This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Take-Two Interactive Software, Inc. (NASDAQ: TTWO)
TTWO was a gap scan candidate. I entered below the OR high (a higher-risk flag), with a target of the 119% fib extension:
Once again I entered well, managed my stops well, but botched the exit. TTWO blasted up above the OR high, and quickly put me up 2R. It didn’t hit my target, so I held on until it closed back below the OR high, and I got out to avoid a loss (which I would have had if I had waited some more). I should have ratcheted up my stop to 1R at +2R, but the prints were pretty volatile and I didn’t want to get chopped out. It was really surging and I thought it could make my target if I held, but I was wrong.
I cranked up my % equity at risk for this trade to ~3.9% ($50). Without a textbook Trader-X setup, I shouldn’t do that. That system has a very high win rate if you pick ‘em well, and a 4% risk is justified there, but with anything else I need to stick with a 2% max equity risk (like my rules say).
This trade further shows where I am at in my progress as a trader. When I began, I was a very consistent trader–I could consistently lose money! I have been able to consistently not lose money for a few months now (since I switched to Zecco), and lately I can consistently break even. The next phase of my trading should be to start to consistently pull in profits. At least I’m out of the n00b-trader woods. :)
Please, any suggestions for profit-taking / preserving would be greatly appreciated! My only thought is to enter my initial stop as a hard stop, and then change to a trailing stop of 1R height once I’m up 1R. Then, if the target was not met, the exit strategy for a daytrade would be to wait until the end of the day, or a candle close below the 5-ema, or hitting the trailing stop. This way I’d give back the top 1R of the move, but in the worst case I’d break even…
Trade Summary:
TTWO Long 130 Shares
Entry: $20.21, Stop: $19.88, Target: $21.11
R: $42.64, Exit: $20.24
P/L: 0.10R, or $4.17
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| TTWO |  |  |  |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
March 7th, 2007 at 12:47 pm
Prospectus, I think you’ll find that a trailing 1R stop might be too tight. Take a look at TraderMike’s comments from a while back on taking profits. It’s probably the hardest thing to get right.
March 7th, 2007 at 11:10 pm
Hi Prospectus,
Good eye spotting TTWO. I like the chart because the candlesticks are orderly ie. no overlap of the real bodies as price ascends from bar 5 to bar 8. I see you are open to suggestions, so I thought I might chime in. Of course its always easier to analyse in retrospect than in real time.
Here are my thoughts. Bars 1,3,and 4 hold the support line of the OR low. Bar 4 is an inverted hammer which is bullish if confirmed. The fifth bar confirmed, so you could have safely entered on the open of the 6th bar. You might consider taking a partial when price tags the OR high to lock in a profit. Notice how each candle from 5 thru 8 gets progressively wider - this usually foreshadows the end of the move. All of the preceding candles had almost no shadows, then the 8th bar printed a long shadow.
Hope this helpful and best of luck in reaching your profit objectives!
March 8th, 2007 at 3:11 am
I guess, one thought about moving stop to breakeven (or any R location): I personally think a stop should always be just under some sort of support. I don’t see a reason on your chart why I would expect a price drop to stop at 20.20ish. So, in this case, if I were being conservative, I’d have moved my stop up to just under the OR high. Or, if not, I’d probably have left my stop alone.
When I play long breakouts, I’m playing a stock that’s pushing through resistance. Since I expect the volume of the breakout to effectively turn that resistance into support, moving my stop to just under breakeven is usually a natural thing to do.
just my 2cents. These kind of posts turn everyone into a backseat driver. :-)
March 8th, 2007 at 5:54 pm
What does it mean to “botch” the exit ?
btw, nice management of the play imo
March 9th, 2007 at 11:00 am
@Dave: Thanks for the link, it helped. I think scaling in and out would be a good strategy, but since I’m dumb and undercapitalized, I have to conserve my daytrades (cursecurse ‘SEC rules’ muttermutter). Once I’m above $25k I’ll definitely scale out (and probably in).
@Jamie: I am always open to suggestions, especially from a master like you. :) I hesitated on the entry to make sure it was going to move. I saw the double inside bars on the 4th and 5th, but I wanted to make sure it would clear $20.00 as well. I guess I was too conservative. As far as the exit, I kind of froze with the 8th bar shadow and watched it fall back down (DOH!). Maybe a rational profit protection stop could be a 50% retrace into the previous candle if that previous candle has a long upper shadow. Please comment anytime! I need all the help I can get. :)
@Richard: Good thoughts on the stop location. I just realized that a trader may naturally give significance to their entry point, but this can be a naive mistake if it’s not a true support/resistance level. Very good observation–thanks! *Adds that to list of Articles to Write* And if everybody gives me their $0.02, I’ll be a millionaire in no time. :)
@Abe: To “Botch” an exit–to screw it up, to basically blow the entire chance for profit. I’m full of botch-skills. ;) Thanks for the management compliment. Not losing money is the first step to trading success.
March 20th, 2007 at 11:13 am
[...] white space, the second bar was a doji, followed by two green bars. It reminded me of the setup in my TTWO trade. I took an entry above the high of bar 4, knowing that it was a higher risk trade since it was [...]