Alberto Costa walks through a losing trade on WELL, a healthcare REIT. The stock bounced off the 50-day moving average and triggered his stop-limit order, then immediately hit his stop. He notes the broader healthcare sector dropped 5.5% that week and suggests smaller positions when uncertain, viewing the loss as a chance to accumulate on reversal.
Hi, welcome to this new video. Today I want to analyze a trade that we discussed a few days ago. If you remember, it was. Well, and the idea was that the price was in this kind of ascended triangle pattern and it was bouncing on the 50 moving average, as you can see here. And we were at this point where we said, okay, we can enter here is a little risky. Why? Because we have this resistance level level and the price may hit that level and then go down. But I say that I was willing to take the risk for a few reasons and this is explained in my previous video. Now what happened? We entered the trade, if you remember, with an order, a stop limit order above this high, and then we placed a stop loss here. And well, if you look at what happened later, you will see that the order was triggered here and then it went down and hit stop loss. Now you may say, okay, it was a risky trade. Why? Because you were around the resistance level. Yeah, you're right. In a way it's true. So in this case, maybe if you want to enter, you could put less money, maybe if you're risking 1% of your capital. Sometimes what I do when I'm not so sure, I risk 75%. But in this case, why this drop? Well, the thing is that, well, is if you remember a stock that is in the healthcare REIT industry, and if you look at what happens in the last days on the healthcare sector in the US market, you can see that it was dropping a lot. You see these huge red candles and you can see this here also, the healthcare in the last week was down 5.5%. That is pretty big. And if we look also at these healthcare facilities, REIT healthcare facilities, that is the sector of. Well, sorry, the industry of. Well, now you can see that is also dropping. So yes, it was probably the drop is related to the fact that the whole sector is going down. That's why when we are looking for trades, it's also good to have a look at the sector and the industry of the stock. But that being said, the question is, how do you react to that? So some people may say, oh great, it was supposed to go up, then it went down. I hit my stop loss, I feel bad. It means that these trades don't work. It means if I see again this kind of pattern in the future, I will not take the trade again. And that's the wrong way to face a loss because loss and wins will come and you don't know in which order. So you cannot just be happy when you are winning. And whenever you are losing, then you don't feel like trading anymore or you lose confidence on your system. You need to be aware that losses are part of the game. So what is the best way to analyze this result is say okay, it was a loss. Fine, I accept it. Lesson learned. Okay, maybe if I see a pattern like that, I may, as I say, take a fraction of the risk. Maybe not 100% of what I risk, maybe 75%. But the best way to me is also to look at what happened as an opportunity. For example, I just say that the healthcare sector is in a strong downtrend now, it's going down. So if you have a long term investing portfolio, this actually could be a good opportunity. To do what? To accumulate shares. Because of course you need to wait some sign of reversal, but it could be good to get shares at a cheap price. That is the idea of the long term investing. So that's how you should somehow reframe what happens and then try to see the positive, the opportunity that this event can trigger. So again, what I wanted to say is this. We hit stop loss. Okay? Not a big deal. Part of the game. The last few videos I show you that we had some winning trades, right? So we made two point something R and another one 180 here we lost one R. So overall we are still profitable. We cannot win all of them. But again, the key message here is don't feel bad when this happen, but rather look at it as from the point of view of the opportunities that this kind of situation can generate. And that's all for this video. Thank you for watching. If you like it, if you have any question, as usual, you can write me a comment. Subscribe to be notified when I upload other videos and see you soon.
