Visa stock was one of the most volatile stocks on July 31. The stock price collapsed to $172 having opened at $195! During that 23 dollars’ fall many traders made money by selling short and taking advantage of the fierce downtrend; the money that other traders lost when they were buying. Sadly I was one of them.
We can all agree now that Visa stock didn’t find support at $172 by chance. That is where the S2 monthly pivot point was situated. However no one could foresee at the market’s open such a sell-off. Visa had been gaining for months and pullbacks were expected. Bulls were looking to enter the market in such a pullback, like the one that occurred in late June, when Visa stock momentarily touched $176, forming a perfect doji candlestick right on the previously confirmed support level. A great long entry opportunity.
July 31. Visa stock down 8%.
During the last day of July, Visa stock eventually penetrated all support levels except the S2 pivot point. Of course we didn’t know that would be the case at that time. I had pointed out $186 as a likely support level, followed by $184 due to the resistance it had met in May and June. The signs though should have put me off from going long on that stock. By the time I opened the stock charts of VISA, it was already trading at $180, far below the possible support levels I had noticed.
Day trading against the trend
So, there I was finding excuses for buying VISA shares. Due to the day’s volatility, I was going to buy a few shares and keep a loose stop loss. The doji candlestick at 7pm (ET+7) and the stochastic divergence helped make up my mind. It was time to risk a small percentage of my capital on this volatile stock. So I bought at about $179 a share hoping for a massive retracement and a big win. Unfortunately, the sell-off was about to peak.
While I was buying those Visa shares, the news was all over the place about Mastercard’s announced earnings, VISA’s major rival. I assumed that was one of the reasons for Visa’s collapse, as Mastercard must have been performing surprisingly well. Well, ok, how much would that influence Visa stock performance? Traders were dumping Visa shares all morning (US time), and I bet it was time for some short sellers to get punished for their greediness. In the end, I was the one that got punished for careless day trading.
A couple of minutes since I bought, a filled red candlestick was printed on the minute chart. Not the kind of candlestick that I wanted to see holding those VISA shares in my hands. As the candlestick was being drawn approaching the support level at $178 I decided to double up my position! I thought that the support level was going to hold without any additional sign though. It was just a doji and the stochastic divergence. And I was about to be proven wrong big time.
$120 million sold in just 2 minutes!
So the market showed me at that exact minute I was totally wrong. I was also terribly wrong for not placing a hard stop loss! Although I was trading a volatile stock, I neglected to place a stop loss order and opted for a mental one!
[quote type=”center”]I would be quick enough to sell, in case the stock plummets.[/quote]
That’s what I had in mind. By the time I was convinced I should get out, VISA stock lost 5 dollars in one minute! I was looking at the trading ladder which was being updated every 10 seconds or so. Each update was costing me 1% of my capital! That’s a huge risk to take in stock trading! I was mesmerized. I was clicking to sell, but the orders were being left unfilled. I could of course place a market order, but I was too afraid of that. When that second red candlestick was printed, I was hopeless. There wasn’t a single sign that VISA stock was going to retrace. Finally I sold at $172.
Ah, that was just great, selling at the day’s low! What a great feeling. What’s more, I even opened a short position at that point, believing the sell-off would continue. Fortunately the hammer candlestick that followed persuaded me that I was about to double my losses. Still, I didn’t buy back before the first green candlestick and I once again closed my position with losses.
[box type=”bio”]Those 2 trades cost me 20% of my trading capital![/box]
In the next one hour I managed to make half of that back, without increasing my risk or position. That was because the volatility hadn’t disappeared and I could trade on the 30s chart applying a momentum day trading strategy, opening and closing positions quickly. I traded with my usual risk tolerance, although this time I was placing automatic stop losses. Psychology and confidence were hurting bad, but the game hadn’t ended. And although I strongly suggest against trading under those circumstances, I carried on with my trading.
Why paying with Visa will be painful for me from now on
5min chart of VISA stock (July 31)
That was my worst performance ever in stock trading until this day. Until the next one, I am sure I won’t forget this particular stock chart. And that being a Visa chart, every time I charge my Visa credit and debit cards, I’ll be hearing bells in my head reminding me of how much money I lost on that day. Well, lessons learned.
