Looks like you made some money today with exm.
Anatomy of a failed trade
- Thread starter omegapoint
- Start date
Looks like you made some money today with exm.
I keep looking at the chart of EXM, and want to buy. Tell me where I'm going wrong here (if wrong)
What was your target???
you had a gap of 84.50 - 86.50 that failed to hold as support so it becomes resistance, also you had a hammer low of 84.33 that was support that also failed and became resistance, from the time and price you show I can only figure that you bought when it bounced off 83.15 that should have been your area where you say you were wrong, there has to be risk- reward , support and resistance areas to target for, easily said not always easily done but you have to know where other guys will sell above before you take the trade and where you are wrong if it doesn't work, on a 15 day 10 minute chart all the averages were rolling over and it was range bound right at 84.00 and the falling 10 ma that just went thru the 50ma, can't get the charts to post but if I can i'll post it, on a 2 day 2 minute chart 84.16 was jamming right into the falling 20ma that had just crossed the 200ma
May I ask if you bought it the first time it hit 84.16 or after it bounced from that level and pulled back again? I looked at the chart and the first time at that level was actually a nice setup. Coming down to support of the 20ma on 15 min. It bounced almost 2 points. By the second time it had already dropped below that MA and there really wasnt any other point in the day where I can see a low risk setup other then a scalp later in the day off the double bottom at 80. Best thing I can tell you is never buy a falling knife second time trough a price level. Thats where sell stops are sitting from earlier buyers and there is a much greater chance that it slices right through that level then reverses again.
heres a chart don't know if it will post, i'm assuming you bought the bounce off the green line
There is only one reason why I would call this a failed trade, Your stop was way too wide. On a stock like DRYS personally I would never give it more than a 0.40- 0.50 stop, and trail it aggressively at that. With reversals if you're wrong about your entry you usually find out right away. No need to prolong the pain at this point, just get out quick and watch for the next support level. Playing reversals is typically always a crap shoot but when you do catch one they can really run. If you manage your risk properly you can be wrong most of the time and still make money.
But on a side note, IMHO reversals are probably not the best beginner strategy especially on volatile stocks like DRYS. You need to be fast.
cheers.
But on a side note, IMHO reversals are probably not the best beginner strategy especially on volatile stocks like DRYS. You need to be fast.
cheers.
EMRGlobal hit it with the tight stop.
I would not think this is a failed trade. first you entered it based on your called falling knife, actually not falling knife, it is just way down, or maybe you think that is support in pullback. second you do cut loss, I do not blame you for 2.5 loss cutting since 3~5 points swing to DRYS is pretty normal, if you try to use 0.3~0.5 point stop loss to swing day trade DRYS, is not reasonable, at least 1 point is better, I just do not know what is your trading plan? it is a swing day trade or just tick-to-tick scalping trade? if it is swing trade, it is good. if it is a scalping trade, then the loss should be around 0.3~0.5 or normal two to five minute bar movement.
When you look at price movement you have to try to apply some logic to it. Of course there is no one answer.
In this case you had a gap opening making 2 month highs. That is very bullish, the willingness to buy at 2 months highs.
With an opening like that you need to look for 3 things.
First that the stock just keeps rising with out looking back. Second, after the gap opening it drops to close the gap then starts its rally.
Third, price keeps dropping as the strong hands use this opportunity to sell.
Once we had the buying enthusiasm on the open and then we dropped to even 84.25 sentiment changed,now all those early buyers are being squeezed. There was a small attempt to rally off of even (84.25) that brought more selling.
Your not going to get much confidence from buyers on a stock that gaps opens a 2 month high then is sold off to negative for the day. Yet that is exactly what you did.
I don't see a knife. This is a classic "key reversal"...very bearish
If you only looked 6 days earlier Feb 7 you would see the same key reversal bar in the opposite direction that led to a $25 move in six days.
Your weakness was not to have a profit exit. Your entry point could have picked off a dollar but not a very good Sharpe ratio.
You were buying in no-mans land.
As for volatility, There is never to much or too little, its all about forming the right trade.
In this case you had a gap opening making 2 month highs. That is very bullish, the willingness to buy at 2 months highs.
With an opening like that you need to look for 3 things.
First that the stock just keeps rising with out looking back. Second, after the gap opening it drops to close the gap then starts its rally.
Third, price keeps dropping as the strong hands use this opportunity to sell.
Once we had the buying enthusiasm on the open and then we dropped to even 84.25 sentiment changed,now all those early buyers are being squeezed. There was a small attempt to rally off of even (84.25) that brought more selling.
Your not going to get much confidence from buyers on a stock that gaps opens a 2 month high then is sold off to negative for the day. Yet that is exactly what you did.
I don't see a knife. This is a classic "key reversal"...very bearish
If you only looked 6 days earlier Feb 7 you would see the same key reversal bar in the opposite direction that led to a $25 move in six days.
Your weakness was not to have a profit exit. Your entry point could have picked off a dollar but not a very good Sharpe ratio.
You were buying in no-mans land.
As for volatility, There is never to much or too little, its all about forming the right trade.