Trading Articles

My First 100 Percent Gain After I stopped Sucking As A Trader

There comes a time when you have to draw a line in the sand. When you say “This is what I want!” — and you go after it with everything you’ve got. It will define you as  a person.  It will shape you.

Will you get that thing — or will it get you?  Will you move forward relentlessly until you have it?  Or are you going to quit when things get ugly?

This was me with the notion of achieving a 100% gain.

I knew they were out there.  I’d read about Nicolas Darvas and how he got them.  I read about Dan Zanger.  I read about William O’Neil.  All finding and riding monster stocks for huge gains.

And yet I was still stuck in the curse of the newbie trader — closing my trades for 5% here or 10% there.  Why?  Because I was petrified of letting those gains go — especially with all of the losers I was buying.

Strange isn’t it how we love to let our losers run, hoping they’ll turn around — but we close out winners at the first sign of a profit?

Anyway — somewhere in one of those losers that I was letting run like Forest Gump I figured out that there was someone else in that trade who was making a lot of money by doing nothing by letting his or her position run.

Yeah, that stopped me dead in my tracks.  Because that sounded like a great time.  A great time I wanted to be having.

TREND VS. COUNTER TREND TRADING

From what I have seen there are pretty much only two ways to trade — with the trend or against it.  Trend trading.  Or counter trend trading.

When you trade with the trend, you do what I talked about here, in this discussion about my trading plan.  You look for a good strong trend, and you ride it as far as you can.

When you counter trend trade — you look for those breakout areas where all the trend traders pile in and you bet against the breakout, more commonly called fading the breakout.

Both trend trading and trend fading have their merits — but it has been my experience that, at some point,  you have to decide which one works for you and you have to go about mastering that method.

For instance — because a lot of breakouts fail, counter trend trading has a higher win rate.  But the gains are smaller because pullbacks tend to be much smaller than trends.  Plus, it’s easy to get all backwards and upside down trading against trends.  And when you do get stuck like that your losing trades are much larger than your wining trades.  So it balances out.

Trend following on the other hand, has a much lower win rate — but when the trends do show up they go and go and go — and the money piles up.  Like I said — you have to figure out what works for you.

For me, it’s trend following.

Which is what I had decided upon when I caught my first 100 percent gain — which is exactly what I was after in the market.  A 100% gain.  I found that trade in $RAD — Rite Aid.  Here’s a chart of what the trade ended up being.

Nice!  I’ll take it.

To be fair, in March of 2009 a lot of stocks took off.  The general market had been plunging for awhile and had finally found bottom.  When that happened, stocks reversed and took off in the other direction.  And the winners were there for the picking.

Luckily, I had decided I was going to be a trend follower and I was going to learn to let my winners run if it was the last thing I did.

Here is the set up for RAD.

Not the perfect base — but it was there.  I bought on the breakout — or I think a little before at .43.

Right after the breakout there was a weird consolidation.  As it wasn’t breaking down completely and hadn’t gotten near my stop I kept the position open and was validated with a huge break to new highs and a 1 day gain of 40%.

This was the first 1 day gain I’d had anywhere near to that size — so of course I was freaking out — and the desire to close it was huge.

Still, my goal was that first 100% gain so I kept the position open.

And I’m glad I did because price shot up again and I was able to claim my first 100% gain.  To be honest, I only closed 1/2 the position here and the final half around $1.20.  What a great lesson that was.

From here I went on to learn quite a few other lessons about trading and about trend following low priced stocks which I’ll cover in other posts.

One of my biggest mistakes from this period is that I didn’t go big enough on my positions — and where my gains could have been massive — they weren’t.  But on the flip side, because I was trading smaller positions I was able to let the positions run.  Which is how I learned the importance of position sizing and how it can effect the psychology of a particular trade.

Go too big and you’re too nervous to think rationally.  Go too small and you don’t make enough money.  It’s a very delicate balance.  But then again, isn’t everything in the market?

Do you remember your first big trade or a moment that turned your trading around for you?  Share your experience below.  I’d love to hear!

2 Comments

  1. Adalberto March 7, 2017
  2. David John Hall March 28, 2017

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