Unusually busy day for me! Even though I didn’t start trading until 12pm EST, I still made 7 trades. 6 winners and 1 winner that I let turn into a loser. All of them small, but on balance it was a net of 5 small (~8 to 10 cent) gains. Since almost all the trades were in and out in under 5 minutes, I don’t think I’ll post any charts except the loser’s.
Today’s Two Mistakes
So, two regrets today. First, I blinked and missed the big mid-day move in Ctrip.com International Ltd. (Nasdaq: CTRP). 2 points in less than 10 minutes! I knew I was supposed to be watching for it! CTRP was on my watchlist thanks to my free trial of highchartpatterns.com. It said to watch for a move past 52 today. I’ve become accustumed to all big volume moves happening at the open and close, so I wasn’t checking it often. Apparently a lot of traders suddenly decided they’d rather buy CTRP than eat lunch. I didn’t see any news to cause it. On the bright side, the move up was so violent that I got some high-probability short plays in after it topped out.
Second, as I mentioned. I had a winning short trade that I let turn into a losing short trade. That was in Frontier Oil Corp (NYSE: FTO). I entered with a stop 5 cents away, and the price action stalled when I had a 20 cent gain. The chart:
Why I should have gotten out:
- My reason for entry was nothing more than a bounce off a downward trendline.
- It wasn’t stalled at 54 and trading. It was stalled with no trades taking place. I thought my platform had frozen. Aren’t Specialists supposed to ensure liquidity? Yeah, right…
- Volume in general was low.
- Earlier in the day, it had found support at this price level, which was also a round number.
- I already had gains equal to 4 times the risk I had taken on the trade.
Why I didn’t get out:
- I deluded myself into thinking of this as a descending triangle being formed. But, when you look closer, you see that it’s not really a good example of one. It doesn’t touch the base, really, during the triangle’s descent. MORE IMPORTANTLY, even if it were a proper descending triangle, the right way to play them is to wait for it to break through the base, and even better to wait for the base to become resistance to confirm the move.
- I was salivating over the potential gains if it dropped below 54, and especially if it decided to go ahead and close the gap it had formed at the open. What’s that cliché about some type of animal being slaughtered? oink, oink.
- This trade followed 6 consecutive winning trades, and I was starting to think I knew what I was doing.
Well, I used the trendline as my stop, which is pretty common, and when it pushed above it, I got out. So, at least I get points for discipline.
Learn from my mistakes! And post yours so I can learn from them. :-)
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| CTRP |  |  |  |
| FTO | | | |
June 25th, 2006 at 4:04 pm
hey
how’d you find highchartpatterns? they are brand new, they seem to need some web design skills
June 26th, 2006 at 10:31 am
They contacted me (and a huge number of other trading blogs, I suspect). So far, 6 days into the trial, their picks have been pretty good to watch.
Funny you should mention that about web design… When I wrote my first entry about them last week, about the first thing I pointed out was that their website looked like a refugee from 1994.