This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
Here’s my trade from today in Continental Airlines, Inc. (NYSE: CAL) that was the final straw in my daytrading struggle:
The One I Missed
I was watching this setup, and then missed the entry due to a distraction. It would have been a great trade:
I was watching for a breakout of the base at $39.40. It went on to hit the pivot point resistance from a prior day, which was my target.
The One I Took
After missing the last one, I saw another base set up:
I picked a higher interday pivot for the target, and was watching the prior high just above $40 for potential resistance. At 39.90, price dropped on volume, but the bid/ask spread widened, so I took it as a cleanup of panic sellers. Price then retraced to my entry point and went on to hit my stop.
Mistakes: I keep messing up my entry, stop and targets. I pick a target that is too far compared to my timeframe and entry setup. I pick a stop that is also too far relative to my timeframe and entry setup. On short timeframe trades (1 min) I have taken, I watch price go up in my favor and then slide right back again for a breakeven or a loss. I don’t have a feel for when price is retracing or when it is reversing, so I either get spooked out, and the trade goes on for a win, or I hang on to avoid a whipsaw and price really reverses.
So there you have it. My last daytrade until I can get in a better situation through capitalization and skill. Thanks for reading, and thanks to all the truly great daytraders that have helped me. I hope to join you someday.
Prospectus, I liked the CAL trade. Just tighten your stops appropriately as trade progresses. No reason for a full R1 loss there, IMHO.
I really like the first setup. It had a long basing period, followed by heavy volume after the break.
Have you considered using buy stop orders to ensure that you don’t miss a good setup like this?
Yeah, when a stock makes a swing low, and starts to recover, I think that’s almost always a good time to raise the stop loss point. The reasoning is, going on to make a lower low would seriously damage the uptrend that you hope you’re in. So, maybe at the 11:48 candle, I’d have raised my stop to 39.84 or something.
Although, who am I kidding? I’d have gotten scared out during the sudden high-volume drop. :-)
@Zoomie: How would you have tightened on this trade? I’ve been of the school of “set and forget” when it comes to stops, so I could use an example.
@Jamie: Yes, I have, but I waver when it comes time to commit. If I get filled, I may not be immediately available to set the stop or manage the trade. But foremost, if I take the entry and it’s a bad setup, I wasted a daytrade. So I’d wait for some confirmation and get in a bit late–part of my whole daytrading problem. That and my stop / target strategy isn’t right, as Zoomie pointed out. I can learn how to spot a good setup from a static chart, but the dynamic trade management is hard to learn from a static chart. I wish you posted on Wallstreak, or made a trade video or something!
@Richard: So in this case, moving the stop to breakeven would have been the right thing to do, as it coincided with the swing low.
Prospectus, I wouldn’t trade off of a 1 minute chart. The shorter the timeframe, the less reliable the candlesticks are for price action determination. But if I did, I would have raised my stop after the pullback and subsequent rally above the swing high. I raise my stops agressively to break-even, but no further-unless there is a very obvious pivot. After a trade goes your way for R1 or more, I would watch it very closely if it retraced much below your entry. That would be the 50% retracement of a mini-rally (on dummy trades that is)! Buyers should be stepping in if the stock has a chance. Sure, you will miss some, but I am not looking for the maximum number of wins, I am looking to preserve my trading capital. Some stocks take a bit longer to progress, and you just need to get an eye for those. Cut your losses, but not your profits. I am talking break-out plays here. That is all I really know how to spot ;)