I guess 100% win rate is too much to ask for!
This morning both CSX Corp (NYSE: CSX) and Nutrisystem Inc (Nasdaq: NTRI) hit my price targets from the weekly charts. I didn’t take the NTRI trade, because of how quick and wide the drop was… it fell from 53.60ish to 51.01 in less than 2 minutes, and my price target was 52.56. Not for me!
CSX, on the other hand, had a much more graceful, controlled-looking drop, and hit my 60.10 target from the weekly charts around 10am EST. This looked much better to me. Here’s the 15 minute chart, and I must say it looks less appealing to me now than it did then:
… but you have to imagine it when that third candle was not yet closed! When it was red all the way to 59.70, the picture looked more rosy.
Now we get to the funny part of the story. (Not ha ha funny, but still… ) Normally, I would be extremely pleased with a 60.10 to 59.70 drop, and taken my profits. But, if you’ve been reading the blog, you know that I’ve been lamenting the amount of profit I leave on the table this way. So, I’ve been trying to be more of a “hold-to-the-close” kinda guy. So, when I got that nagging feeling that I should get out, this time I stopped myself. I thought, “You are going to miss out on another point of profit. You’ll be kicking yourself, yet again. Stay in the trade, and make your blog readers proud!” Here’s a free tip: Whenever you are thinking about a trade in terms of who will be proud, just get out!
You can’t see it on the 15 minute chart, but it got back up all the way to 59.90, and then fell back to 59.80 again. I thought that was a good sign. A 20-cent pullback and now we’re heading back south. Which is why I actually sold some more of it. WHAT? That’s right. Part of a trade management strategy I’m trying out is to increase my position after the first pullback of a winning trade. There’s more to it than that, but I’ll write that up sometime this weekend. Anyway, was that a bright thing to do? One trade is not enough to tell, really. It certainly didn’t work out in this case!
The third candle then closed back up at 59.94, which doesn’t quite make a hammer, really, but it’s still not very bearish looking. It was at that point that I got a second nagging feeling I should get out. This is when that internal argument starts. I don’t know if all traders have these, but I always have. Today, it goes something like this:
| Smart Me: | That’s not a very bearish looking candle. |
| Stupid Me: | It’s only half off the candle lows. I just had 40 cents of profit. |
| Smart Me: | Don’t focus on where the stock has been. Focus on where you think it’s going. This is a NYSE stock that’s been falling all morning, and it’s shortly after 10. You know those sadistic specialists like to push stocks back up around this time. |
| Stupid Me: | But I just had 40 cents! It’ll go back down. Didn’t you get the memo about the new strategy? We’re supposed to hold all day. If it can’t push through 60, it’s still a good trade. |
| Smart Me: | I believe the strategy was to hold good trades all day. Besides, while you were saying that, it pushed through 60. Loser. |
| Stupid Me: | I meant 60.10. That’s where the June support from the weekly charts was. Besides, now that we’re past break-even, we might as well see if it hits our stop or not. |
| Smart Me: | We might as well see?? This is your criteria for staying in a trade? You have like zero chance of impressing your blog readers, now. |
| Stupid Me: | Bite me. |
Before I had too much time to sort that out, it pushed well above 60.10, and stopped me out. Luckily, even Stupid Me always honors the stop. Full 1R loss, though, when I got nervous about the trade in time to break even. That doesn’t feel right. But, I’m torn…
You see, the whole premise I’m operating under this week is that my gut takes me out of trades too soon, too often. In this case, staying in the trade meant a loss. In lots of trades over the last year, staying in after I wanted out would have meant windfall gains. I think I need to work harder on differentiating when I have an impulse to protect gains (which I should suppress), and when I have an impulse that says the trade is turning bad (which I should honor).
If CSX had turned around at 60.09 and gone on to make new lows, would I be writing this exact post with the “Smart” and “Stupid” labels swapped? Hmmm…
No, definitely not. It would have been an early victory under the trade management idea I’m trying, which would have felt good. But, some of the thoughts I was having were counterproductive, no matter what the outcome turned out to be. First and foremost, thinking about how much more profit I had a few seconds ago is never a good idea. I don’t know if I will ever completely stop those thoughts, but over time I learn to ignore them faster. Like, on losing trades, I’m ashamed to say I still occasionally have an urge to double down. I’ve learned my lesson on that, though, and just immediately put it back out of my mind. It amazes me that I still have that thought, though. Human nature, I guess.
Even though I’m torn on this case, I’m going to go ahead and categorize this as “Mistake” in the blog. That way, I’ll be sure to re-read this later when I’ll no doubt know more than I do now. It’s a shame my winning streak is over, but no winning streak lasts forever. A week and a half is actually a pretty nice run. It would be nice if another opportunity popped up this afternoon that could leave me green for the day, but losses are part of trading. I can accept it either way.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| CSX |  |  |  |
| NTRI | | | |
