It hurts – I know. Many professional traders have stories of “losing their shirts” at some point in their career – perhaps it is some sort of strange initiation, but it happens, especially when you start making money consistently and you ramp up size in overconfidence (as I did),

It is perfectly fine to paper trade to regain confidence. The worst thing you could do would be to walk away, which seems like the easiest thing to do. Take a break if needed and get right back into the game with documenting as much as you can on paper and seek out outside or internet resources/articles/books as need be.

I am hoping to create a resource of stories of overcoming fear along with personal experiences from which we all can benefit.

If I can be of any assistance, please let me know.

Discipline and keeping to my stops has kept me around as well. I went through about a year when I had almost all stops too close and was too conservative which decreased returns and winning % of course, but it certainly kept me around longer to learn so much more.

I’ve been positioned with entry stops (short) for a while and a few were triggered yesterday and I went a little aggressive today to help make-up for the conservative (doubtful) stance I’ve had on the market for a bit. I’m not saying this is the end all of the bull market – absolutely not. But the indexes had been developing momentum divergences and grossly overextended conditions for about two weeks now.

In terms of changing my trading style (personal observation) I follow momentum and price swings and try to place entries at the bottom of an observed swing to ride up to the crest of an upswing and chose selectively when conditions may be overextended (or swings are extended) and look to fade these moves as evidenced by divergences in buying/selling power and price. I am also a short-term trader with an emphasis on market ETFs and leading large-cap stocks.

I’ll be posting a bit more this evening regarding the state of the market from a ’swing chart’ perspective and momentum perspective. You’re right. This is tough. Trading is difficult. It almost seems when we’ve got it all figured out that the market pays us a valuable visit and collects expensive tuition from us. I’m not immune either. No one is. I still take some knocks but – just like you mentioned – hold fast to my stops and position sizing, simply because I’ve lived experiences where I didn’t and it cost me.

Thank you for your comment and sharing your experience.

When I first started, I just did news related momentum day-trades on stocks under $10. I went in with 1,000 shares and tried to capture 30 or 40 cents for $300 or $400. No technical analysis – nothing. Just motion.

6 of my first 7 trades were profitable and my one loss was $400 – not bad. I was making $200 – $700 per trade. Then the “Deer” got me. It was very similar to what you described where I had a mental stop, it hit it, dropped me down $1,000, went BACK up to where I bought it (and I didn’t get out because I was so shocked it happened so quickly and I figured the worst was over) then it dropped down $1… then $2… then I closed out half the trade (I actually was so confident that I bought 2,000 shares – 2x my normal position).

It was on a Friday and you bet I had a horrible weekend. By the time Monday rolled around, the stock gapped down $1 and I sold 50c later (on the downside) because I was frozen. Yah – that cost me about $5,000. Half my account also.

In the first month, I rode my account up 20% then saw the value drop about 40% within one weekend. That’s enough to beat the lesson into you that the market isn’t all fun and games and must be treated with a business-like approach with education and risk management. Like you said, absolute stops (and discipline) are required!

Losses of that magnitude have never happened to me since then, but I’ve had some overnight gaps whack me unexpectedly. It’s part of the game, really. Learning how to deal with it is the second part.

Thank you again for sharing!

When my wife and I started trading we did pretty well for the first 3 weeks.. made about 30%!

I thought I had it all figured out. but then…

My biggest loss was pretty much 50% of my account balance. I placed a short with no stop (a mental one I suppose).. the market pretty much went against me form the start and I was out by a chunk.

I called my wife and explained the situation.. confident it would come back down. It did.

It got to within my “mental stop” range but I still didn’t close it out. I waited.. It went back up..

I went to bed that night with a large (potential) loss in my account.

My wife woke up around 3am and checked the account. We were out by a *LOT*. She woke me up. We decided to place an opposing buy order at the current value to “hold” the position and figure out what to do in the morning.

In the morning we were staring down the barrel of a $7,000 loss (we had about $14k in the account at the time).

Of course, guess what? The buy order we placed to ‘freeze’ the position was the TOP. The market came back down, even went below my original short but the combined trades were still in the red.

After trying to trade my way out of the situation, we eventually gave in and closed both positions. A 50% (or so) loss.

It was those events (over 3 or 4 days) that finally made me put a HARD STOP in each and every single trade (by “hard stop” I mean our provider will close the position automatically if it’s reached).

I now *NEVER* place any trade without that hard stop… and you know what? My trading is better for it. When the stop gets hit – 95+% of the time the trade was ‘wrong’. Coincidence?

Anyhow, that’s my story. I’m not sure if it helps as I agree that, until you have experienced the anxiety of a 50% loss sitting in your account, you really can’t fully embrace just how important stops are!!!!