When a Loss Is a Good Trade

Is there such a thing as a good trading loss? Everyone wants to win and make money. That’s why you’re here, right?

Now, nobody wins 100% of the time. Losses are normal. That’s how trading works. Still, it never ceases to amaze me that some traders get upset with a loss when they did everything right. Which is why it’s so important to have the right mindset.

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The Big Picture

Now, if you’ve ever experienced getting stopped out only to watch a stock rip 5 minutes later, you know what I mean.

Rather than use hypotheticals, let’s use a recent runner as an example.

On Monday (July 20), Zhengye Biotechnology Holding Limited (NASDAQ: ZYBT) was the low-float, China scam, stock du jour.

I know that I’m making a broad generalization. And even though I find it unlikely, it is possible there are exceptions. Save your notes.

Because there’s no denying that ZYBT is a totally disgusting, absolute scam of a Chinese pump-and-dump.

That being said, it was also a banger alert on three of my services: Silver Dollar Club (the Rubicon Cross), Morning Income Algo (RCT), and Oracle.

Now, anyone who traded the dollar cross on ZYBT got stopped out. You tell me, is this a bad loss?

What I’m about to say is very unpopular. People really do not like this:

If you took a stop in premarket on an absolute, complete, utter scam Chinese stock, I don’t perceive that as bad.

I know it ran to $1.40 in premarket. But realize it could’ve gone back to $0.70 again, right?

Stops Save Lives, Stops Save Accounts

People want some magical secret that would tell you to stay in instead of taking the Rubicon stop at $0.90.

Here’s the secret: It doesn’t exist.

This is where you’ve got to be careful with selection bias. Because it’s really easy to remember these, okay?

This is good content for your trading journal. Very often traders fixate on the ones that took off and forget the ones you stopped out on that went back to $0.70.

Now, the chart below should help you understand there are different ways to trade one of these. This is what happened the rest of the day…

If it isn’t obvious that ZYBT is a classic pump-and-dump then study that chart. Save it. Print it and put it next to your monitor.

One of my students took that dollar cross trade and got stopped out. Want to know what I said?

Good trade. You took your shot. You followed your plan. That is how it’s done.

My Take

My friend, you might wonder if there was a way to take advantage of a huge run like we saw on ZYBT. The short answer is yes.

For example, assuming you sized appropriately based on a dollar loss rather than a percent loss, you could’ve bought the dollar cross again and hit 2:1 reward-to-risk in five minutes.

Or, you could’ve traded the Morning Income Algo plan and bought at $1.18. Or the Oracle signal at $1.31.

Any way you look at it, getting stopped out was a good trade.

Watchlist

Let’s look at what I call a “Wallet Padder” ETF. The Tradr 2X Long SNDK Daily ETF (BATS: SNXX) gives you two times exposure to Sandisk Corporation (NASDAQ: SNDK) stock.

That means that if SNDK goes up 12% on the day, SNXX goes up 24%. Likewise, if SNDK falls 10%, then SNXX falls 20%.

Single-stock leveraged ETFs aren’t exactly exciting trades. But they consistently hit Oracle signals and provide solid trading opportunities. Add SNXX to your watchlist to take advantage of future SNDK moves.

On My Radar

• SpaceX (NASDAQ: SPCX) update: 32% of the float sold short
• Elon is right about this: SpaceX will be the most profitable company, probably in history.
• Chip stocks bounced to start the week. Accumulation or short covering?
• Competition lights a fire under frontier model companies and drives US-based open weight AI model innovation. Bring it on. Maybe Higgins needs a friend?