Well, far from not trading… I found a lot of little trades to make. Unfortunately, like I predicted, this was not my kind of market. I like to get in at surgically precise points, where price moves right away. Instead, today, a lot of times I’d take a loss, then re-enter for a gain. The moves were just slightly too choppy for me, taking me out of the initial entry. Also, my performance after the fed announcement wasn’t too great, because the time it took to get my fills made me jumpy. I could have made a lot of money long NVDA… instead I made 3 small gains and 1 small loss on it. WEAK.

As a result, I made relatively little money today. But, it was fun.

I talked 3 freaking seconds too long for youtube’s fickle tastes… so instead of editing it on my mac, I downloaded a shareware AVI splitter and just split it into two parts. Faster, and should avoid the aspect-ratio black bars that make things harder to read.

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

I only took one trade today, since I had a full schedule of other garbage (aka work) to do, and didn’t have time to watch the markets past about 11 ET. My trade was in LEH, which was poised to gap down at the open. I entered in premarket trading, anticipating a larger selloff on the open. I’ve noticed this phenomenon by watching gappers move further in the direction of the gap in the first bar. My play was always to enter on a reversal after a retrace, as a Trader-X or Jamie style setup. This time I decided to play the first move. My entry is the orange line, and my stop was 2 cents above the premarket high. I covered half at the light blue line, and moved the stop on the rest to breakeven. I hoped to get the 138% fib extension, but LEH quickly retraced back to the open and stopped me out on the other half.

LEH made it to the 119% fib at the close, but I was long gone by then. In the end I made +1R on the trade, and fairly comfortably as my trade was in the black from the open onward. Since I discovered that I can trade outside of market hours with my prop firm, I’ve been looking for more trades like this. Nice to start out with a win first thing in the morning. :)

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I think it was 6 trades. The first four were pretty disappointing, but the last two were great. I have found that I am getting very few trade-ideas alerts this week. Since I am mainly alerted about 3-day highs and lows on strong volume, that tells me that stocks are either stuck in their recent range, or dropping on volume that’s not too spectacular. A strange thing yesterday was that almost all my alerts yesterday were on NYSE stocks. Strange days…

Like I’ve mentioned before, I found myself mostly unable to participate in the massive drop at the end of the day. . . stocks are pretty much falling all willy-nilly and not in a way I can short them in a controlled fashion. Maybe I should consider trying to just scale into a move in progress if these days keep happening.

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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
Stock	Links
LEH	| |

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