This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
This trade in Amkor Technology, Inc. (NASDAQ: AMKR) is a great example of how Rule #1 has helped my trading. It’s also a great example of why you should add two ticks around your entry/stop prices based on support / resistance levels (thanks, Jamie!)
Setup
I missed all the great moves in the morning, so I was looking for something that was trending up strong. I maxed out my per trade risk at 2%. I saw AMKR making new highs and jumped in, hoping to ride the move up:
I chose a stop two ticks below the low of the 13:30-13:45 bar. I top-ticked it at $13.57, which is a bad way to start a trade. Sideways for a while, and then it rose on up. Suddenly, at $13.64, it did this:
Play by Play
I kept my cool during the first decline, and watched it rally back above my entry. But then, it went down again fast. I was watching the ticks down, and there wasn’t any volume there, so I thought it would retrace back up allowing me a better exit point near my entry. It dropped to 1 cent away from my stop! I would have lost 1R if I hadn’t used Jamie’s rule. Back on up, and I determined that my trade was not proven correct and I got out at $13.55. I can handle one drop and recovery to breakeven, but the second one is a gift–I took it. I’m also pleased about my read on the price action and that I didn’t panic sell near the bottom.
Lessons Learned
Before Rule #1, I would have stayed with the trade, letting my stop determine my exit point, and I’d probably get a 1R loss as a result. I probably should have bailed after the first drop and retrace, though, to really use Rule #1. Either way, I’ve taken a new focus on cutting losses and it helps me to stay in the game for the long run. After three trades so far this month, with two losers and one win, I’m still up on my P&L and I have a positive expectancy (0.45R).
Trade Summary:
AMKR Long 317 Shares
Entry: $13.57, Stop: $13.43, Target: $14.00
R: $44.38, Exit: $13.55
P/L: -0.14R, or ($6.34)
Trade Grade:
| Stocks Mentioned In This Article | |
|---|---|
| Stock | Links |
| AMKR |  |  |  |
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
