The lighting looks good, the beard looks straight glasses. I'm never quite perfect. So today I just took my biggest loss of the entire year. Today is my biggest red day of the entire year.

So today in this episode I'm going to talk about being a world class loser because that's what I am. but that's not a bad thing. being a loser is one thing, being a good loser is another. and I try to be a good loser which means I take losses.

but I follow a set of rules of knowing when to walk away. So I don't capitulate and let the losses get bigger and bigger. So in my, uh, best-selling book I talk about how to become a world class loser here on page uh 82. The fact is, uh, in all of my years of trading, the way that I was able to grow my account and I'll pull up my P&l here Um, so you can kind of look at this the way that I was able to grow my account from less than $600 to oh, today, it's got to be over 12 million.

Uh, let's see sitting at 12.4 million in gross profit. I was able to do that because I am very disciplined about cutting losses. but in this moment right now I do feel um I feel a bit torn. So I'm in the red I've doubled my daily Max loss and it happened in one trade and it was kind of a freak incident.

You know these things happen. We'll talk about exactly what happened in a moment. but but to make this episode valuable for those of you who are going to watch it months from now or even years from now, let's talk kind of high level about the situation that I'm in. So I just took a big loss and it doesn't feel good And I'm thinking all right, I do have a rule that if I'm down more than $5,000 I stop trading for the rest of the day.

Um, and I am down more than 5,000 So now the question is should I keep trading. The obvious answer is no, Well, wait a second. You have a rule if you're down more than 5,000 but ultimately it's It's always a choice. So right now I have a choice to make.

Do I try to recoup some of the loss. Maybe cut the loss down 30% of it. Maybe I cut it in half or do I completely. You know, accept defeat and and and follow my rule of shutting it down.

My I think the right answer is to follow the rules and you're probably thinking that too. The right answer is just to follow the rules. Otherwise, what's the sense in having the rules? Um, but something that I think about is rules are designed to protect you and to prevent you from having even bigger losses. You do not want rules that confine you or prevent you from having big wins, right? so they kind of have to serve a purpose.

Otherwise, it's not helpful. So so let's kind of ask the question on a bigger scale without factoring in my rule. Should I keep trading today And so here's what I think about Number One. Um, and let's get out the Whiteboard so I can take a couple notes here.

So number One, we have an issue today. Um, which is that I am uh, emotionally activated and what that essentially means is I had a big loss and now as a result of having that loss I feel frustrated I feel disappointment I'm feeling all these emotions and if I trade, what am I likely to do? I'm likely to be thinking about the amount that I lost and how can I make that back And so now I'm think thinking about the market not in terms of is this a good setup would I like this for just a small little trade? I'm thinking does this trade have the potential to make me at least three3 to $5,000 because if it doesn't it's not even going to put a dent in my loss. So I'm not even going to bother. and that's not a good way of thinking about trading, right? You want to trade the market you're in and and I guess it's fine to ask the question of whether or not this really has that opportunity.

but my feeling is that when you start thinking about trades in terms of how much can this offset this other thing, you're applying something that is not related to the market to the market. and I think that that can get really dangerous because then all of a sudden I'm starting to think, all right. Well, you know I should take uh, 10,000 shares and if I get you know, 50 cents a share, that'll be plus 5,000 All right, Well, you know. So now I take a trade and when I'm up 15 cents or 20 cents a share I don't take any profit off the table and then it comes back down to break even.

Or maybe it turns into a loss. or as you know, 10,000 shares, you know I could easily lose 30 cents and then I'm down another three grand. and now I'm taking much bigger losses than typical. And the reason I'm doing that is because rather than moving quickly and following my strategy, I'm now focusing on something completely different.

Like this is a hail Mar trade that either is going to give me the potential to recoup all of my losses for the day or you know or not. so I think then the next level is okay. I'm emotionally activated. Therefore, I'm not going to be thinking as clearly today as I would on another day.

Uh, second is just the fact that I had a big loss. Um, you know, you know. Does that say you know poor, uh, poor environment for um, my strategy today Because if that's the case, then continuing to trade I'm most likely to continue to have more losses because it's a poor environment for my strategy. Doesn't it make sense that on a day that you double your daily goal in like five minutes of trading, that's the day you should dig deep and trade more.

Yes, and on a day that you go to double your max loss in like one trade, isn't that the day you should trade far less? Probably. Now it's possible that you could take a huge loss on one trade and then another stock comes up. Proves itself is very strong and you could have a chance of redemption. That is especially true in a hot Market the market is heating up.

but I wouldn't say it's hot And the way I evaluate that is by looking at the Gap scanner and kind of asking myself, all right based on our current gappers. Um, you know what's sort of this? What's sort of the lay of the land And what we can see is that the two leading gappers are 35 million share and 42 million share floats. These are higher floats. They're easy to borrow.

these are grinding stocks. They're not breakout stocks. The type of stocks that you buy, you walk away for an hour, you come back and you know you hope it's up. This is not a a type of um, stock that you're going to do well jumping in and out of and trying to quickly, you know, scalp your way up 203 cents a share.

to you know, three four grand. This is not the type of stock to do that on this one ioac. Well, this one unfortunately is has no volume and then you know Sprc I did trade that earlier I was green on it but it's only up 22% it's F it's kind of fading. So what the Gap scanner is telling me right now is that there is not something else that looks really good that it makes sense to trade and the the condition of the market also supports that.

So I think even if I did not have a $5,000 Max loss rule, everything else that I would say is like the gut check of should I keep trading says no, you should not keep trading. Okay, so that means I'm going to be oops. I'm sorry about that. So that means I'm going to be sitting here.

um, with this big loss and I'm not going to be able to recover it. uh, presumably until well, maybe tomorrow. So I sort of feel my window is closing my window for me is between roughly 7 a.m. and and 10: a.m.

and right now it's 10:05 So my window has closed. Which means at this point I need to accept, uh, defeat I need to accept that I've uh, been beaten and wrecked and uh, you know, viciously spanked by the market. and uh, this is part of trading. So being a worldclass loser means that.

Number one, when you're in a trade and it's flushing, um, you're able to just say I I have to get out rather than panic and be sort of dear in the headlights. and Frozen you're able to exit the position. That's probably the first. uh, the first step because a lot of Traders will panic and then they'll just hold.

and next thing you know, they're holding a stock down several dollars a share or they're averaging down and the loss is getting bigger and bigger and bigger. And that's that's now making for a bigger loss. And it's an opportunity cost because you're missing the opportunity to focus on something else that might have been better if You' cut the loss immediately. When it was only you know 5,000 instead of 10 or 15 or 20 or whatever, it would have been easier to recover from it.

And that's kind of always been my philosophy that if I just cut it faster, it's easier to recover. So um, so being a good Los loser means number one. cutting it very quickly being a good loser. Number two means after the loss, what do you do and what a good loser does after the loss is they take a step back and have a moment of reflection.

What did I do wrong? Did I do something wrong? Now some losses are not lessons, they're just losses. Even the best Traders you know and I'm not the best Trader by any means. but um, you know even a Trader who's been doing this for a very long time like me. You know my accuracy is 68% 68.9% So that means I'm wrong a solid 30% of the time I'm wrong all the time.

and that's okay. it's I I Don't even know that we would call it being wrong. 12.4 million certainly feels like I'm doing something right. So these are just losses and winner Loser right and wrong are sort of interchanged.

but uh, but the fact is, this is part of trading that you're going to have. uh, trades that are losses and so the best losers are able to cut the loss quickly. and then in those moments of I just had the loss reflect back and look closely at that trade and ask, was there something in it that is a lesson? Sometimes the answer is no, sometimes the answer is yes. In the case of today, the answer is yes.

There is a lesson that I can learn and so I'll talk about that in in a few because that's going to be more specific to today's trade. So I I often think there is a lesson to be learned. Um, when I have these kind of big losses and sometimes it can be as simple as you know. I I've gotten a little overconfident I've been trading with too much size and I need to slow down a little bit.

But what's really important is that you spend a few minutes reflecting because what a bad loser will do is they'll take the loss and then immediately throw their money into the next trade. They don't even process. It's like a rebound trade. They're not even processing what happened here, they're already in the next trade and that is a really unhealthy pattern.

Because you're not making good decisions, you're still like your mind is still focused on this previous experience, previous trade, and now you're already into the next one. And what often happens is you'll have back to back to back losses and that can create that capitulation or that Snowball Effect where you go from Down 2 Grand to 8, Grand to 12, Grand to 16, Grand to 20 grand, 25 to 30 to 60. You know all of a sudden things get bigger and bigger. whether it's happening on an intraday basis or or it can happen on a weekly or a monthly basis if if you're not adapting and adjusting and spending that time to reflect.

So for me, one of the things that used to happen when I was earlier in my career is that when I would take a big loss like this, I wouldn't be to trade in my account until I deposited more money and so I had a built-in resting period where my account was like in time out and so I was like all right I Guess this this? makes sense to well. I can't trade with real money I Can Sim trade? but why don't I Kind of do some digging and try to figure out where things went off the rails and that that is a very good thing to do because obviously if you could figure out where things went off the rails, uh, then you become aware of that possible Trigger or that possible setup or whatever it is and you can now avoid it in the future. So you know one of the things for me is with more than a decade of trading experience under my belt. I do have a lot of educated intuition and I'm able to share that with you to help you avoid some of these landmines.

but I still make my own mistakes and I'm still learning because the Market's always changing. so being able to step back and slow down is a characteristic of a world class loser. When it comes to day trading, cut your losses, step back, evaluate what you did wrong. Don't immediately jump into the next trade, just step back and slow down and then you have to come to a conclusion and the conclusion can sometimes be all right.

This was just a freak accident you like let's say I got caught in a stock that got halted pending news in the middle of the trade and I lost 30 grand on it. It's like, well, this, this is this is life. You know things happen. um I don't know what much more to say about it.

Let's say you lost your internet or something like that. Oh maybe I should get a backup internet. you know there might be something, but there are certain scenario where there's the conclusion is sort of. there's not much I could have done to prevent that.

This just is what it is and I've got to take it on the chin and move forward. Um, and then there's other instances where you're going to implement changes as a result of your Deep dive. You're going to say I'm no longer going to do this, this, this and this and now when you come back into the market, you're coming back in with a game plan of how you're going to do better. and and and this is based on the current market.

Or you may also come to the conclusion that okay, this was a freak accident, this L loss happened but the market is still really strong today. we're going to very hot Market You know some of my best days during 2020 2021 were days where I went into the red 25 or $30,000 I kind of got kicked in the teeth and it gave me a little you know a little Spirit to come back up swinging hard and all of a sudden I'd finish the day up 7585, 90, $100,000 or $200,000 or more in one day And there was a kind of getting kicked that got me to get that aggressive where if I hadn't gotten knocked down I probably wouldn't have been that aggressive to begin with, but that type of um, aggress aggression in trading should be reserved for the hottest markets. and if that's not the market you're in where you're seeing backtack other opportunities and other Traders are doing really well then you don't want to trade like that, you know and so I do also look around I'm like, well, how are other people doing today you know, is this just me Did I just choose the wrong stock and I just you know if I move on and focus on something else, I'll I'll do okay and so if I look around I see other people are doing really well on this stock or that stock that can be helpful for me as well. or if I look around I see people are like oh, this is trash, there's nothing good, this is so choppy then that sort of reaffirms All right: I I should walk away and again, this is not factoring in what your max loss may be how much where you are relative to that I do think that there's really no purpose in having rules if you're not going to follow them and the reason I set a Max loss of $5,000 is because I looked at my metrics and what I discovered was that on days where I went down five grand which was my Max loss and I continued to trade, I had an 80% chance of doubling that loss to being down 10 grand or more.

An 80% chance. which means I only had 20% chance of recovering that loss and finishing in the green. And based on all those trades, I would have been better off and I would have lost a lot less money if I had just stopped at 5 grand. And this is also because on the days where I would end up going down to 10, 15, 20, 30, 40, 50, whatever a huge red day.

um, then coming in the next day, there's that opportunity cost because now I'm carrying the weight of that loss with me. So I'm going to be in the shadow of that loss for a period of time. So one of the things that um, that I talk about quite a bit is the process of recovering from loss. So this is the way I approach it and I actually I unfortunately just had a red day last.

Tuesday Um, it was a was a $5,000 red day or $4,800 red day. Um, so that was last. Tuesday Okay, so I go down 4,800 this is just my daily I I do it as a bar a bar kind of bar graph. Um, so I I went down this much and and actually I'm going to draw this differently.

Um, all right. so had made progress and then lost. Um, five grand. Right here.

All right. So you know, little red days? Whatever. those are no big deal, but a $5,000 red day is my full Max loss I don't like to lose more than I can make in one good day. Uh, so you know I I can make 5,000 in one day I can make 15 I can make 20.

but realistically I don't want to lose more than five if I can help it. So now I've had this $5,000 red day day. so this is day one D1 D2 D day day two I sort of have a choice. it could be a no trade day I could take zero trades I could be aggressive and if the Market's cold, I could go like that and then what happens on day three again, day four.

Again, right? You don't want to do this and if you're having backtack Max loss days after the first day, second day. Okay, now I'm taking too much size. Clearly, the market is not on my side right now I need to reduce the size if you reduce your size and you have two more red days. at least they're smaller, right? So ideally, however, uh, you're going to self-correct a little bit before a second red day so that so like for tomorrow.

For instance, I have to be careful. Uh, so I I can't be super aggressive tomorrow because I could risk having another. you know, big red day or something like that. so have to be a little more conservative tomorrow.

And that means reduce, um, share size? All right. So with smaller share size, I could have a red day here and go further in the red or I could have a green day. Is it likely that I would make the full amount back in one day? Probably not with smaller share size. but that's okay.

anything off the low was good. If I can do that 2 days in a row, 3 days in a row, that's great. Once I make back about 50% of the loss, then I I remove the share size restriction and I start stepping back up to the plate. So this whole thing right here.

Everything that's happening right in here. This is about minimizing how much I'm going to draw down and helping myself prepare for the recovery back up. This is an ideal situation. I mean obviously it's not ideal to have have a red day like this, but they happen.

So now it's a question of how do you respond to it and number one reducing share size. Maybe you do have a couple more red days. You know we go a little bit lower here with smaller share size because the Market's really tough and accuracy is poor. But then you start having a couple of small green days like this.

another small red day. Maybe this is a more extended one, takes a little longer, but again, until I've recouped about half the loss. and if the loss gets bigger, then the recoup line comes down a little bit. I'm going to be conservative once I've made back half the loss.

That's when I start to feel like okay, the wind is at my back I'm starting to gain a little bit of momentum I'm starting to get more confident because I've had a bunch of small green days and the pain from the red day is is now. um, it's much. It's much further in the distance. in the moment, those red days can be very painful and very upsetting.

One of the things that I sort of trained myself is that I'll ask myself Ross are you g to think about this day a week from now? You going to think about this day a month from now and if the answer is no, then beyond doing my sort of due diligence of understanding why the loss happened and what I can do to prevent it I don't want to spend more time thinking about it I'm not going to waste all of today thinking about this loss when I could make the entire amount back in a couple days. Why do that? Why subject yourself to those emotional roller coasters? It's easier said than done, but the way I have been able to sort of compartmentalize this is by looking back at my P&l So when I look back at my P&l you know when you're zoomed in and you know you made whatever. So I made 13,000 on Friday I made 3600 and then like 800. so 4,000 this week and then U I just lost 10,000 today.

All right. All right, so down 10 grand here. Um so when you look at it like this, you're super zoomed in. it feels like oh my God I can't believe it I just gave back all of you know the progress from that day but now let's just zoom out for a moment.

So if we zoom out, we're going to see okay, yeah, I just gave back that 10 grand you know? but this was 13 you know and it's like oh then I had this one. Oh and then I had this one and you're like okay, right? So put it in perspective and this is the area where the biggest risk in trading is for Traders who do not have a track record Because for me, the track record is a source of confidence. You know when I look back, um just at you know the last 90 days or whatever it is. Um, you know 90 days here I look at this and this is a source of confidence.

It's like okay I know what I'm doing Do I have some draw Downs here and there? Yes but I I keep recovering from them and I know what I'm doing. So I'm going to recover from this one as well. It's the traders who have no track record that have nothing to help them reestablish confidence. and that's why I'm such a big advocate of not putting real money into the market until you've established a track record in the simulator.

Trade in the simulator prove profitability and then if you lose money with real money, you could still look back at the simulator. Be like I'm still the same Trader who you know went from you know, zero profits to 25,000 in you know, a couple months or whatever it is, you know you're like okay, so I I know that I know what I'm doing based on this I just need to slow down and have the discipline to follow my rules and maybe some of my revised rules I' put into place. so you know. I I Think it's important to track your metrics um, for a lot of reasons, but it's really helpful.

after you have a big loss, you know one or two or whatever it is that you're able to pull up these metrics and kind of remind yourself that it's a pep talk. Okay, I do know what I'm doing. Disappointing as it is to lose 10 grand in one day. Um, obviously.

I I still know what I'm doing and I can also be really grateful that, um, my biggest red day of the entire year and my biggest red uh trade of the entire year is only uh, $1,417 So I'm at just over. well. I was just over 400,000 in Gross prod profit yesterday. so drop back down.

That's that's gross profit. Uh. but nonetheless. uh, it's it is a setback.

Um, dollar amount. you know, 10,000 feels like a good chunk. uh, percentage wise. it's not really that much and big picture.

It's nothing that I won't recover from within. you know, a few days, or a week or two weeks. you know, at the most, most likely. So so if the first step to sort of recovering is number one, the first step to recovering from A Loss first is like cutting the loss very quickly.

All right, cut the loss very quickly. What do you do following the loss? So we have this, um, so we'll we'll kind of write these out. Um, one cut the loss. Rip off the Band-Aid I Hate hearing about traders who are holding stocks that they've been.

you know, in for months and months In there it's like no, no, no, no, you got to cut the loss. So that's my opinion. But it's worked what really well for me. So number one, cut the loss.

Um, number two is reflection. All right. So reflection and then out of reflection we're going to get potentially. Um, you know we we'll get some action items So it could be, um, adjust strategy.

uh reduce share size. Um, you could potentially have have you know, no change needed depending on you know the scenario, no change needed. Um and then you know continue trading today and that's going to be based on you know, sort of a decision tree there. yes or no.

Um, you know based on the market and things like that. All right. So cut the loss, reflection and then number three, you got to get back on the horse. So I I don't know we we say this, um you know, know, jump back in.

um I don't know, we'll just draw a picture of of a horse here. this is going to be embarrassing. um okay, he's got a long head and all right let's switch off to this real quick. Okay so um I know as soon as I started drawing that line I was like this was a mistake.

um okay so get back on the horse. um I was I was just talking to my son about this um a couple days ago he so he what happened um I asked him if he knew the expression of what it means to get back on a horse and uh he said no and I said it means if you fall off a horse you fall off your bike something like that. um you have to get back on. Oh we were reading a book.

uh the Box Car children book and violet in the book. uh had gotten very scared because they were in New York City they had taken an elevator and she got trapped in the elevator. This was the mystery of the um, the purple pool. uh I it's book number 33 maybe? Anyways, um so so her brother, older brother um says Violet you she's she's like I'll rather take the stairs and he's like no no no, you got to you got to get back in that elevator, you got to get back on the horse.

You can't let this fester and so my son was curious about what that meant and then I was kind of explaining. You know if something scary happen happens, um it it's or something bad happens. it's good to get back on the horse and at first I was like you know if you try something you don't like it, you know maybe it's okay to try it a second time because you just you just don't know. In any case, when it comes to trading, um, you have to the the most successful Traders are incredibly resilient.

We get kicked in the teeth, We get, um, you know, ferociously viciously, um horribly. SP by the market you know our asses are red as can be. It's just the worst we can imagine. Uh, and and then we have to get back.

We have to come. We have to come back and and give it another try. You know it's we and we do it because we know the potential, We know how much we can make as a Trader We know how how well other Traders do if we can just you know, slightly align this and the reward is is so significant that we come back in face of it. In the face of it.

Um, it it feels, you know it's it's like you know, skiing or some of these other things. There's an adrenaline rush that comes with skiing coming that comes with from doing these things you love, but there's there's of course risk and you know you have the risk. We know about it, We're not unaware of it. but even after the worst happens, we still want to come back.

And that means we. You know. For those of us who do that, we really do enjoy trading and we really want to stick with it. Um, and and so we have chosen this path.

But with this path comes some of the roller coasters, the ups and the downs. and right now I'm on a little bit of a Down but it's not going to stop me from coming back in and breaking the ice tomorrow I Have to I Have to come back I Have to show up even after the day that I lost $275,000 the biggest red day of my entire career and it was on my birthday no less I Still came back the next day and in fact I made that made back all that loss within about two weeks. That was a different Market Um, but nonetheless. uh I got back on the horse and so anytime I have a loss or I have a draw down, there's never a question of oh I'm just going to quit and give up and walk away.

No way. This is a puzzle that I am determined to continue. you know, trying to solve each day and if I solve it successfully I walk away with a little bit more than I started at the beginning of the day. So for those that are interested, we can look um, we can look at my trades um from today and this is relevant.

Um, because I'm going to walk you through my sort of three-step process here of cutting the loss, reflection, and um, some of the action items that are going to come from this. So I'll start by saying that we've been in a market. um, that has has been kind of interesting because we've had some incredible moves, but they've been very sort of like, um, they. they've been sort of surprises and because we haven't been expecting them often, I'm not fully prepared to capitalize on it.

and then I end up feeling like I missed it and it's kind of gotten me in a little bit of a habit of trying to jump sooner and sooner and sooner into something that's popping up because I don't want to miss the limited window The Limited opportunity. But that can be a little bit dangerous as we'll see today because that feeling of needing to jump quickly rushes The thought process and the due diligence sort of everything else and that can then lead into some making some mistakes and having some big losses. Um, and now I could say that that um, you know has already happened a couple of times um, in the last two weeks. but not to the scale of today to the point where it's really forcing me to look more closely at what I'm doing.

So that's sort of the context of the overall. Market Uh, the Market's been been warm in the sense that we've been having these pops. it's been hot on some days, but then really cold on the next. and a lot of these days where it's been hot I feel like I end up missing a good chunk of the move which is sort of frustrating.

So um, so so anyways. uh, first trade of the day today was on Auvi. All right. So Auvi, there's nothing really to share on this one, particularly I finished up $192 Uh, this one did pop up.

um, it had some news and on this one I took uh two trades. The first trade was a long I bought uh not into the first candle here which popped up and dropped I bought right here as it was curling back up and I made about $800 on that trade right there. which you know all in all is is certainly not bad at all. Um, that's that's a decent little trade.

then I got back in it. um right here and on this one. and actually I bought a little high at 80 and I was looking for a break through this flat top which is a little aggressive because it was a double top with these topping Tails but the fact that it had recovered back up so I took 2,000 shares on this. but I lost um like 25 cents I lost 500 bucks.

So anyways left. Let leaves me with $192 of net profit. Nothing super exciting. The next one was Sprc.

Sprc hits my scanner and again I see that it's got news and I'm like okay here we we've got news and this is sort of that. This is kind of what I'm talking about here. where um, it sort of feels like we have a short window where this goes from $5 to n almost $9 a share and if you're not jumping in fairly quickly, you're potentially missing the whole thing. at least on this stock.

but it's felt this way. there's We've seen quite a bit of this, so on this one, um I got in. let's see, let me just look at my trade. Um so I actually got in this one at $717 uh which was pretty quick.

So it pops up here, it dips down and I'm in right there and then it pops up through here. but I was only able to make like $1,400 on it at the most and then I gave back 500 off the top. Even this one, it kind of had big spreads I mean I was trading with small size I was breaking the ice but I wasn't able to really get a good cushion. Uh so I'm kind of watching.

this was again like you know, top and bottom of the hour and then Qrx? uh wrecked me verocious ferociously. Um, it. it was really violent and this is so so what happened on this one. uh I mean I can only really laugh because it's just so ridiculous.

Um, but so that was a one minute sharp. So news comes out at 8:30 A.M Um, it's got announces FDA clearance of clinical optimization plan. Okay so there's news on it and it's um, it's popping up right here and as it pops up I'm like oh, here we go. Boom! Okay, we've got we've got something.

uh something moving. So on this one it popped up to a high of 790. um I bought. Let's see.

Um now I'm not even sure which candle I bought on um I think I might have bought I bought $7 and I think it was right here. Um no it couldn't have been there. No I think it was right here. it was right here so it it already popped up, it dipped down I bought at seven and I was looking for that rip back up um and and then it drops to 640.

So I'm down 60 cents a share and I was like okay, this isn't great obviously but this could still first candle make a new high work. maybe I'm just early and then in this candle it literally drops from $637 to $4 36 two points in one 10sec candle. uh you know. Listen th this is this is where my biggest loss of the year has come from.

um this kind of flush. It is a shame and so on. 4,000 shares, 2,000 start or 2,000 ad I lost 10 grand which is really not good. uh it's not good at all.

Uh, but I cut my loss at about um let's see I cut my loss at I started selling trying to sell at 6 I got filled at like 550 and sold the rest at probably five. so I I sold in sort of the middle I was like I could just you know maybe this will and it did come back up a little bit but you know. anyways I cut the loss and then I'm like all right I just lost $10,000 in about 25 seconds. What just happened That was crazy I feel like that money just got ripped right out of my account.

So so now I I need to kind of step back and kind of think okay, what just happened um algo Spike high frequency trading algorithms spiked on the news and then a bit of an algo flush. So what we know from these high frequency trading algorithms is that if we learn to predict them, we can profit from the direction that they trade. Uh, but um, but we are playing chess in a way against the computer. These things are smart.

These are high frequency trading algorithms. market makers that are very sophisticated. These guys hire you know, the best mathematicians to figure out ways to print money out of the market. And so one of the things that they'll do uh which is can be to our advantage is when a stock starts.

um, moving higher so we have a stock, this was at U Well, this went from $5 to eight so was at $5 a share right here. And as a market maker, they have to be on the bid and the ask. So these are the bids here and these are the offers here. All right.

So when we look at traditional level two we would see all right. here's five and then the offer is. you know, five, um, 550 And we'll just say this is the midpoint. whatever just for the sake of making this simple.

Um, it's fine. This, we'll just say this is 450. It's got a big spread, and then they've got another order at six. Another one at 625 650, $7 725, $8 All right.

So this is. and then they've got bids down here at, you know, $4 and whatever. Whatever. 350.

Let's just say So all of a sudden news comes in and a uh, high frequency trading algorithm because there's there's many of them and they'll trade against each other, comes in and executes a you know, 10,000 share buy order at $5 The second that order comes in, these other market makers, they subscribe to the data, so they see that order come in. and now what do they do? They pull their orders, They get rid of this one. They get rid of this one. They can't get rid of all of them.

but they get rid of a lot of them. So now all of a sudden this stock has gone from five all the way up to to 650. And now another. You know, Algo hits that buy button 10,000 shares because now the stock at 650 is up 25% 30% of the day and so now even more orders get pulled.

And this is literally what can create flash crashes. Um, but they can go the opposite. A flash crash is when a stock drops like this. So when it's dropping, the market makers are pulling all their orders off the book.

So there's an illusion that these high high frequency trading algorithms create liquidity in the market. But in fact, they only do that during a certain type of market. So during a market that is trading in range like this, the market makers are stacked on the book. All right.

So let's look at a level two of a market maker. Uh, that's pretty stacked on the book. So uh, so this stock right here. um Ccccc.

This one's pretty stacked all right. right now. this is very stack. It's got a higher float so it's not surprising.

sttk little thinner. and then we've got Auvi pretty pretty thick too. Um, let's see what's another one. Um CTO this one's a little thinner.

This this has a bigger spread. It could probably move up and down a little bit faster. Um, let's see what was Qrx. Qrx is a little bit thinner as well right now.

So during a during during a market that's within range, there's a tremendous amount of liquidity. But as soon as the market starts to break out of the standard deviations one way or the other, a lot of these market makers, they know their algorithm generates a incredible profit in these markets range. Bound markets they buy sell Buy sell, Buy sell. but as soon as it breaks out of certain standard deviation, they stop making money.

So what do they do? They press the on off switch. Now, that's actually not a bad drawing. Um, if I do say so myself. All right so that we've got the Onoff switch here.

and this is a rocker switch. By the way, they press the off switch and it happens automatically. And now instead of on the level two, you've got the bid and you've got the offer. Instead of having all of these market makers on both sides creating liquidity, Well now we've had the stock break out of the standard deviation.

So now let's say you know 30% of them just go off line completely. They're like, nope, I'm not. We're We're not going to make the market on this stock, just going offline all right. Or they oops, sorry, they super super thin out their orders.

They put them really far away, really spaced out. Now you've got fewer Market participants. Which means the now: when the big selling comes in as the stock is dropping, you don't have market makers to absorb that buying. so there's actually less liquidity in these areas.

Or when you have the squeeze going up, there's also less liquidity. So this is where we get parabolic GameStop type moves. But this is also where we get what we've seen with some of these Chinese stocks where they drop. You know, 80, You know, 80, 80 to 90% in one day because all of a sudden the market makers don't make the market for it and there's no liquidity for it.

And so the The High Frequency trading algorithms that we have in the market which do generate more than 50% of the volume and and they facilitate trading they in a sense there's sort of the argument that they create stability in the market by actively trading and always being there. They create liquidity. But in another sense I almost think they amplify volatility I Don't know if they create stability, they amplify volatility And that was obviously very true during the flash crash, right? So, and we've had a few instances of this where all of a sudden these Mark these algorithms go Haywire they start feeding off each other and you get these massive drops. but it works the other way too.

which is what we call the Algo. Spike So you know I can't be too much of a complainer because I've made a lot of money on algo spikes. This is one where I just got caught in one that didn't work the flush essentially. So if we go back on the Whiteboard Um, so when it's so when the stock is going up all of a sudden, um, the offers thin out and you have more orders that come in.

the more orders that come in, the more these offers thin out. and then next thing you know, you're seeing these stocks go from. You know, 5, 7, 8, 10, 12, 14. You know, $20 a share and it's insane.

And all of a sudden you've got millions of shares of volume and the stock is up. You know, 10 points? This is crazy And then the thing is, once it's up that much, this is where things kind of get interesting. Um, once the stock is is now kind of up, it's broken out of its standard deviation and it's up that much. Then at a certain point, um, we start to see this sort of volume.

uh, pick up and now the market makers kind of come back and the stock will start to be sort of range bound. but you know that'll be after it already made this like huge, you know, 500% move. So now once we're coming into like a 15 minute period of condensed price Action Now market makers start coming in and we start seeing, um, you know we start seeing the the sellers kind of Stack Up and it starts to become more thickly traded. and then again, if it starts to break out again, it'll start to thin out as it breaks out.

But what can also happen And we've seen this. We've seen this a number of times and happen today. we have the Algo Spike and then all of a sudden I Don't know exactly why it happens, but it happens sometimes. all of a sudden.

um, the bids are gone and that's that's literally what happened on this trade. I Got in and all of a sudden the bid goes from $7 on the bid, that bid is gone and it goes to like 620 or 640 whatever it was and then it's like 575 and now I'm selling and now as soon as my sell order comes in, they pull that bid and it drops down to 525. I Try to sell again, they pull that bid and it drops down to 490. I try to sell again, they'll drop that bid, it'll drop down to 430.

They will keep doing that and this this is more likely to happen on lighter volume stocks. So we can now start to talk about some of the takeaways from today's Um disaster. All right. So you know the Algo spike is a Um is a phenomena in the market that goes both ways.

It can create algo spikes, it can create algo flushes, and typically what I'm looking for is a spike and for it to correlate with breaking news. however, um, to see a stock have breaking news, to see it Spike and then to see this rug pull, uh, it's it's concerning I do not like seeing that and we saw one yesterday as well. So I I didn't get I didn't take a big loss on the one yesterday. so I kind of was like ah, that was weird I don't know and you know but today I did and so now I'm I'm like okay I gotta make an adjustment.

So what? what I'm kind of looking at here is um, some of this has been, um, like, perpetuated by the fact that a lot of us have felt like there's a very small window to jump on. These stocks are moving quickly. So it's created this sort of incentive to jump in faster and faster and faster. and that all of that resulted yesterday I think it was or two days ago and then again today.

Uh, in me jumping in a stock very very quickly and um, not waiting long enough for a true pullback. So this was like my entry at seven was a whole dollar breakout. kind of like dip for the rip back up. but I don't even think I looked at how many shares of volume had traded.

In fact, I know that I did not because I looked at it after the fact and I was like that was pretty light on volume so that was part of it, right? So I I didn't real at the moment. When I got in, the spreads were tight so I was just looking at the spreads the level two, but with light volume spreads can be tight and then all of a sudden they can open up again and that's what happened. So I saw is too aggressive for the volume because I wasn't thinking about because I didn't look at it and I was just like the spreads are tight. So I'm looking at, you know, basically a 10-cent stop.

It was like, you know, 690 by seven I was like boom I'm in at Seven, 688 in at Seven. All right, easy, that's good. Good dip trade looking for 725 750 and then all of a sudden it's like 660 620 on the bid and now I'm like okay, shoot, I'm down dollar a share I got to hit the bid and it goes 575 550. You know, five and it just starts dropping.

So so now on the Whiteboard I did cut my loss so you know step number. what happened? That was weird I've never seen that happen before. Um, step one, Step one. Cut the loss All right.

Check. Minus 10 grand. That's that sucks. But all right, it is what it is.

Step two: Uh, step back, step back and reflect. reflect. Sorry. So now I'm saying all right.

um I realized after the fact I jumped in that uh, too quickly and I was feeling that Ur like the urge but also that like I needed like I needed to move very very fast and that was causing me to not have the time to make all the decisions you know to evaluate everything I need to make a really good decision so I'm like okay on that one. I I moved too fast um I need to wait and and even if means missing the beginning of a move, it's better to miss the beginning of a move, but to take a well-calculated trade than to just jump in something as quickly as I did today. All right. So I need to slow down a little bit.

Um, trading breaking news I have no issue with that because that is how I've made the majority of my profit. It's trading breaking news, so that's not the problem. The problem just today was that I think I jumped in before it was well enough established that this was going to be strong news that the market would respond favorably to I jumped in the middle of an algo Spike on very light volume and so I would say the biggest takeaway is that I need to slow down a little bit and um, and this is similar to what happened on Monday too Monday I had a similar trade where I jumped in really just way too fast. So I'm not sure why I um I mean I I Have you know well I kind of already stated why I think I'm feeling that way but but I'm a little bit surprised that um that I'm being as quick as I as I have been.

but I think it must speak to a feeling of being a little behind and needing to catch up a little bit not being maybe where I want to be on the Year this and that and just trying to have a really good finish to the year and I need to let that go I need to, just, um, let that go entirely. So all right so so action item here is, um, go slower and to help me with that, I could remove um certain hot Keys remove my buy hotkey because pressing shift one a couple times is how I got into this. Uh, and you know I can just boom boom boom. Next thing you know, I'm in 20,000 shares right? So I I will sometimes do this.

This is something I've done before: remove the buying hotkey just to slow me down a little bit. I could also add um a confirmation window to slow me down a little bit. uh sometimes I hesitate to do these things because if I do go slow I don't need the hotkey if I'm going slow. but if I go slow, adding a confirmation window is still going to hurt me when I finally do have a trade that I like uh it's going to hurt a little bit.

So so I think this actually is I'm I'm not going to do this but I think I will do this I think I will remove this hotkey. Um so this is going to be a to do to go slower um and this is also an opportunity where I can you know print um pictures of some of my favorite setups and you know I I was showing you guys um well I guess this was for warrior Pro members that I was showing um but I was showing you my trades from this um big move that we had H what was it? um on it was last week at some point we see if I can grab it here real quick. So we had the stock that made you know like a 400% move. It was really really impressive and you know it's like those the ones I need to be aggressive on when it's hot I got to be aggressive I got to swing hard um but at that point it was obvious like this thing was going.

really it was going bananas. So I didn't need to kind of be guessing and jumping into anticipate. So I would say um, less, um anticipating and you know, let it prove itself because jumping into sort of anticipate this thing. Yes, that is a sign of a very um, you know very high level of educated intuition.

but you know sometimes you get into these markets where that doesn't work and and I think what happened today, you know, seeing just sort of how quickly that algo can um can turn against me I've got to be a little careful that I don't fall into that trap again of seeing something moving and seeing the spreads are tight for a moment cuz for all I know all of that could be you know part of some new algorithm that's been built to trap Traders like me, you know I don't know it's Pro I Me? probably not, but you know you just have to really stay on your toes. so go slower. print out some pictures of, you know, some of these really great setups. um I won't go over all of them now.

it's fine, but you know, print out a couple of those pictures, keep them around my desk. Um, and and then um, um, you know. As as stated before, um, reduce share size. So I got to reduce my share size here for a couple of days.

Uh, until I've made back $10,000 right or no? sorry until I've made back 5,000 So the P&l is going up going up. Uh, lose 10 grand? Okay, so here we go now: I want to make a small step up tomorrow? another small step up, um on Friday and you know into next week. If if I start to do a little bit better, boom, I'll be recovered by, you know Monday Tuesday Okay, if I have a another red day tomorrow, let's keep it small. Let's not have another $10,000 red day tomorrow.

Not worth it. So keep the red days small if I'm in a little bit of a you know, slump here and we have another red day. All right. it is what it is.

but let's keep them tight, not let the draw down get too big and start to be focusing on making that curl coming back up. And then once I've recouped about half of the loss which right now is at 10,000 So once I recoup five grand, then I can take off the share size restriction and start to step back up to the plate with some momentum. So that's where I'm at right now. and that really is.

Um, you know in in my experience this is. the way to recover and recoup losses. I Mean it's the it's It's the only way that I know. But I've done it more times I could possibly count.

You know all in more than a decade of trading experience I Couldn't even tell you how many times I've been in a draw down of more than 15 grand I couldn't even count. it happens, this traded, right? So yes, trading is risky. No, my results are not typical easy come easy go. but for me, the composure is important.

So letting it go. Okay, I had a loss I'm going to let it go in the sense that I'm not going to let it Captivate me emotionally. Um, but I am going to draw some lessons from it and apply those to tomorrow. and I'm going to come in tomorrow recognizing that my fuse is a little shorter.

so I have to be a little bit careful on these next few days not to get frustrated and stubborn and then you know start to snowball. And that's why the reduced share size is so important. So if this has been helpful for you, for those of you that are going to watch this on YouTube as a recap: I hope you hit the thumbs up and I hope you subscribe to the channel I Try to be upfront with you I try to keep it real. You've seen my biggest red days.

You've seen my biggest green days. Both of those are actually I think they're both on YouTube Definitely the red day recap is so you know it's got to roll with the punches and this is, um, it's it's important for you guys to be able to know that. So I hope you enjoy this episode and uh, you could check out another one that YouTube thinks you're going to love right there. And I'll see you for tomorrow's recap.