Wicked Out? The most frustrating part of stock and crypto trading

What does it mean to be “wicked out” and how to prevent it

Crypto Futurist
3 min readJul 28, 2023

Stock and crypto trading can be a thrilling experience when you’re making money hand over fist, but it can also be very costly. One way to save yourself from massive losses is to use “stop loss” orders to trigger a sell order if the price plummets.

However, it’s not uncommon that price rebounds immediately after a stop loss order is triggered. This is one of the most frustrating occurances for traders.

Here’s an example of getting “wicked out”

Today, I woke up to find that my ROKU position “wicked out” printing a 7% loss, after which it shot up more than 20%. Ouch. My bad. Today was ROKU’s earnings report, and it came in hot as I expected it to. What I didn’t expect was an end-of-day selloff yesterday. Looking back, I can see that I made the right call on the position, but the wrong call in risk management. Every trading experience, even the challenging ones, can be an opportunity to learn and improve.

When getting wicked out, it’s essential to stay calm and avoid making impulsive decisions out of frustration. Perhaps you need to reevaluate your trading strategy. Having a well-thought-out stop loss strategy is crucial for managing risk and protecting your capital.

More Effective Stop Loss Strategies

The most common way to use a stop loss is to identify key support levels on the stock’s chart and set your stop loss just below these levels. However, support and resistance levels are as dynamic as prices, especially in crypto, where price targets aren’t based on any particular fundamentals.

Moreover, it’s not uncommon to see the price plummet to just below resistance and then run back up. This can be due to margin calls on short sellers. However, it can also be the result of price manipulation. If you can see a support level, so can other traders, and they WILL try to wick out as many holders as possible.

So, basically, I’m not a fan of the run-of-the-mill stop loss.

Here are a few ideas to consider

Trailing Stop Loss

I prefer to use a percent-based stop loss called a trailing stop loss. This strategy allows me to account for market volatility and adjust my stop loss accordingly for each trade. Moreover, if the price of the stock or coin rises, the stop price rises with it protecting your profits. For example, if you set a 10% trailing stop loss and the price goes up 25% and then plummets, you’ll still lock in a 15% profit.

Moving Average Stop Loss

Yesterday I posted an article about using moving averages in trading. With a moving average stop loss, you can set your stop below a moving average. This method adapts to the stock’s price trends. Not all brokers offer moving average stop losses. For example, Robinhood does not. (Unless you’re still a trader in training, Robinhood is not your best bet, anyway.)

Average True Range (ATR) Stop Loss

Less common is the ATR indicator considers market volatility, making it a useful tool for setting stop losses. Using a multiple of the ATR, you can determine your stop loss level, which expands during high volatility and tightens during calmer market periods.

Always Manage Risk

Most importantly, always manage risk. In yesterday’s article, I talked about only getting into a position if the resistance level is twice the support level. In other words, if support is 10% below the current price, then only take a position if the resistance level is 20% up. With this method, you can lose half of the time and still break even. As your instincts improve, and you win more than half the time, you start making money.

This goes without saying, but if you’re not profiting on half of your trades, then you’re not ready to place big bets. Stick with very small bets or use paper trading until you can consistently win more than half of the time.

Even more important than that, we traders need to remove emotions and bias from our trading. If you have “feelings” — good or bad—about a trade, take a step back and look at it objectively and check off the risk management box before taking any risk.

Good luck!

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Crypto Futurist

Pace LaVia is a freelance reporter specializing in cryptocurrency, renewable energy, and other future technologies.