Context

Yesterday I made 3 large trades on individual stocks, emboldened by successfully day trading $VOO and $VYM for 2-3 weeks, why not move to more volatile stocks for a larger gain?

Uncertain about:

  • Friday jobs report: will it be positive?
  • Israel / Iran escalating situation.
  • US East Coast Docks strike: should benefit $FDX and not harm $MSFT / $MU, right? Might affect my large $VOO position, though, which is still reecovering.

Plan

I don’t know if I will day trade, but if I do, I will start using stop loss orders. It sounds like a good idea.

Execution

$MU

I tried to day trade $MU without a specific plan other than to try using stop losses (thanks to The Daily Trading Coach audiobook arguments).

After seeing the stock go down the whole morning and believing that the risk was low because I entered $MU trades. I still had a position at a higher cost basis that I expected would take 2-3d to go back up and result in gains, that probably anchored me.

My expectation was that the stock had would start going up in afternoon trading and get close to $101.50+ because the macro news didn’t seem to affect $MU.

I placed orders with stop losses but really without a clear idea of what was the right level. I just looked at the chart and tried to set values that I thought were reasonable. In retrospect, I was correct predicting the support level, but the stop loss prices were too tight. The second time I entered, I did make a win, but then I lost much of the win on the way down after 14:00 because I was creating LIMIT orders instead of STOP LOSS orders and I was stressed and hurrying because my broker’s trading app is clunky and slow.

Even though I didn’t really make much money, today was a milestone because I practiced with and experienced what better risk management is about.

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Some illiquid microcap

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Sold what I bought yesterday at ~3.9% ROI. Stock is range-bound on a support level that hasn’t been broken in 2 years even though all the important metrics are up and revenue growth is back.

Observations

Working well

  • Using stop loss orders: what a discovery and what a peace of mind! I should have started using them the first time I read about them in The Art of Execution. It would have dramatically changed my performance, especially during the last two years and through the 70%+ major losses I’ve had because of, mainly, “wishful thinking” risk management.
  • Profit from volatility on high convinction microcaps while you can: I will eventually be an 8 figure trader and I won’t be able to invest in deals like this. Take advantage while you can.

Do Differently

  • Attach stop loss orders to initial trades. Creating stop loss orders on my broker app is slow and error prone because of the clunky interface.