Advice For New Traders When Momentum Dries Up

After a handful of weeks of strong momentum, I’m now looking at logging my first red week of June. As of this writing, I’m down by about -$18,000 on the week with just one more trading day to go.

The loss of momentum is unfortunate, but not devastating. I had luckily built a large enough cushion through the start of the month that I’m still on pace to meet my monthly benchmark of $40,000. While that perspective is good to have, it’s not always easy to maintain after several red days in a row.

Part of making a career of day trading is understanding that swings in momentum like this happen, and traders need to be prepared for dry spells. The tricky thing for those new to day trading, and even market veterans, is maintaining the balancing act between not getting discouraged while also keeping an eye on how much risk to take on in case momentum suddenly makes a comeback

The first step in finding balance while momentum disappears is recognizing when reliable trading setups become less reliable.

While my Monday morning trades in ContraVir Pharmaceuticals Inc. CTRV constituted some of my largest losses for the week, it was really Tuesday’s opening gap and go setup in Cesca Therapeutics Inc. KOOL that tipped me off that it was time to apply the brakes.

Ultimately, gap and go trading is a riskier approach to the market since it requires traders to enter the position quickly, usually on the first couple candles of the day. In the case of KOOL, the setup just didn’t hold.

Wednesday’s losses were additional salt on the wound, but it drove the message home. My trades that day were all proven setups, looking for red to green moves following consolidation off of highs. Melinta Therapeutics Inc. MLNT was ultimately poor timing, but my next trade in Estre Ambiental Inc. ESTR followed all the rules, but just didn’t yield results.

And that’s the bitter pill traders sometimes have to swallow. There are no sure things in the market. Experienced traders have the benefit of surviving red streaks or a big daily loss. Unfortunately, newer traders still have to take their lumps.

While that might not be much of a comfort to anyone else who might be in a slump, the best advice I can provide is to quote Winston Churchill: “If you’re going through hell, keep going”