An Unpredictable Market Demands Caution

I hope everyone’s had a good and, more importantly, safe week. It’s been a tough time, and we’re still in early innings. But if we stay safe, observe the social distancing guidelines and help one another as much as we can, we’ll see the other end of this.

While the lockdown measures around the Warrior Trading homefront have kept everyone around here healthy, the same can’t be said for my trading account. While I’m still well-positioned after last week’s stellar $17,000 profit, a couple of red days at the end of March took out most of that figure.

This is just how it’s been recently, ups and downs. I don’t like to repeat myself, but this market remains unpredictable. Even typically reliable setups and trading patterns can’t always be trusted to produce the same results as they would under typical market circumstances.

Monday’s opening trade in Bellerophon Therapeutics, Inc. BLPH drove that point home yet again. What looked like a basic gap and go setup completely collapsed immediately after the open, taking my 2,000 share position down by more than -$2 at the low. Luckily it bounced slightly to cut some of the loss.

Unfortunately, I foolishly held out hope that I could turn this around and, instead of cutting my loss, added another 2,000 shares for a red to green move. When the chart broke down yet again, I was stopped out as the price dropped below $18.80.

By then, I had hit my max loss and learned my lesson for the day. Unfortunately, I had even bigger losses on Tuesday that were ultimately a result of being too aggressive and hoping for a momentum swing that just wasn’t there.

I did manage to regain some ground Wednesday and Thursday, looking for stocks gapping up, waiting for buying at the open, basically doing the same thing I had done earlier in the week that had backfired so spectacularly.

The difference? Well, I was using small share size and being less aggressive. While that meant my gains have been smaller than my losses this week, I at least managed to eke out some solid winning trades in a week that began with two big red days.

Although it’s a frustrating lesson to learn (and relearn), there are just times when the market will defy expectations and carefully executed trades just go wrong. When that happens several times in a row, or you find yourself on the wrong end of a big trade, the best thing you can do is proceed with caution. You may have to trade in the red for a short while, but knowing when to take ground hits will always beat constantly striking out at the plate.