Chat with trader 05-04-2023 14:57 113 Views

My Day Trading Journey From Beginner To Humbled Trader

You have probably heard my stories as an immigrant in my teens. Seeing my parents struggle with money, trying to adapt to my life in North America, and dealing with being bullied in school definitely built up a tough skin for me and showed me that I needed to work hard to get a solid footing on my feet.

But I've never actually shared… how I became the Humbled Trader.

When I Was A Beginner Trader, I Won, But Then I Lost…

I was a LOSING trader for almost 2 years before I started seeing any consistent green PNL. (My PNL curve in my first 2 years looked like the crypto chart…starting from 2022.)

I made $50 one day and then the next day I lost $100. On the third day, I would become so pissed that I would revenge trade and lose another $60 or even more.

I also joined many alert chat rooms. If one didn’t work, I would hop on the next one. But following others never worked. So yeah, my trading journey was very much like most beginner traders.

My Trading Addiction Is Like…Training My Pokemon

I don’t know if it’s just me… day trading was more than just making money. It was like a computer game. It was like trying to beat the gym leader with a high-level Pokemon.

I knew I sucked and I knew I was not likely to win at that time. But I also knew if I kept trying, and kept training my Pikachu, I could slowly get better and eventually beat the gym lord.

For most sane people, seeing all red PNLs after 6 months or even 1 year, they would have quit. However, while I did take breaks many times, I always found myself wanting to come back to the market. I was still very drawn to the challenge and all the market movements.

I Learned These 3 Day Trading Tips To Stay Alive In The Market

Reflecting on my journey, I figured that I did 3 things correctly in my beginner years that eventually made me a better trader:

Tip 1: Keep The Position Size Small—Make Room For Mistakes

The first thing was that I kept my position size extremely small at 50 to 100 shares, depending on the stock price. I was risking very little. Instead of swinging for fences and risking $500 or $1000, I was risking $20-$50 per trade.

Tip 2: Keep The 9-7 Jobs To Have Stable Income—No Stress To Trade For Your Living

The second best decision that I made was to keep my 9-7 job while I started trading even though I absolutely despised it.

Because of that stable income, I never needed to make trading profits to live. In fact, I kept on refunding my small accounts with my 9-7 paycheck.

Tip 3: Keep Trying To Trade

The third thing, which is also what matters most, was that I didn’t give up. My family and friends didn’t understand how trading works, and they thought I was insane.

But people say, crazy is repeating the same failure over and over. And to become a profitable day trader, yeah, you kind of have to be very crazy first.

I mean, Elon Musk when he first started Tesla was called crazy many times…. Now 20 years later, he’s a genius? A crazy genius!

So with persistence and hard work, I finally started seeing some progress in year 2. I was still losing, but I was losing less and less, and most importantly, my losses were a lot smaller than my profits.

Then I finally flipped my PnL.

Don’t Overlook Risk Management!

And yes, my friends, you know I’m mentioning risk management…again (Not Lamborghinis this time!).

I only turned my trading around after implementing some strict risk management. It didn't change my trading result overnight, but just like going to the gym and working out, the results are only noticeable after a long period of time.

Finally, near the end of year 2, I went from red to green, after losing around $17,000.

At this point, you must be thinking. Okay, Shay, so you lost $17k and became a profitable trader after that. Is that why you were “Humbled”? Oh no… I wish that was all the money I lost. And I'm getting to the juicy part here.

Nine months after going red to green, I found consistency in trading and was also making on average two times more per day than my 9-7 job. I finally quit my dreadful job to day trade full time. Everything seems great. I have finally accomplished the dream I set out to do almost 3 years ago.

Everything should be sunshine and rainbows and leading us straight to Lamborghini land… right?

Well, it seemed like I was getting there until SNAPCHAT showed up. You are about to hear the story of my most memorable trade—a trade that made me the Humbled Trader.

The Trade that Humbled Me — The Snapchat IPO

The Snapchat IPO was probably the hottest topic at the beginning of 2017.

All the millennials and anyone following the stock market were closely watching the SNAP IPO. It was truly the hottest stock of the year. I was waiting for 2 days after the IPO run-up and shorted the stock down after the huge IPO rally.

(This is a classic momentum trade after the “news event” is done. You may learn more about the strategies in my class or check out some of my Youtube videos—How to Trade Momentum Stocks. )

As you can see on this chart here, after IPO at $24 and selling off from the highs of $29, SNAP stock had continued the downtrend trajectory to a low of $11.

How The Nightmare Began…

However, I decided to start putting on a swing short position after this huge multi-month sell-off.

My thesis: the company had an extremely inflated market cap despite the underlying business not looking so great.

They were burning cash faster than Jerome Powell could have printed them. And I was further convinced that the stock was going back to single digits after some extremely terrible earnings in August and Nov of 2017.

So, I entered my short swing positions around $15.50 in late November and was ready to kick back, and collect my profits with a price target of $8-9.

And at first, my trade worked out according to plan. You can see on the chart here the stock tanked from $15 to $14, despite a small bounce it tanked after earnings down to $12.

But instead of taking some partial profits, I added even more shares at around $13 because I did believe the stock should be trading in single digits.

This mistake put me at a bigger capital risk per trade than my original plan…

I Was Too Early To Short…

Well, it turned out… I was right on that thesis and price target… But I was just ONE WHOLE YEAR too early.

Almost right after I added more short positions, the stock bounced… HUGE. It went back to over $15 and traded around $16. The area where I really should have stopped out because my average cost was in the mid-$14.

Not only that I did not cut losses, I continued to add some more short positions and cover some for a loss in order to average up. At the same time, I had to move some funds from my day trading account to this swing trading account in order to keep the margin maintenance.

What is Margin Maintenance?

The minimum amount of equity that an investor must maintain in the margin account after the purchase has been made, i.e. the money amount to keep in your account to keep your trade alive.

Guys, this is the worst combo meal you could ever order—bag holding plus adding on to a losing trade.

I Got The Bag Holder Syndrome

For months, I couldn't sleep at night, I was extremely stressed, and there were weeks when I would just wake up and stare at Snapchat stock chart the entire day.

I couldn't concentrate on my day trades, I didn’t want to go out, and I didn’t talk to anyone else. I just stayed at home glued to my computer praying that SNAP would tank.

I remember in early Feb 2018 the market was tanking and selling off. I was at around the breakeven point with my existing swing short positions at $13.70s.

But keep in mind I had covered some for a loss much earlier around $15 and $14.

In my mind, I thought hey since the market is selling off… that should help with my SNAP short positions. I knew that was an excuse. I should have covered my remaining position for basically breakeven. But I was too stubborn…

And…SNAP Shot To The Sky

On the evening of Feb 5th. SNAP reported earnings. And they blew it out of the park. Their revenue was up as well as their user growth. The stock absolutely rallied after hours. That was the moment I knew… OMG I blew it.

So the next morning, I finally covered at around $19. Actually, I was forced to because I got a margin call.

What is Margin Call?

A margin call is when a broker closes down your positions for you because of the unrealized loss is breaching margin maintenance requirements of 25% in your trading account.

I was exhausted from the bagholding experience that lasted over 4 months. I remember just closing down that trade. Liquidated all of my other positions at the time. Shut down everything and went back to sleep… as if that could allow me to escape from reality…

After 1 Week…

I remember finally logging back in and checking my account statements after one whole week of soaking in misery, defeat, and most importantly, disappointment in myself. Adding in all the previous partial losses I had taken from trimmed positions so I could average up higher on this short.

I had lost a total of $47K on this swing short position on SNAP…

47K was more than half of my trading account balance at the time and my preplanned risk on this swing trade in 2017 was only $10K.

I was extremely disappointed at myself… for going down this downward spiral of breaking rule after rule for so many months and ignoring all the principles I had followed strictly to allow myself to become consistently profitable.

I got too complacent…I thought, as a full-time day trader making six figures and my portfolio still growing, I was better than the market. But clearly, I let my pride get the best of me. And I paid a hefty price for this huge mistake.

Biggest Trading Lessons Learned

Even though the Snapchat loss isn't the biggest loss of my trading career, I think it's by far the most memorable because of the amount of time I spent bagholding the stock and how much toll that took on my emotional health and ultimately affected my life and my relationships in real life.

Maybe that's why I rarely swing short anymore nowadays. The pain of being short-squeezed for months left me traumatized.

I was extremely humbled after that experience. And I want to make sure I share my painful story and the lessons I learned with other traders. Hence the name, “Humbled Trader” was born.

This name will serve as a reminder for myself that if I forego risk management and discipline, the market will catch up with me, and the punishment… will not be fun.

The Birth of the Humbled Trader Community

My trading journey continued after the SnapChat loss. Later that year, I met some traders who were seeking guidance on Reddit. Together with Orane, who was my trading mentor at that time, we created a private and free group for traders.

More and more traders were invited to the group, and I have slowly recovered my confidence. Enough to help more and more beginners based on my experience. Orane had a nickname, the Oracle, while I was wondering what my nickname should be.

It was these trading group members who joined me from day 1 who inspired me to pick up the name Humbled Trader. and eventually give birth to my own Humbled Trader Community.

Today, the Humbled Trader Community is supported by 7 trading coaches and over 900 members.

Of course, risk management stays the number one rule in our community.

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