Daily Recap: Learning from My Trade Loss

Today was a challenging day in my trading journey, as I faced a significant loss of $46 on a trade with ZAPP. This brings my account balance down to $1,068.42. Despite the setback, I believe that every trade, whether profitable or not, offers valuable insights and lessons. Here’s a detailed analysis of what went wrong and what I learned from the experience.

The Trade: ZAPP

I had my eye on ZAPP during the early market hours due to its notable pre-market activity. With limited appealing options in the pre-market, ZAPP appeared to be the best candidate as the market opened.

At the market open, ZAPP began to ramp up, and I decided to wait briefly to observe its movement. Unfortunately, I didn’t wait long enough and ended up buying in at $5.07. One crucial lesson from today is to avoid buying stocks right at the market open due to their high volatility, which can result in rapid price fluctuations and significant sell-offs if the stock had gapped up during pre-market. In this case, my impatience led to a poorly timed entry.

Reflecting on this, I realize that waiting 3-5 minutes after the market opens could provide a better opportunity to establish a plan and set an appropriate stop loss. During this trade, I placed an OCO (One Cancels the Other) buy order with a 5-cent offset on the ask price, but I failed to have a stop loss in place at the time of the buy. Within just 13 seconds, the price dropped to $4.84, resulting in a $46 loss.

The key mistake here was buying into the ramp-up hype without a solid setup or a well-defined stop loss. Ideally, the stop loss should have been set at the low of the previous candle when I bought in, which was around $4.30. This could have led to an even more substantial loss. To avoid this in the future, I plan to wait for trades to settle and display clear signs of a ramp-up, along with a defined stop loss at the low of any pullback.

Moving forward, I’ll start placing TRG (Target) orders with a 3:1 reward-to-risk ratio, using an offset based on where the stop loss should be placed. I’ll use my calculator to determine the appropriate share size to ensure my risk is limited to 2% of my account size.

Practice Makes Progress

After this trade, I switched to my other simulator account for some additional practice trades. These practice trades went significantly better. I found better entry points and used my TRG order to ensure a predefined stop loss. One trade, in particular, yielded a profit of over $100 with a 5:1 reward-to-risk ratio. This success reassured me that by avoiding the market open hype and taking the time to find good setups, I can achieve profitable trades.

Conclusion

Today was tough and full of mistakes, but these mistakes are essential for growth, especially while I’m still on the simulator. I’m learning valuable lessons each day, and I’m grateful for the opportunity to practice and improve my skills without the immediate pressure of real money on the line. This journey is about continuous learning and development, and I’m committed to becoming a better trader each day.

By reflecting on and analyzing each trade, I aim to make informed adjustments to my strategies and continue progressing on this journey.