Out of every crisis , new ideas are born.

Some will shape the future of our country, our world and others, well, they will become cautionary tales that will be passed down from generation to generation.

Thus is the story of Dave Day Trader Global, otherwise known as Dave Portnoy, @stoolpresidente, the founder of Barstool Sports.

Our story begins right before Covid-19 arrived in New York City and shutdown society in a way that we have never seen before.

On January 29th, 2020 it was announced that Penn Gaming Inc. (PENN) had purchased a 36% stake in Barstool worth $163 million in cash and stock.

The problem might have been with the stock.

You see, PENN was trading around $26.21 when the news broke and by February 20th, it was above $39.

For the first time, the stock market had caught Dave’s interest.

He now understood that as PENN climbed, the value of his deal got better and better.

As we all know, that also meant that as the stock began to drop, and oh did it drop, the deal got worse and worse.

By the end of February it was back at $27.

By March 11th, PENN was below $20 and on March 18th it hit a low of $3.75.

All of this movement was out of Dave’s control and that’s not a good thing.

Portnoy likes to be in control and he also has a tremendous appetite for risk.

He didn’t start Barstool as a side project while working a 9-5 job.

No, as soon as he knew what he wanted to do, he was all in from day 1.

An appetite for risk and non conformance fueled his success and his legend continues to grow.

Being unable to stop the PENN bleeding was painful but what was much worse was his inability to talk about it.

You see, prior to the PENN dream, the only SEC Dave knew had Alabama and LSU in it.

Now he had to learn about the other SEC, the Securities & Exchange commission.

They don’t let you talk about your holdings the way Dave would want to.

They don’t even let Elon Musk talk about Tesla!

So, for the first time, ever, Dave was not in control and he couldn’t talk about it.

That left him with no choice but to take back the control.

That’s where Davey Day Trader Global began.

Dave Portnoy decided overnight that he would become a day trader and he would broadcast his trading live on Twitter for all to see.

His disclaimer is simple as it’s right below his twitter handle:

El Presidente/3 time Bee Sting survivor. I own a ton of Penn Stock. I’m not a financial advisor. Don’t trust anything I say about stocks or my gambling picks

So, always with the “go big” or “go home” mentality, he opened a multi-million dollar account and set to work.

At the same time, he created a must have checklist for everything a new trader does not want to do. I’ve been actively trading for over 20 years, in the long game, and I learned a lot of tough lessons along the way. Watching him learn those lessons at warp speed became better than anything there was on television (other than the Cuomo updates). I didn’t enjoy watching him lose, no way, you have to root for the guy. He’s emotional, passionate and refreshingly transparent. When he was rooting his 95,000 shares of Nike stock higher into the close, you were right there with him wanting the money to come in. But, at the same time, it was a trip down memory lane for everything you don’t want to do as a trade.

Week 1:

Quickly done over a hundred thousand.

LESSON 1: Start small and get proof of concept. It’s all about the long game. People will be just as excited watching you make $1,000 as they will $100,000, it’s all about the winning and losing, not the size of the trade.

Big swing and back up.

Dave reaches +$150,000 and starts commanding people to take a knee and bow to the new king of day trading.

LESSON 2: The worst thing that can happen to you as a new trader is you win at the beginning. It gives you a false sense of confidence which becomes incredibly dangerous, incredible fast.

Now up, and with more confidence than ever, Dave begins to discuss the idea of having someone else run Bar Stool because he’s got a trading empire to run.

He starts buying Boeing stock because ‘Boeing can’t fail, it’s America.”

LESSON 3: You can’t trade based off an idea of a company on that specific day because the chances your timing is in sync with the movement of the stock are almost non-existent. Boeing had just been below 100. Maybe that’s where the “it can’t fail” mentality could have come in but he was buying above 130, after it had come up by over 30% in 72 hours. The technicals of the stock must match up with the fundamental idea.

Pro Tip: This is where options could have been much more useful for the individual trader. Instead of owning 50,000 shares of Boeing at a cost of five million dollars, he could have simply bought calls for $10 going out weeks in time and put up five hundred thousand dollars. It would have been much less risk and the same reward. Plus, in an environment where the market is moving 4% a day, going out weeks is like going out a year in normal times. Or he could have sold calls against his stock to help finance his position and really reduce the risk. I reached out on twitter really as a fan trying to help because if he would have sold the 140 calls against his 130 position and held he would have made a million dollars. $500,000 on the 50,000 shares of Boeing going from 130 to 140 and then $500,000 on the 140 calls he sold.

That would have been LEGENDARY. Instead, Davey Day Trader Global went the other way and created the ultimate cautionary tale for new traders.

At some point he accidentally sold stock that he did not own and learned what shorting is. He became obsessed. DDTG couldn’t believe you could sell stocks short and root for them to go down. So he started experimenting and made a little money. Remember lesson 1?

Which leads us to April 6th, one of the greatest stock market days ever where the market had a rally of historical proportions.

I was having a real good day myself on 4/6. I went out with call options on TWTR, T, CSCO, UBER and more. It was one of my best days of the year. So I hadn’t had a chance to tune into Dave’s broadcast. As things slowed around lunchtime I got curious. On Friday, April 3rd, DDTG was long 95,000 shares of Nike and it was going up into the close.

I looked at Nike, it was above $84. Was he up $500,000? More?

I turned on his twitter feed just in time to see an epic rant for the ages. He was screaming, cursing, ripping his sweatshirt. what happened?

I didn’t understand.

This was one of the best days ever, didn’t he have 95,000 shares of Nike?

I quickly scrolled the feed only to find he had been shorting Boeing all day.

He was down between $500,000 and $1,000,000.

It was all in the Boeing short and he was long a stock too, Luckin Coffee. They had just been accused of a massive fraud and the stock had fallen from the 20’s to $5.

LESSON 4: Don’t try and catch a falling knife. A stock that’s down huge is down huge for a reason and 99% of the time it won’t have a quick comeback. Plus, those are the exact kind of stocks that won’t rally in a beaten down market that’s having a good day.

At this point Dave threw his computer screen and everything went dark.

He came back later with a fierce pep talk about how he’d be back but the rest of the week highlighted even more carnage. It went from being entertaining to frustrating.

I don’t think anyone is worried about him financially. He’s set and even PENN managed to fight it’s way off the ground. Even more of a credit to him, there became a noticeable sponsor around his broadcast, @FelixGray.com. considering how many people were tuning in every day to watch Portnoy trade, the sponsorship probably covered his trading.

It was frustrating because you realized this wasn’t going to last. It was unsustainable.

LESSON 5: Succeeding in the market is all about the Long Game. Every day we evaluate upside rewards, downside risk, keep levels of support and key levels of resistance. Wehave a plan and we execute on the plan. Without that you can’t stay in the long game.

In less than 5 trading days, Dave Day Trader Global went from his love of Boeing and America to his disbelief at how high it had climbed and his hatred for the Fed for rescuing the market.

Only the stock market can turn you around like that.

So if you use this cautionary tale as a what not to do in trading, everyone wins.

Dave has his business, his celebrity and his sponsors.

You now have a list of major mistakes that you can avoid on your journey as a trader.

From having watched hundreds and hundreds of traders, I can tell you with confidence, it’s not the trader with huge swings and big numbers that you want to watch, it’s the consistent trader because they’ll be on top at the end of the year and they’ll be in it for the long game.

But if you want some short term entertainment, then enjoy Davey Day Trader Global before it’s gone for good.

Want more great investing ideas?

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PENN shares closed at $13.91 on Friday, up $1.02 (+7.91%). Year-to-date, PENN has declined -45.58%, versus a -13.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Adam Mesh

Adam Mesh started his career as a day trader in the 90's as electronic trading revolutionized the markets. After executives at the firm recognized his unique ability to breakdown and translate what's happening in the market, he quickly moved through the ranks gaining national attention. Mesh has been recognized by Fortune Magazine for an uncanny streak of successful trading and has appeared on every major financial media outlet. Mesh believes that the key to stock market success is to keep the strategies simple enough so that they can be repeated. "Consistency and Discipline" are always found at the base of every great success story. Adam can be reached via email at [email protected]. More...

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