I watch a lot of YouTube videos that's not related to day trading, I watch some real
estate , fitness, film and animation, comedy, and some tech YouTube channels as well. I
watch a bit of everything. The only thing I absolutely do not care about watching…
you guessed it, makeup and supercars.
One of the tech channels I follow is TechLead, I watch him not because i care about coding,
computers and all that stuff, thats clearly too smart for me.
Like I mentioned in my previous videos about my PC trading set up at home, as well as my
travel trading set up, I really have no clue what I bought, I'm just friends and family
with a bunch of engineers and gamers who gave me these tips. I don't follow stock tips but
i do follow tech tips.
Anyways the reason I follow TechLead is because he speaks in a monotone for almost all his
videos. And its nice to listen to that to cleanse my mind after a full day of hectic
trading in the markets.
One of Techleads videos’ from last year in May was this one “How I lost $350K day
trading stocks and what I learned from it”. God reading this video title pains me already.
Not because losing $350K is a lot of mooney, but he didn’t put a space in between the
word, day trading. It’s day, trading, two words. This is really triggering all my OCD
tendencies.
Let me disclaim this first, I like TechLead’s videos and i've been following his channel
for a long time. I'm simply making this video to analyze his loss is made to be constructive
and entertaining. We’re going to review TechLead’s experience day trading for over
a year, what he did well on, as well as what are the mistakes that caused him to lose $350K
over the course of one year. And hopefully everyone as traders can learn from this experience.
So lets talk about TechLead’s experience now. In the video, he shares that he was focused
on trading commodities in 2014. Specifically the ETF’s that track the underlying price
movements of these precious metals like Gold, silver. He was long ETFs such as RJA, SLVR,
RJI etc etc.
And ill be honest here, I’ve never traded commodities. I used to day trade leveraged
gold etf’s such as JNUG, DUST, JDST, especially during FOMC. They make great momentum trades
long and short. But I never hold them for too long, because if we’re day trading most
of the assets are just trading vehicles thats moving, not because we believe in the long
term valuation of the company or in this case the precious metals.
TechLead also says in the video that the reason he had longed these commodities ETF’s is
because they had a good run in the beginning of 2014, which is true, and he was also using
that as a hedge as the US dollar price weakens.
If you look at these crude oil, gold and natural gas charts. The trend is clearing going up
from Jan to June 2014. Until the trend reversed.
Unfortunately it seems like TechLead was caught in this sharp trend reversal in commodities,
which he mentioned in his video, the Commodities price shock of 2014.in which global commodity
prices fell 38% between June 2014 and early 2015.
I’m not here to dissect and analyze commodities price trends or the global economic factors
that might have caused the crash. That clearly not my expertise, i'm just a day traders not
an economist.
And that price drop was very similar to what we saw in late April this year when Crude
oil went to negative -$37 per barrel. No one could have seen that coming, but if you did
though next time make sure you call me first.
But the mistake TechLead made here was NOT because he was lazy and didn’t do his homework
or research, no no the guy did the work. I mean he’s a senior level engineer who worked
at Google Facebook and other tech companies. Im sure he has an IQ above TSLA’s stock
price both presplit and post split.
While I always say, most new traders entering the market fail, because they treat trading
as a get rich quick scheme and never bother spending the time and effort to learn the
skill first. This was not TechLead’s mistake.
The first mistake here was that he fought the overall trend of the stock. From the video
it sounded like he swing trading and joining big picture trends, not day trading. Which
is a viable strategy. Like he said global commodities had a good run the first half
of 2014, and it sounded like he was simply buying the dip to join the trend going higher.
This works perfectly fine, until the dip keeps dipping. When trading intraday, we use higher
time frames such as 15 min, 30min or hourly charts to see the clear trend of the stock.
Trend is your best friend. But that also means when the trend reverses, you better gtf out.
If TechLead was really joining the trend long on this multi month swing, he should be observing
the weekly and monthly charts. Using RJA for example here, The first sign was the weekly
uptrend breaking. The second sign was this lower high set in that cannot retest the previous
high. Then of course the test of previous low from the beginning of 2014.
From a technical analysis standpoint, if a stock has completely given this entire good
bullish run of 6 months from beginning of 2014 to June, and now we’re testing previous
lows and making lower lows. This is extremely bearish as a swing trade.
So this is the first lesson here, don’t fight the trend, especially when it's a global
decline across most commodities prices. And really the reasons are just too big for us
little retail traders to fight against.
The second lesson here is, do not become too overly confident with Beginners luck. Its
interesting that both Techlead and Graham Stephan both had some luck making money trading
in the market for their first few trades. While im clearly the least lucky beginner
trader because I never made money in my first year trading. Which in hindsight now looking
back, was a great learning experience.
Like I mentioned in a few previous videos, luck is not a consistent strategy you can
rely on. Especially when you get that luck with your first few trades in the stock market.
Its easy to feel like you know it all, you’re right all the time and you own the market.
If you had been rewarded early on with reckless trading behaviors such as chasing breakouts,
adding to a loser, or hold and hope. If a trader made money and got lucky doing those
things early on, then of course he or she will repeat the same mistakes again, expecting
to get away with it… until that luck runs out.
Being lucky early on makes the new traders disregard the real fundamental skills of day
trading, its not luck, its risk management.
Which is the third important lesson here from TechLead’s experience day trading. He fought
the trend of the bigger picture yes, but he also didn’t cut his loser, instead he held
on for too long.
I'm sure the beginners luck we talked about earlier also contributed to the reason why
he held on for so long. Another reason was that he started doing a lot of research and
reading news sites that are contributing to his thesis and his hope in commodities.
This is a very interesting thing to realize for all traders. If you analyze your losers
vs your winning trades, you’ll notice that you do a lot more research in the losing stocks
after you’re already deep underwater. No really think about this, this is true because
I've certainly done this myself.
Some of my biggest losers in the past as a beginner trader was holding on to these turd
small cap stocks for way too long. I kept adding to those losers, and researching news
on twitter stocktwits and yahoo finance.
Oh they’re making this drug that's going to cure cancer and they will make millions
and the stock price will jump from $0.20 now to $30 for sure in 3 months. I mean I'm long
and holding the bag since $5, but i will be 100% right and rich just watch me hold on.
If you’ve done this. Com’on comment down below. Its ok, you’re not alone here. Ive
done this in the past years ago on stocks like SAEX, TOPS, GBR and many others. And
this is what we call in trading, doing the homework while bagholding.
And its from doing all these research while he was underwater with his commodities long
position, TechLead also mentions that he became too biased and bearish of the dollar, which
made he even more bullish on commodities and held on to his losing positions until the
end of 2014, which resulted in that big loss of $350K.
350K is a lot of money for a new trader to lose. That's why I talked about in my past
videos, you want to start with a decent small account like 3K or 5K, to feel like you have
skin in the game. And know that the trading account is enough and worth it for you to
manage your risk and limit losses.
But at the same time, generally its a bad idea for new traders to start with too big
of an account. Because you need time to learn your setups strategies, build your discipline,
and most importantly risk management. If you cannot manage risk on a small $5000 account,
you won't be able to protect a 100k account. That's just the honest truth and reality.
Again, this video is meant to be a constructive review of his big loss. I'm sorry for Techlead’s
loss but I’m sure he’s made it back many times over as a millionaire now. And i'm grateful
that he’s sharing this loss on youtube for new traders entering the market to learn from.
Make sure to check out his video
in the description below.