I’ll start by saying anyone can dig themselves out of a financial hole. I know it because I’ve lived it.
I setup a small account in Robinhood to mess around with. Test new ideas. New strategies…
I was testing different options strategies at the beginning of 2019 (selling spreads, buying condors, and other exotic sounding things). I lost on these strategies but it was just a test account and I was learning. I didn’t mind the losses, at first.
Then I looked at my account and saw that I was in a -65% drawdown! Pretty f’n steep by any standards! Whatever I was testing clearly was not working. In that moment, climbing out of the hole I dug myself into felt like mission impossible.
How Can I Turn this Around?
After giving myself some room to breathe, it was time to game plan. Despite having dug myself into a hole, I knew there was a way out. There had to be. I took this as a learning experience and I started to think, “How can I turn this around?” So I decided to look at what was working and see how I could expand on it:
What’s Working… Intermediate-term swing trading: With this strategy I’m just checking in at the end of the day and working with primarily daily and weekly timeframes.
Expansion: Day trading: – I would take what was working on the daily and weekly time frames and apply it intra-day, I started to look for options plays that I could use to day trade and drive the account from there.
Why Day Trading?
A day trade is buying and selling (or shorting and covering) on the same day. I wanted to test day trading because it was a style that fit my personality, and I had the time for it. It’s also a strategy that would allow me to focus for a short period of time during the day, and then be able to carry on with everything else that I wanted to do.
Now, if you’re not familiar with day trading, there’s something called a Pattern Day Trader rule, the SEC calls it the PDT rule. The rule states that if your account is under $25K, you can’t have more than three day trades within a rolling 5-business-day period. Since my test account was less than that, I was restricted to making only three day trades a week. If I broke the rule and made a fourth day trade, then I would be labeled as a Pattern Day Trader, and my account would be frozen for 90 days! Clearly I didn’t want that to happen. Since I was only limited to three trades a week, I needed to really zero in and focus on the best setups that I could go for and how I was going to trade them well.
I thought about my intermediate-term swing trading strategy since I was already utilizing that approach in my primary account. I focused on stocks that can move and potentially go up 500 or a thousand percent in a couple of years, but these are also the types of stocks that can really move and have some intra-day volatility as well (moving 5-10%, and possibly more in a day). So, I focused on those stocks. I also looked at stocks that were already in solid uptrends, proven that they’re a winner, and in their runs. I, therefore, applied that approach to my day trade and started looking for that same kind of pattern. I looked for these tight consolidations on the hourly charts, see if it zooms down into the minute charts, even down to a one-minute chart, and then trade options that are just a little bit out of the money, and then get in and try to ride those trends.
Digging Myself Out of the Hole
I ended up with a win rate of about 60-65%, somewhere in that ballpark, for the day trading. And for me, that’s outstanding. For my intermediate-term swing trading, my batting average is around 40%, but I’m able to make that work too. You don’t need to have a very high batting average to win in the market. You just need to have your winners be bigger than your losers. And so with this day trading strategy, I was able to take that steep AF drawdown that I was in, and come out six months later and recover the entire thing. I took out half of my profits every month and was able to generate a +12000% return.
I knew that the return was high but that return percentage blew my mind! I thought it was a typo and rechecked the math, but it was there. It’s one of the proudest things I’ve done so far as a trader, and it’s a strategy that I was able to incorporate because I had a lot of experience going into it. I would not recommend this strategy if you are brand new in the market because there are a lot of moving pieces. I came into this strategy with 20 years of experience knowing what worked and what didn’t work for me in stocks and options. But even with experience, it was vital for me to test out a couple of other theories, doing it on a small scale, and improve as an overall trader.
Anyone Can Dig themselves out of a Hole
Anyone can dig themselves out of a hole, and if I could have this kind of success, so can you! Don’t be afraid to test ideas or new strategies out on a small scale. You could journal your trades in order to start seeing what’s working for you and what’s not working for you. Be sure to download my Free Trade Tracker to help you keep track of these trades. https://www.marawealth.com/trade-tracker/ . You can also model success.
All these things you can do and let it work in your favor. You don’t need to wait 20 years to have this kind of success. You don’t need to wait and go through the boom and bust like I did for the first 10 years of my trading. And now that I’m trading full-time and am a trading coach, I’m glad I’m able to share my experiences with you to help you find the same success in your trading!
If you have found yourself in a hole and would like some help climbing out, or if you have interested in learning about our trading programs, click here.
Here’s a video I made about the climb!