[INTRA-DAY ACTION]
Just want to cover 2 trades from the watchlist which I've traded so far this week. They are both excellent setups and really great trades, but my execution was shocking in retrospect and I need to uncover the reasons why. This should also give readers an insight into what I look for when stocks are approaching trigger levels.
First up is MRVL, the entry target was initially $9.75 last week, and this figure was adjusted to $10 for new entries this week. Here's the chart:
My entry here was at $10 based on the ridiculously sized pullback on what I considered relatively low volume. This is the 15min 5 day, you can also see the bullish candlestick wicking at the support level - which was also a falling window as it closed the gap.
My entry was great and it started to move nicely later in the day and formed a bull flag into the close. A slight drop down on Tuesday saw a wave of buyers and some aggressive up moves. I cashed out at $10.62 on a pullback from the double top where my initial target was around $12.
MRVL has made 3 lower highs since then, but at no point was my position in jeopardy of a loss even with my tighter than usual stop at $9.85.
I took the profits here because they were there to be taken, and I didn't want to give them back. There is no harm in that, but in the long term if I take profits at 30% of the way to my target it will be detrimental to the growth of my account. I made 3:1 risk on this trade which is good, but realistically I should still be holding - despite this weeks 30% drawdown from max profit rule.
Jetblue trade
This setup was just golden. Watchlist entry was $4.50 long with stops at $4.35 and initial target at %5.25-50 with a longer term view to $6. I said I would evaluate the trade on a break of $5. JBLU dipped a little below the trigger price and filled the window. The downward pressure continued a little but the short term support trendline remained intact. A double bottom at the 200EMA ensued before some industry based news (AMR earnings) cause a rip in the airline stocks an this just took off.
I cashed out at $4.81 which was mistake one. Mistake two was that I didn't add to my position at the support level as I only scaled in half. Mistake three was not giving the rally time to breathe. Mistake four was watching the rally on the 5min chart and not the 15min or hourly. Mistake five was not holding until the initial target at $5.25 (which was hit on the nose). Finally mistake six was not buying back in on the greatest low volume pullback bull flag at a clear support level ($5).
That's six mistakes in one setup and six new things I've learned about this kind of setup. Similar to the MRVL setup I made about 2.5:1 risk here and it's great to get profits, but risk is risk and I know I am willing to lose it on a trade - so why take profits before the target?
I think plainly the reason is the setup I'm using here to trade with. 1 monitor with a relatively slow broadband connection, trading from 9pm-2:30am ish while jet lagged. Physically the setup is bad, and I believe that has negative connotations psychologically when it comes to trading.
Elsewhere I lost $20 on WABC, it wasn't my risk or a drawdown, I re-evaluated the trade and decided it wasn't a good setup. No issue closing a trade that isn't working, because you are essentially losing money by having your capital tied up in a slug. Retrospectively it was a bad choice to add that to the watchlist, given the low volume and a spread which is nearly as bad as a UK stock ($0.20 .. ok, so a UK stock would be more like 25p on a 10 pound stock, but still - for the US 20 cents is unacceptable to me).
AKS looked great on a retest of $10 - the watchlist trigger was actually to short that at $10 - you would have been very quickly stopped out there on the 30% drawdown rule for the week - or would have lost entire risk.
This 30% rule for the week will be interesting to evaluate at the weekend. I feel it is important to protect profits and reduce losses, but this could actually have a negative impact on your trading, closing trades that are working for you and are still at logical support or resistance areas.
My entry here was at $10 based on the ridiculously sized pullback on what I considered relatively low volume. This is the 15min 5 day, you can also see the bullish candlestick wicking at the support level - which was also a falling window as it closed the gap.My entry was great and it started to move nicely later in the day and formed a bull flag into the close. A slight drop down on Tuesday saw a wave of buyers and some aggressive up moves. I cashed out at $10.62 on a pullback from the double top where my initial target was around $12.
MRVL has made 3 lower highs since then, but at no point was my position in jeopardy of a loss even with my tighter than usual stop at $9.85.
I took the profits here because they were there to be taken, and I didn't want to give them back. There is no harm in that, but in the long term if I take profits at 30% of the way to my target it will be detrimental to the growth of my account. I made 3:1 risk on this trade which is good, but realistically I should still be holding - despite this weeks 30% drawdown from max profit rule.
Jetblue trade
This setup was just golden. Watchlist entry was $4.50 long with stops at $4.35 and initial target at %5.25-50 with a longer term view to $6. I said I would evaluate the trade on a break of $5. JBLU dipped a little below the trigger price and filled the window. The downward pressure continued a little but the short term support trendline remained intact. A double bottom at the 200EMA ensued before some industry based news (AMR earnings) cause a rip in the airline stocks an this just took off.I cashed out at $4.81 which was mistake one. Mistake two was that I didn't add to my position at the support level as I only scaled in half. Mistake three was not giving the rally time to breathe. Mistake four was watching the rally on the 5min chart and not the 15min or hourly. Mistake five was not holding until the initial target at $5.25 (which was hit on the nose). Finally mistake six was not buying back in on the greatest low volume pullback bull flag at a clear support level ($5).
That's six mistakes in one setup and six new things I've learned about this kind of setup. Similar to the MRVL setup I made about 2.5:1 risk here and it's great to get profits, but risk is risk and I know I am willing to lose it on a trade - so why take profits before the target?
I think plainly the reason is the setup I'm using here to trade with. 1 monitor with a relatively slow broadband connection, trading from 9pm-2:30am ish while jet lagged. Physically the setup is bad, and I believe that has negative connotations psychologically when it comes to trading.
Elsewhere I lost $20 on WABC, it wasn't my risk or a drawdown, I re-evaluated the trade and decided it wasn't a good setup. No issue closing a trade that isn't working, because you are essentially losing money by having your capital tied up in a slug. Retrospectively it was a bad choice to add that to the watchlist, given the low volume and a spread which is nearly as bad as a UK stock ($0.20 .. ok, so a UK stock would be more like 25p on a 10 pound stock, but still - for the US 20 cents is unacceptable to me).
AKS looked great on a retest of $10 - the watchlist trigger was actually to short that at $10 - you would have been very quickly stopped out there on the 30% drawdown rule for the week - or would have lost entire risk.
This 30% rule for the week will be interesting to evaluate at the weekend. I feel it is important to protect profits and reduce losses, but this could actually have a negative impact on your trading, closing trades that are working for you and are still at logical support or resistance areas.
