I Lost $2,500 Day Trading and This Is What I Learned

How to Control Risk as a Day Trader

Photo by Verne Ho on Unsplash

I lost $2,500 and ultimately it was due to being greedy, arrogant & simply, stupid.

On average, I make about $350-$400 a day trading securities and I do this by having a plan before entering a trade.

I started to feel a little overconfident in my ability to be green and with all the hype and FOMO out there I decided to go balls-to-the-wall and “play” with more money than ever before.

I was trading MRNA (Modern) and on this day I decided to use roughly $80,000. Typically I use $1,000-$10,000 (depending on the stock) so this was a big jump for me. I wanted to make $5,000+ instead of my usual measly $350+ but boy…was I wrong.

Everything was in perfect order…

• MRNA was replacing CoStar Group Inc. CSGP in the Nasdaq 100.
• MRNA Moderna was partnering with Takeda and the Government of Japan to supply an additional 50 Million Doses of Moderna’s COVID-19 Vaccine.
• MRNA selected for Variant Booster Vaccine Candidate in 2022.
• MRNA trending up in the premarket.
• Strong volume, etc., etc.

Then this happened — here’s a quick image, but let me explain the stupid part.

1-hour chart MRNA 7/20/21

Once I had some confirmation of bullish flags I entered the trade to go long on MRNA. I watched my move start to soar up in beautiful, four-figure gains and was so excited to see more positive money than ever before.

Typically, I take greens within the first hour of trading but my money-hungry little monster got the best of me. I wanted MORE, so I decided to stay in.

I know that there is pullback most of the time when longing a stock so I wasn’t too concerned with seeing small red ticks.

5-minute chart MRNA 7/20/21

The chart you see above is a 5-minute chart (more info) and roughly 2 hours and 45 minutes in I decided to throw on a stop loss under the previous day's close (dashed white line) and decided to go brag to my roommate.

About 30 minutes later I came back to my screen and was utterly throttled.

There was a HUGE sell-off during that time… my stop loss was hit and in a matter of minutes, I lost $2,500.

Disheartened as I was, I learned some very valuable lessons this day.

5-minute chart MRNA with basic support/resistance lines

1. Do not be an idiot. If you are trading ANY amount of money, no matter how confident you are you should never leave your screen unattended. You NEED to be watching your support/resistance/level II/active trader, etc. Things can change in a matter of minutes.
2. Have a plan! I shouldn’t have put my stop loss where I did. I should have done the calculations to understand exactly what I was comfortable with losing. I arrogantly didn’t even do the math when I placed mine- I went off of “not -likely-to-happen”. Big mistake.
3. Not having support/resistance lines. I just added a couple in the photo above. Where the blue line is drawn is a good indication of where support was broken. If you see the LARGE red sell-off breaking the blue line, that is a good time to start paying closer attention. It also broke through the VWAP (purple line) within those 5 minutes. Sometimes the VWAP can be a good indicator of whether or not the prices will or will not reclaim. This line can sometimes act as support and resistance as well.
4. The whole idea that things are “unlikely” to happen is a total facade. These things happen — all of the time and you cannot predict the outcome! You can make educated guesses but you have to understand that you may be wrong and take precautions.
5. Confidence is different than arrogance. I was confident that I could make more money by using more money but it was arrogant to not protect myself and gradually increase the amount I trade with. I don’t know why I ever considered $300+ wasn’t a good amount to make either!! That’s more than a lot of jobs pay in a day and by being a relatively new trader- I should have taken my growth slowly and with a little more grace.

I’m not saying I will never strive to make 4 figures a day or use a large amount of money again but my account just isn’t large enough to take losses like that.

I want to gradually build this up. Not only will that make me a more proficient trader but it will be a lot safer and easier to control. You have to be willing to lose as much as you are willing to gain or at least 2 to 1.

Getting rich quickly isn’t the goal & it shouldn’t be yours either. Personally, until I can continue to prove to myself that I have a strong grasp with gradually growing, I won’t be taking nearly as big of moves.

This isn’t a race, this is a skill and there is always more to learn.