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$JCP J.C. Penny was my worst trade ever. I did so many things wrong, but I was learning at the same time. Ray @RayTL_ brought up that I should go through it again and explain the lessons I learned so this thread will attempt to do that.
Some background first, It was the start of 2017 and I was trading with real money for about 2 years. My account was small, about 5k because I knew I was learning and that is all the money my wife would let me have at the time.
I was still in the mindset of trying to catch the bottom. I was convinced at the time that RSI bullish momentum divergence as the holy grail in doing this. Here comes J.C. Penny's.
This was an anchor store in the mall that had been around for 100 years, this was a perfect candidate since it had fallen from its highs of around 87.00 in 2007 and how much lower could it go. I started buying a small position on December 30 2016 at about $8.40.
It had a quick move up and I added a little more and then it gapped down below my entry price so I dollar cost averaged and bought more. As it got oversold I started seeing bullish momentum divergences appear on the chart so that must be the bottom so I bought more,
I bought at every blue arrow on the chart. In total I bought in 15 different time and saw 6 different bullish momentum divergences that were all fake. By March 100% of my trading account was now J.C. Penny.
I capitulated on March 20 2017 and took some time off to reflect on what happened and re-evaluate what the hell I was doing. So these are some of the lessons I learned and things I did to get my head on straight. 1) I got off stocktwits and started posting on Twitter.
2) I tried to follow only serious traders (There are amazing traders and the sharing of information is amazing on Twitter, but be careful because there are a lot of charlatans out there also), I don't have time for YOLO traders.
3) I started the journey of defining the trader I want to be... this took a long time to figure out. 4) I decided I was in this to make money not be right ie. cut your damn losses! 5) I read the right books, for me it was O'neil, Schwager, Weinstein, and Minervini
6) I began to understand there is no holy grail (and you can always find a momentum divergence if you look hard enough, heck I found 6 of them in a downtrend) 7) I defined my time frame which is a weeks to months trader in a bullish market
8) I worked out a system to mitigate my risk and take a paper cut and not a bludgeoning. 9) I had to accept that I was going to be wrong and dollar cost averaging into a loser is just stupid and makes me lose even more money.
10) I created a system so that I would only buy stocks in uptrends and look even deeper to look for the sectors that are outperforming and then the strongest stocks within those sectors and now I grade my stocks which I learned from @mwebster1971 .
My process is always evolving as I continue to gain experience and know myself better. I am working on buying closer to my buy signal which in turn will let me ratchet my stop up by a couple percent. I continuously look for ways to decrease the noise in my trading (and life).
Peak to trough I lost about 33% on my JCP trade which really stung. I don't use RSI too often anymore and if I do it is secondary to price action. I buy high to sell higher. I defined my process to the point that minimizes emotional buying. I created a process to mitigate my risk
I have become thankful for that trade in hindsight because I am a better trader today because of the JCP trade. JCP is now 0.27 cents... a stock can always go lower
