Did you know that our recent episode about Stephen blowing up his account was one of our most popular to date? Either this means that traders are interested in hearing stories of loss and recovery, or that you’re all keenly interested in Stephen’s mistakes. Perhaps a bit of both?

This week, it’s more bad news: Stephen loses $5k. But there is a silver lining for our listeners: you can learn from Stephen’s mistakes so that you can avoid the same fate as Tim helps him evaluate what went wrong and how to proceed moving forward.

Stephen’s terrible, horrible, no good, very bad day. In retrospect, perhaps Stephen should have seen it coming. Not only did he suffer a 3k loss in January (though he made quite a bit of that back), but he also accidentally left his laptop in a cab.

But then, in early February, things really hit the fan. It started out a classic trader love story: boy meets Biotech stock, does his research, looks at the long-term chart, and considers the current state of the market. He decides to go for it, and to go big.

Stephen was so sure of his imminent success that he went about double the size of his normal trade. Things started out on a positive note, but when the pattern deviated, even when Stephen began to see signs that it wasn’t going to work out, he held on for too long and ended up losing big.

What went wrong? As Tim is quick to remind Stephen, sometimes bad trades happen to good people. Truthfully, Stephen did everything right at the start. But then he broke a few pretty important rules and ended up losing. Among them:  

Holding on too long. Holding on over the weekend is often a recipe for disaster. In the episode, Tim and Stephen discuss the hows and whys of this phenomenon and offer examples of warning signs that you should just let go so that you don’t have a rude awakening come Monday morning.

It was too good to be true. Have you ever heard the saying “if it looks too good to be true, it probably is”? When Stephen saw what looked like the perfect trade, he went in bigger than he normally would, which changed his emotional reaction when things started to go wrong.

He didn’t stick to his plan. Perhaps one of the biggest fatal flaws in Stephen’s trade? He didn’t stick to the plan. Basically, Stephen learned the hard way that going in with a larger position makes it even more important to stick to your plan.

Tim and Stephen add that many of these mistakes can act as powerful learning experiences for listeners. If you’ve decided on this trade, for whatever reason, and this trade is not working, you have to be even more rigid about sticking to your plan!

Stephen’s stages of trading. Following this trading fiasco, Stephen begins to have some big realizations about the stages of a trading career. In his opinion, it goes like so:

Stage 1: You lose all the time and can’t seem to win. This is when you have to focus on learning how things work in trading.

Stage 2: Now, you know how things work, but you battle more with discipline; it seems like the moment you get overconfident, you start losing again.

Stage 3: Profitability.

Stephen observes that he’s stuck in stage two, and this recent event has made him feel like he’s backsliding and just “giving back everything I’ve made”. However, in that, he has the motivation to continue strengthening his base of knowledge so that he can continue on his trajectory as a trader. He and Tim discuss some specific tools that he can use to begin working his way to stage 3!

Ultimately, on some level, Stephen knew that this could happen. This experience has been unfortunate but it has reminded him to go back to basics and stick to patterns.

Every long-term trader has been there, and probably more than once. If you’re a new trader, you’ll probably find yourself there at some point if you haven’t already. However, in the scheme of things, it is just a speed bump. Even Stephen’s parents agree! Tune in to the episode to hear the advice that they offered Stephen which leaves Tim speechless!  

Thanks for tuning in to the new, serial format for the Steady Trade Podcast! Stay tuned for weekly episodes covering every aspect of how to be a steady trader with long-term, reliable success!

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