Why Consistent Trading Doesn't Always Lead To Consistent Results

Like May, June is turning out to be another strong trading month with solid momentum and great follow-through. Two weeks in and I’m already well above my $40,000 monthly target, which means the next two weeks are just icing on the cake.

In fact, I had my best day of the year this week, posting over $21,000 in profits on a flurry of trades. All told, I made more than 100 orders that day on four separate stocks.

However, despite several strong +$10,000 days, I did have a wake-up call on Monday that caused me to re-evaluate how I was approaching my initial trades in this strong market. It came down to how I was timing my trades, when I was being aggressive and when I was scaling back.

The loss was particularly hard because I was already up $8,000 on the stock, Provention Bio Inc. PRVB, before getting stopped out twice in a row, wiping out that profit and putting me in the hold $10,000. The thing was, the stock had huge momentum, up 150% premarket and continuing all the way from an $11open to a high of $22.80. The stock was still trading well above VWAP even when it fell $2 per share and I sustained my losses.

When I first saw the stock as a leading gapper on my premarket scanner, there were plenty of factors that might have turned me off from trading PRVB. It had a float of almost 25 million, it was above my preferred price and there was already a lot of volume before the open.

However, I don’t regret taking the position, I just regret how I handled it.

In summary: I undercapitalized my first position, got frustrated, didn’t get completely filled on my next entry, got more frustrated and, eventually, just let my emotions take over before I finally tapped out.

I talk a lot about risk management techniques and knowing when to be aggressive and when to be cautious. That’s because there are hard-and-fast rules, or at least general best practices, that are easy for new traders to understand. It’s less easy to communicate how to apply these elements universally and in the moment. Trading is results-oriented, but because of the near-infinite variables involved in trading, sometimes consistent techniques can yield inconsistent results.

As I said, PRVB wasn’t my typical trading setup, but it was an opportunity that I knew I could trade. The problem was, because PRVB was different from my preferred stocks, I was too cautious in my opening position, didn’t take enough size, and then just succumb to FOMO when I felt it was going to move even higher. Once it got close to $20, territory where I have a history of sustaining big losses, I threw risk management to the wind, increased my share size and ended my day in the red.

While I could say the takeaway from that day was to be more aggressive from the jump and shrink my share size after logging a profit, that’s not always the best approach for every stock, especially in a less bullish market environment. In reality, different stocks, different setups, a whole array of variables inform how to approach a trade.
While looking for clear trading setups and scaling your position are critical tactics to trading consistently, situational awareness and a cool head can be key x-factors for getting the most out of a trade. To develop those skills, there’s no better teacher than practice.