jesse LivermoreIt is official. I had My First Stock Trading Loss Doing The Millionaire Challenge. My first real loss I should say. I took a loss of commission in March but that’s no big news. Ok… Let’s get a few things straight so you know where I am coming from. The first thing is I have taken many stock losses over my lifetime so this is not new. The second thing is I HATE losing money which also isn’t new. The third thing is my losses in NO WAY reflects Tim Sykes and his challenge. On the contrary I feel my first real loss doing the millionaire challenge highlights the better parts of the Tim Sykes millionaire challenge. Yes we all want to make money and that is fine and dandy but it’s about learning the rules and sticking to them. Ok let’s begin.
I actually traded 2 stocks today and unfortunately I lost on both. I will discuss the 2 but the big one is more important. Remember I HATE to lose money but I don’t paper trade stocks while I develop my skills. When you practice with real money and lose OUCH is what you get but OUCH is what you learn from. You see I feel the emotional factor is a HUGE part of trading and my learning curve so I cut out paper trading altogether. If you haven’t read the post I wrote regarding paper trading then click here first and then come back and read about the good, bad and learned lessons from my stock trading losses.
ARIA Ariad Pharmaceuticals Inc.
I have had ARIA on my watchlist for quite some time and I made $94 short selling it last month. If you don’t know what shorting a stock is then read here so you know what I am referring to. Why do I have ARIA on my watchlist you ask? I look at it daily because it allows me to learn from how volatile it is without too much volatility. It’s more of a practice stock for me but after my loss I might have to rethink my thought process and practice with good setups as they come.
That being said I decided to short sell ARIA again based off of the resistance and support levels I had set for it. That in conjunction with the level 2 indicated to me that it might be headed back down. I broke a rule and anticipated because I didn’t wait for the stock to go from green to red on the day. In addition I had a bit of bad luck and timing as an article from Seeking Alpha praised the stock 15 minutes after I shorted it. In a nutshell I was dead wrong.
- I cut my losses fast. I actually should have cut them faster but in fairness I originally told myself to hold out a bit longer but forced myself to follow the rules and cut losses when it hit my risk level. Luckily for me I cut my losses because it went up another .24 cents which would have been another $240 loss.
- I am learning by trading real money. You can’t learn to maneuver a car unless you get inside of an automobile and drive it. No paper trading remember!
- I finally made my first loss. HUH? Hear me out. I had mostly green on my Profit.ly chart up until now. Nothing significant but I always thought to myself I know one day I am going to lose. Well here it is and I lived to blog about it.
- I stayed relatively calm. I get nervous when I am thinking of trading a stock and have convinced myself a few times to not trade. In hindsight I lost a lot of potential money from my nerves but I am learning to stay calm.
- I was wrong and I admit it. You might think that being wrong is bad but it’s good to admit when you are wrong and move on so I put this on the good side.
The Bad Part of My Stock Trade Loss of ARIA
- I was wrong. Yeah I put it on the good side but COME ON don’t believe the BS I wrote about admitting blah blah blah… I was still dead wrong.
- I can’t lie I HATE losing money and it doesn’t feel good. It actually makes me feel a bit bruised, sad and vulnerable.
- Not a smart trade set up in hindsight. My risk to reward wasn’t too good to begin with so I probably should have just left it alone. Had I made money I might be more tempted to trade this all the time. I am not saying I won’t trade it again but I need to let the trade come to me. I pushed.
- I didn’t realize that at 10:15am Seeking Alpha posted a good article on ARIA which you can read here. I got into the trade around 9:55am. Bad timing but there is no real way I could have known that Seeking Alpha was posting about the stock I was trading.
- I should have cut losses quicker. I set a numerical stop loss on my trading account instead of hawking the level 2. I had a feeling something wasn’t right (Seeking Alpha) and should have bailed out about $50 earlier.
The Lessons Learned From My Stock Trade Loss of ARIA
- I learned that I need to set my risk to reward levels better. I will take my losses but hold out for my gains until I come close to or hit my goals.
- I learned I need to wait for good setups. A very wise trader once said, “it only takes one time to get rich… no need to over trade.”
- I learned to look at Seeking Alpha a little closer now. They move stocks and one must stay diligently on top of their game if they want to trade for a profit.
- I learned and will continue to learn how to control my emotions and not freak out. I am sure I will need more practice but I am pleased to say I stayed calm.
- I learned that it is very therapeutic to share with you my successes and failures.
Well that is about it. What happened to the other stock you say? Oh yeah… I traded AVNR Avanir Pharmaceuticals, Inc. Here is what happened in a nutshell. I had AVNR on my watchlist and I noticed toward the last hour of trading that it had spiked 5% in a matter of minutes. Then I noticed the level 2 showing that there was a turn of events and the sellers were stacking. So, I decided to short in hopes of recouping some of my losses from earlier in the day. In addition, I also thought it was good practice with an upside financial potential.
I am happy to say I was dead on reading the level 2 which gave me clues that AVNR might be ready to head back down. To a degree I was right. The sellers came in hard but the buyers fought back. For 50 minutes it consolidated and stayed in a 2 to 3 cent range. When it didn’t fall back 5% or do what I expected it to do I bought to cover with a $10 loss and loss of commission. The stock will probably head back down from my short at $4.63 but I didn’t want to hold overnight.
All in all AVNR wouldn’t have been a big winner but it was a good stock training lesson which I was proud to experience.
If you have any questions please leave it in the comment section below. Thanks.
Some of the links in this post are from my sponsors. I thought you should know because honesty is better then sugarcoated bullsh*t.