Friday’s Trades

I did decide to trade today… can’t end the week on yesterday’s down day! :-) But, I’m finished now, after two small wins on LLY and SEIC. They’re still going up as I write this, but I really need to pack for my trip. Plus, I don’t really trust today’s market… as Trader Mike points out, this is a kind of unusual day. So, I will be content to leave the week on an up note.

There are a couple things I want to investigate this weekend and write up. For instance, I saw a comment on some blog stating that buying puts is superior to using a stop loss. I want to do some math and see what conditions make that a true statement. Obviously for intraday trades the answer ought to be “never buy puts,” but maybe there is a case for swing trades… Anyway, don’t hold your breath… I always think I’m going to get more done on these trips than I actually end up doing!

Sorry no charts, but this is an example of the kind of pre-trade thought process I go through. I got into LLY because:

• it was continuing a steady uptrend from yesterday
• it was consolidating just above the previous daily high from Jun 20th
• all the companies in Google Finance’s “related companies” section were up for the day

So I got in @ 55.16 when volume picked up and it broke out of its consolidation range. At that point, my stop was 55, which would have indicated a break of the uptrend. So, that’s 16 cents of downside, and no resistance until the 56 area in the last 3 months. I liked that risk/reward. Sometimes I question the way I reason about that, though, because intra-day, I don’t think I’ve ever hit such a lofty price target. I think I need to investigate incorporating the ATR, to get a more realistic reward estimate.