This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Well, I broke my win streak. I took a trade in Celgene Corporation (NASDAQ: CELG) today. I’m unhappy with it mostly because I ignored the rule from Phantom of the Pits: “Reduce and remove positions if not immediately proven correct”. I also ignored some cues from the price action. Here’s the 30-minute chart:
I went short during the fourth candle at $53.98 as the third candle closed below the OR low. I thought $54 would provide resistance. The trade just went sideways, and I should have gotten out per the “reduce-and-remove” rule, since the trade was not proven correct. The thing is, it was not proven incorrect either, so I sat on it, hoping (uh-oh) for the move…
As I watched, I saw a weird thing on my tick chart:
It looked like a flat edge underneath about $54.10, as if there was buying support catching any shares that fell down to that level. Well, I had to leave for a few hours, so I decided to let fate decide. I had been right about the support, and I was stopped out for -1R.
Trade Summary:
Short 27 shares @ $53.98, Initial Stop $54.60, R=$16.74, Target $52.66
Initial Risk/Reward ~ 2.23 (I don’t like to take a trade unless this ratio is above 2)
Cover @ $54.60, P/L=-1.0R or -$16.74
Lessons:
Reduce and remove!! The only time you should be allowed to hope is when you are already proven correct, and you are hoping for more profits. I also should have trusted my read on the buying support. My entry was poor as well, being far from the 5-ema.
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| CELG |  |  |  |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
January 9th, 2007 at 8:12 pm
Prospectus: Wasn’t Prospectus the ancient god of dummy trades?
Awesome critique. That is why I like posting my trades, it makes me review them every day.