Mediocre Monday

Some days are better spent in bed, or on the golf course, than trading. Today was one of those days for me.

In spite of the fact that the S&P futures showed strongly down in the premarket, I found NOTHING that interested me to short on a gap. So, like an idiot, I found a couple of stocks I could go long on a gap with. The best news first:

DELL had gapped down and looked to be a pretty safe bet to close that gap, given that tech stocks are leading the charge right now. I got in at 29.60 and set a 1/4ATR stop, which was 19 cents. I felt pretty comfortable with that. If I was right, I had a long ways to go to close the gap. If I was wrong, I would know pretty soon. As it turns out, the stock just fiddled around after I got in – up a little, down a little, up a little, down a little. It approached but never breached my stop loss. In the meantime…

…CROX had gapped down too, and I decided it was “due”. (I think there is a “trader’s fallacy” lurking in that thought.) So, like an idiot, I jumped in long at 45.57 and set my stop at 44.40. I watched CROX wander aimlessly for a while before it decided to head south and take out my stop for a lovely 1R loss to start the day. This led me to…

…the decision to try to capture at least a little profit in DELL once it turned positive. Once I was up a bit, I set a trailing stop at 10c. I ultimately got stopped out for a .8R gain. But, after looking at the rest of the chart, I got fidgety too early. Had I left my initial stop loss, or even trailed at 19 cents, I would have picked up at least an additional dime, if not an additional 16 cents.

The lesson is patience and compartmentalizing. I allowed the CROX loss to get involved in my DELL trade, which resulted in me leaving at least half my profits on the table. If I had let my profits run, I’d be a happier guy right now.

I also shorted WFC late in the day on what appeared to be a nicely formed continuation flag, but I was wrong for a 1R loss.

I also tried a couple of swing trades today with little downside and what appear to be strong upside: NOK and AMAT. I’m short NOK at 39.49 with a 40.01 stop and long AMAT at 18.73 with a stop at 18.43. I’ll report on those when the positions close.

Terrific Tuesday

In the spirit of Karl Denninger, here’s how today went:

I shorted SOHU twice today, the first time at the open on a Gap & Trap and the second time on a nicely formed continuation flag for a total of 2.5R. The first trade lasted a grand total of 57 seconds before my trailing stop was hit for a 1.5R gain. I took that one because the stock was up waaaaay too high for two-day-old news, particularly in a market that was showing down to start the day. I was right. The second time I saw a good continuation pattern and caught it in time to make 1R in a little less than 4 minutes.

Let’s see – that’s 2.5 R in a little under 5 minutes. If I could do that 8 hours a day, 200 days a year…. Uhm, not likely.

Anyway, that’s the good news.

I gave the ole’ RBMP a try again – three times – with ANPI, PIEX and QI, for a net loss of 1R. I broke even on one, lost .1R on a second and .9R on the third. Did I do anything wrong? You betcha:

ANPI had a humongous gap less than two weeks ago. I just plain ignored it. Stupid, stupid, stupid. (That’s the one I broke even on.)

PEIX actually had a decent setup. It printed solidly up during the first five minutes, but then fell out from under me. My stop loss got hit on the way down for a .9R loss.

QI was a little different. The pre-market setup was good, but it printed a spinning top on the the first five minute bar, then followed that up with a down bar, which is where I chose to get in. I didn’t violate any of the entry rules, but in retrospect, that spinning top shoulda been a warning flag to me that the market wasn’t sure which way to go. Had I waited on some confirmation of the actual directional momentum, I would not have taken this trade. Although the stock actually traded higher in the first five minutes, a little more patience on my part would have rewarded me by keeping me OUT of the trade.

As I analyze my trades this month, I am significantly more profitable when I play short than when I play long. I’ve succeeded playing short in a rising market as well as in a falling market. But I am no better than 50/50 playing long in ANY market.

Lots to think about.

I am determined to crack the nut on this RBMP.

Learning to Not Lose Money

Hey, I think I’m starting to get it. Yesterday I traded more than at any time up till now, and – for the most part – traded right. Not that I hit all winners, but I executed correctly and limited my risk correctly.

One exception: when I left town on Thursday, I had one open position on a swing trade I had put on Thursday. When I got back yesterday, I checked my position and discovered that my stop had expired. Yep, I had put in my stop as a “Day” rather than a “GTC”. That cost me almost one full R. Lesson learned!

Anyway, here’s yesterday’s results:

HAL on a Gap & Go: I made .4R but realized in my debrief that I had set my stops too tight for such a volatile stock. With wider stops, I’d have made more. The lesson is to make certain that the width of my stop matches the volatility of the stock; not too big for smaller volatility, not too small for bigger.

COP on a continuation flag: This was my big winner, 4.5R. Strangely, I also realized my stop on this one was too small for the volatility. I left some money on the table, but at 4.5R, I’m not unhappy.

ERTS on a continuation flag: I lost 1R, but I played it right and limited my risk correctly.

Overall, it was a 3.5R day. I can make a terrific living with days like that!