Tuesday, August 23, 2011

One "so-so" Trade

As I continued to reject setups that didn't meet my strict criteria, and watched them produce anticipated profits, I thought I had come across a setup that had a good potential.  But it ended up getting stopped out.  In hindsight, it really wasn't a highest quality setup, nor did I exit at the first sign of failure.  So, selection wasn't good, and execution was mediocre.

In the past, one losing trade would make me try harder to immediately get back my losses, potentially setting me up into revenge trading mode.  It's like the old Lay's potato chip slogan, "Betcha can't eat [trade] just one."  Now, one of my trading rules is to have a 15 minute cooldown after a loss or trading error.  Today, I only had one trade (a loss), so yes, I DO have the ability to just trade just ONE and be done!

GSK - 5min, buy above high of 10:35 bar - Beyond the FE16 setup
GSK-5min-at time of setup

Flag #1

Now that I'm in armchair trader mode, it's easy to see that even with the gap up (although not above the prior day high), this stock was choppy in the opening range, with little of the typical "juiced" behavior of a gap stock.

Flag #2

However, it made a relatively strong move, and what attracted me to this was the consolidation that was taking place for at least 4+ bars.  And when a trendline of the swing lows were drawn, it intersected with the big green bar seen on the chart.  That was a sign there were many looking at this chart.  But the other concern I can clearly see now are the wicks in the bars during the consolidation.

Once the stock broke out and didn't run, there was an opportunity to exit with a reduced loss.

GSK-5 min   Uh oh....

Flag(s) #3

There was a big red bar that broke and closed below the (1) $43 support, (2) the upward sloping trendline, and (3) the 5ema.  If that wasn't enough of a reason to get out, then I'm not sure else is.  I knew I should be exiting, and that this was likely a fakeout breakout.  However, I was thinking to myself how nearly all the other trades I passed that morning worked well, so this one should recover.


I let it hit my stop below the consolidation, increasing my loss by maybe $.10 over the more ideal exit, and decided that's my first and last trade of the day.  It was time to evaluate what went wrong, and why I took this trade.  I believe now that since I saw many successful trades go by, and saw something better in this GSK setup than reality.  I would grade this setup as barely a C, a trade I should NOT have taken.

Next Step

Time to refocus and build some exercises to help me visualize and burn into my mind, (1) What is a quality setup, and (2) How I act upon seeing it.

1 comment:

Flowtastical said...


After hours I am looking at my pnl. I am circling the trades I did well and remembering everything about those situations.

How the stock looked. How I felt. How was my conviction in that trade.

I want my pnl to look just like those great trades and every other "C Trade" I made doesn't even exist anymore.

Tomorrow is about 100% execution of those great setups I executed today.