You're definitely keeping it too water-logged... let it dry out completely before watering again! At the same time, you need to be making sure the air around it is quite humid as this is how seedlings actually get the water they need. One of my favorite methods is to soak a towel or something in water and set it in a ring around the seedling (not touching it)... keeping this moist will give it all the humidity it needs for a couple of days until it starts giving you real leaves.
Good luck! I like the fact that you're "winging it" ... but do so thoughtfully!