Sometimes you just have the worst luck with the same stocks. Does luck have anything to do with anything in trading? Some might attempt to make that argument.
Let’s just say being aware of the stocks that give you the most trouble and deciding whether or not to trade them cautiously is something you have to give consideration to.
It’s easy to think “I don’t have to worry about these so-called trouble stocks” but does that make the most sense?
I find that keeping track of the stocks that I have been unsuccessful at trading or even taken losses that I never anticipated, helps me determine how I approach that stock later.
Consider how the loss occurred.
Was it on the long side or the short side? Above or below VWAP? On a green or red market day? Was the stock up or down on the day, more or less than its average true range?
These are just a fraction of the questions I ask myself.
I found that one of the main ways I could eliminate the losses (or minimize them in some cases) was not by simply never trading the stock again. Why miss out on the opportunity to make money, better yet, learn and get more proficient at trading the name.
I love a challenge.
Don’t think you have to stop trading a particular name just because it is giving you the most trouble.
I actually discovered that I could actually focus more on the options (if they were available) for that stock, instead of the stock itself.
Tesla is a great example of a stock that gave us trouble because I was so short-biased on the name, despite it seeming to defy gravity each and every market day. I just couldn’t get ourselves in a position to buy.
However, I found that if I invested in options with expiration dates that were further out, I could take advantage of the price range over time and swing the options, as opposed to putting down so much buying power on an intraday trade with more risk.
The bottom line?
Figure out what stocks are giving you the most trouble. Make a spreadsheet or watchlist. Keep them on watch and learn how they move, and react, to market conditions, news, etc.
Then trade smaller sizes. Set hard stops if you do trade the name. Don’t trade these stocks like you trade other stocks you are more confident with.
Trade them small intentionally, scalp trade them if you have to, but treat them differently so you minimize your risk and still have a chance at profits.
Follow my free 4-step roadmap to gain the insights you will need to:
- Develop consistency
- Make trading into a career
- Succeed for the long term
Enter your email below, and I’ll send you my free, 4-step guide to help you grow as a trader: