Scratched Trade on VAL

Today I finally followed through on something I’ve been meaning to do for a long time… I’ve been wanting to increase my position size as my trades go in my favor (sometimes called “pressing” winning trades). A lot of people (including me, not long ago) reduce their positions over the course of a trade to take partial profits. I stopped doing this a while back, because I found that I rarely sold the second half at a higher price. So, it was actually making me less money, with more time in the markets, and more commissions. Since then, I’ve wanted to try the opposite and press my winners (I even mentioned it waaay back in my StockTickr interview last August). But, I’ve rarely had winning trades that lasted more than a few minutes! So, I haven’t had many opportunities to practice.

The Trade

Today, I made a trade on VAL on a break of a narrow-range candle just under the HOD. I actually waited for the price to clear the high before getting in the trade. This was around 28.70. My fill wasn’t great (average price of 28.725), but I actually took this as a good sign, since it never hurts to have lots of buying on a breakout.

I expected there to be some resistance at 28.75 (minor round number), but once we cleared that I thought we’d go straight to 29. Well, the price did stall at 28.75, as expected, but just momentarily. As the price was pushing through that level, the overall indices were all pushing to new highs, and the TICK was in the 800’s and above. I thought, there will never be a better time to try pressing a trade. So, I bought more as the price reached 28.76. I got another sucky fill, at 28.79. This time, though, I was less pleased, because I didn’t see any volume to go with it. Instead, this felt like one of those empty “you are about to be screwed” fills… the kind where the specialist makes easy money off you and all you can do is watch.

Press Reasonably!

Of course, it goes without saying that when you press a trade, you should also raise your maximum stop-loss point (otherwise, your maximum risk is more than your original risk, which is a no-no. There’s some subtlety to it, because you always want your stop loss to be at a reasonable point, in terms of the price action, so that has a major influence on how many additional shares you can safely buy. I asked myself, “if this trade stays healthy, what’s the lowest I’d expect it to fall?” I thought it shouldn’t go back below the previous HOD, at this point. Anything up to that would still be reasonably healthy, though (pullbacks to the breakout point are pretty common, after all). So, I made sure my revised stop loss was just under that point (28.68ish).

The Trade Continues

Well, as I expected after my “fuck you” fill, the price fell from 28.80 a good bit before rising again. Not too scary, but not fun either. I breathed a little easier when we cleared 28.75 again. At this point, I again asked myself, “what do I expect to see, if this is still a healthy trade?” I decided, this is only a healthy trade if it can make another new high. If it stalls out again at 28.80, I’m getting out.

Well, we reached 28.80, and prints started becoming awfully infrequent. When the ask fell back to 28.79, I sold my entire position. I got yet another ugly fill, at 28.76. Good grief, you’d never know this stock was doing twice its normal volume, and over a million shares! All in all, I made 0.02 R. Thanks for playing! Better luck next time!

As you can see on the chart, the price did nothing but fall after my exit. It always feels good when that happens…. makes you feel like you knew what you were doing!