Turning Day Trading Profits Into Losses

One thing years of day trading has taught me is that going for home runs is a mistake. Does that mean you don’t get a home run occasionally? Of course you do! They pop up from time to time, but the traders who succeed in this game long term build their accounts and pay for their cars and boats and vacations with singles and doubles. Yesterday, I forgot that. I forgot my own rules.

I got greedy.

Here’s how it happened. $SHIP was running. It had a huge run up in the morning, but I didn’t chase it. It based nicely around lunch time, as often happens with stocks that exploded in the morning. As it pulled back into the $6 area and held the VWAP, I started entering. This is one of my favorite day trading setups. I bought 2000 shares at an average price just below $6, with a tight stop loss. A low-risk, high-reward setup. It ran to $7 and I scaled out along the way for a nice profit.


As it pulled back, I kept a few shares, hoping for a home run. Then, I added more shares. This was during the lunchtime lull – most breakouts fail at this time, which should have kept me out of this trade. Sure enough, no play materialized and I lost a decent chunk of my profits.

I got in again at $6.30 and $6.38. This time, it popped nicely, giving me an average gain of $.70/share – not bad for a 3000 share position. Then it pulled back and I got greedy again. I really wanted to hit that home run trade and so I ignored the evidence that this wasn’t a bullish pullback. It was a steep, high volume pullback – the opposite of what I look for in a pullback trade prospect. Sure enough, it dropped further and I lost all my gains from earlier…and more.


Here’s the takeaway: don’t go for home runs. Once in awhile, they materialize, but the vast majority of the time you’ll be building your account with small, consistent gains.