They say in trading you shouldn’t be emotional — and they’re right. However, there’s something about when you get a good zinger that makes it hard to forget. There’s such a balance between: ‘don’t be emotional’ and ‘learn from your mistakes.’
Why am I talking about this today?
Well, next week is FAANG earnings. Last year, during FAANG earnings in July, it was actually my worst week of the year. Not last quarter, and not the one before that… it was last July. But, for some reason, it still stings a bit. More than that, it makes me a little cautious ahead of FAANG earnings every single quarter — and that’s something that I want to impart to my readers.
So, why was it my worst week? Well, there are a few reasons…
First off, volatility: generally, due to the fact that Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL & GOOG) are the market leaders, and because they’re heavily weighted within the indexes, they move the market. In a big way. Each earnings season is different, due to expectations and reality, however, for the most part, they move the market.
Traders often ask — ‘Well, if I’m trading Adobe (ADBE) then why does it matter?’ Usually about 85% of stocks will move with the market. If, for whatever reason, AAPL earnings aren’t great, the Nasdaq is GOING to move. Then this hits your other Nasdaq positions.
Now, of course this can work in your favor. But, since this is a news-related announcement (what we call a binary event) we never know. It’s the technical analysts worst nightmare
Yes, we can go back and look at the technical pattern, and prior reports, and what the company ‘typically’ does — and make our educated opinion — which, we do. But sometimes it’s just not going to work.
The example of the last time for me, that it just did NOT work, was July 2018 on FAANG earnings week.
Normally, I’m very consistent. As traders, we will have losses. It’s part of the game. But the wins have to outweigh the losses. That week, I think everything I placed went bad. It doesn’t happen often, but when it does, it hurts.
So what did I do? Well, for one I went to Tame my Trade Monster.
What does that mean?
I went through my process that I do when I have a bad week. I outlined this in my class that I taught with John not too long ago. During this class, I went over my worst days and weeks of trading, and what I did to get past them. Taming your Trade Monster is CRITICAL to your trading success.
If you want to try this too, you can check out that class here.
And while that week still stings a bit, my most important piece here is that I like to go almost flat before it now.
Why?
The market moves in a sporadic way, that can give any trader a run for their money. So, I’m going (almost) flat. I have a small position on in ETSY along with XLU… but beyond that, I’m waiting for explosive earnings moves to trade them, after the fact. I may place a few (very low risk) earnings trades next week, but beyond that, I’m waiting for a more reliable market. I’m also, Taming My Trade Monster.
What about you?
I want to know what your worst trade, or your worst week was. I also want to know how you Tamed your Trade Monster. Drop me a comment below!
Have a great three day weekend! I know I will. I’ll see ya’ll on Monday.
Danielle
How did you Know I needed this exact topic?!! THIS week was my worst ever because I did not close NFLX calks before earnings.
Big lessons learned. The Analysts upgrade the morning of announcement day was prob a major “pump ‘n’ dump. What could have been some small losers turned into a major gut kicker.
I have to remember J.C.’s mantra “RE-entry is just a commission away”.
Thank you for your honesty . Only other traders understand.
I’m glad I have a long weekend to put some distance behind this. Thank you for everything you do for traders.
Hey TNT,
You know, it just felt like it was time. We talk a lot about the good trades – which are important, because you need to know how to find the best patterns to repeat them, BUT we also must talk about failures. This is how we learn.
I’m sorry to hear your week was terrible! NFLX got me once as well, when I let my butterfly go to the last day and the theta decay took most of it. Holding calls through earnings that get hit by the IV crush – well, it’s a lesson I’ve learned as well. It’s okay though, just forgive yourself for it. I’m sure you won’t do it again 🙂
Have a great day –
Danielle
Well said. Every trader must learn from their mistakes or they run the risk of repeating them. CASH IS A POSITION.
It’s such a fine line between learning from mistakes and being too scared of the past.
And yes, cash is a very important position! Thanks for your comment.
-Danielle
My trade Monster is still at large I tried to tame Him but he broke out last week and it was Soul destroying, worst week this year! What I have done to bring him in line is to document all that happened in my trade Journal, changed my trading plan to represent what has happened and I have put the revised plan beside the Three places that I trade form, to cement the Death of the beast. One of the most basic of the rules is to trade the last week of Options expiration with Lunch money only. (I am trying to be Jovial to make it feel just a bit better). But it is most important to accept, where and how you have gone wrong, the only way to adapt and make changes to the Plan is to have a good one to begin with. With out an up to date one, it will be impossible to survive in the markets as a retail Trader.
Hey Colin,
I like that, ‘cement the death of the beast.’
Options expiration is a huge pain for me, typically. I like directional moves and the pinning and bouncing back and forth that occurs is pretty frustrating. I always trade this time with small size. When it works, it’s a good strategy but I just find it rather dull. However, since it comes around 12 times per year, it’s a good skill to learn.
You’re absolutely correct in that it’s most important to accept, where and how you’ve gone. That’s how we learn and grow as traders.
Have a great night –
Danielle