Episode 43: Failure, the Sequel

Star Wars. Nightmare on Elm Street. Indiana Jones. All of these long-running film franchises have something in common with this episode: they’re all ongoing tales of intrigue with some scary moments. For the third time in a short period of time, hosts Tim and Stephen are offering a sequel-like commentary on Stephen’s series of recent losses.

Stephen experienced a series of losses, and now, the hosts are getting to the bottom of his errors so that he can reclaim his trading mojo. In the episode, they’ll dissect what happened, what specifically went wrong, and how Stephen can save face and regain his trading composure. Stephen is in a pretty low place right now, but there’s no way Tim is going to let him quit.

Hi, my Name is Stephen

Like an addict admitting defeat, Stephen shares how he’s feeling as a trader right now, and it’s not good.

He’s had some ups and downs in trading, but now he feels that he’s hit rock bottom. He’s lost a lot of confidence and feels like his go-to patterns have abandoned him. He’s out of the zone; he used to be able to have a few beers and pop out a few good trades; now he feels like he can’t do anything right.

As Tim points out, it may not be Stephen’s setups that have stopped working; it could be a market shift. The market is cyclical; things that once worked sometimes stop. As Tim points out, this could mean that the old way will come back around again, or that it’s time to adapt to the market.

Stephen’s trade of terror

Let’s briefly recap Stephen’s trade of terror. It was a colossal loss short selling a day one low float stock with news (don’t worry, Tim and Stephen explain what that means in the episode).

As Tim explains, Stephen broke many cardinal rules going for this trade, including shorting too early rather than on the “backside”. However, in falling prey to the temptation of the trade, Stephen put his hand on the fire and got burned.  

It can be enticing.

Tim is quick to admit that while Stephen broke some rules, it’s understandable why he went for the trade. To set the scene, it’s Monday morning; you’re excited to trade. Here you have a low float stock with news and a contract win. It’s gapping up, and then the volume comes in…the trade lures traders in. But then, it rolls them over.

Stephen was lured in. He thought he did all his homework: he worked up the numbers, and he really thought that they were encouraging.

Tim and Stephen discuss how while Stephen did do some things right, there were many warning signs that he ignored; basically, he set himself up so that it was difficult to get out of the trade. He wanted it to work so much that he ignored the basics. They talk about trading psychology and how sometimes, doing your due diligence isn’t enough: you can’t make certain trades work.

Stephen’s next steps

While experienced traders like Tim Sykes have been very supportive in urging Stephen to keep going, he’s still going to need a massive confidence boost to keep forging forward. So for now, his homework is:

  • Start small. First, try to have one green trade. Then, one green day. Then, one green week. Slow but steady.
  • Go back to the basics. Really analyze the data; create and stick to a trading plan; play it safe.
  • Regain confidence slowly. By taking smaller positions and being very careful and methodical in trades, Stephen hopes to work toward a greater sense of self-confidence again.

This is Stephen’s hero’s journey. Right now, he’s cast out and experiencing the moment of darkness. These things happen to our hero, but it’s how our hero responds to this adversity that makes the story. Tim believes that Stephen truly can turn it around.

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