Another Retail Trade: Lehman Brothers Holdings Inc. (NYSE: LEH)

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

No prop account yet, so another retail day for me. The market was in a funk today, not really going anywhere. I decided to take the risk and force a trade in Lehman Brothers Holdings Inc. (NYSE: LEH). I am responsible for all of my trading results, including these.

The Setup

I saw LEH making what looked like a rounding bottom on the 5-min chart:

I wanted to buy a break of the round number at $71.00 with a stop below the base at $70.69, initial target the intraday pivot point at $71.75.

The Trigger

I described all of my entry and trade management in real time on Wallstreak. Read this if you want the details. (By the way, thanks again to Ugly for making Wallstreak! I really like how I can reply to my own thread, leaving a coherent conversation about the setup I see, the entry and the trade management and exit, as well as afterthoughts.)

The Trade

Here’s the 5-min chart of my trade:

I managed the stop as shown. I traded off of the 5-min timeframe, but I watched this 1-min chart to get a feel for the underlying action:

On this timeframe, I saw the lower swing high and moved my stop up in case the breakout I bought didn’t hold. I’m glad I did, as I was stopped out before LEH moved on to hit my original stop.

The Takeaway

I forced a trade on a choppy day and accepted the extra risk, so I’m responsible for this loss. I’ve made peace with myself over it, though. ;)

I’m glad that I limited the loss to 1/3 of my initial risk. I usually have winners and losers both average about 1R, but for July I’ve been closer to 1.3R average win to -0.77R average loss, with a 63% win rate. That’s huge for me, as I now have a positive expectancy over the last two months! I’ve always been negative or flat, so I can see the progress I’m making as a trader. As I go prop, I’m excited to be able to use smaller stops to increase the size of my winners in R terms, even if it sacrifices my win rate a bit. I tend to place them wide, because when you’ve got only one daytrade for the day, you don’t want it to be a loser if at all possible, which also limits your upside in R terms (hence my old 1:1 average win / average loss ratio).

Trade Summary:

LEH Long
Entry: $70.95, Stop: $70.69, Target: $71.75
Exit: $70.91, P/L: -0.33R

Trade Grade:

Stocks Mentioned In This Article
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This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com