How I stopped making the same mistakes in 2010 and started to make more money

[NoDoji]

TF, I am sorry about that loss, and I've been there more than once.

I just looked at the SWM chart and early on it looked like a nice long for the bounce. I'm curious, did you not use a hard stop or was it slippage that killed you on that crash? I always wonder what slippage would be like if a stop was hit on a move like that with 500 or more shares.

Hey, remember every day and every trade is brand new. Be careful about revenge trading. Keep to your rules and you will come back from this!

 

[NoDoji]

Quote from oraclewizard77:

Looking at SWM, it went down due to poor earnings. Then it went down some more due to poor guidance. For those that don't understand, technical analysis is the study of price. Price is a reflection of FA and can be impacted by reports. So what you should have done before trading a stock based on TA is to see were there any reports released or being released. If so, the best option is to not trade the stock during the release of these reports unless you are gambling based on buying call or put options which at least will give you a hard stop that the market can not break.

You know, that's an unfair assessment of this trade.

When earnings are already on the table the night before and they're really good, but the lowered guidance causes the stock to open gapped down 8%, almost $6 a share, and you go long because support is established and a higher low is established and the price action is actually quite stable at that point, you really really really don't expect a sudden selloff of another $20+ dollars.

These are very rare, but real, possibilities. I'm sure TF knows what he could've done differently and will correct for this, but still anything can happen.

 

[oraclewizard77]

No, I am not wrong. When really bad stuff comes out against a stock, what you get is margin calls, because longer term investors are long the stock on margin. So as the stock goes lower, you get more margin calls unless the stock was heavily shorted which may provide support as short sellers close their positions at a profit. You need to look at ATR of a stock. If it normally trades 6 points, that is different, if it normally trades 1 point a day, then you are going to smacked down hard if it breaks levels.

A nuclear bomb goes off in NY, do you go long at support, I think not.

Quote from NoDoji:

You know, that's an unfair assessment of this trade.

When earnings are already on the table the night before and they're really good, but the lowered guidance causes the stock to open gapped down 8%, almost $6 a share, and you go long because support is established and a higher low is established and the price action is actually quite stable at that point, you really really really don't expect a sudden selloff of another $20+ dollars.

These are very rare, but real, possibilities. I'm sure TF knows what he could've done differently and will correct for this, but still anything can happen.

 

[NoDoji]

Quote from oraclewizard77:

No, I am not wrong. When really bad stuff comes out against a stock, what you get is margin calls, because longer term investors are long the stock on margin. So as the stock goes lower, you get more margin calls unless the stock was heavily shorted which may provide support as short sellers close their positions at a profit. You need to look at ATR of a stock. If it normally trades 6 points, that is different, if it normally trades 1 point a day, then you are going to smacked down hard if it breaks levels.

A nuclear bomb goes off in NY, do you go long at support, I think not.

Wait minute, there was no "nuclear bomb". This stock started the day as a solid "dead cat bounce" trade. It had a serious gap down on slightly lowered guidance, and established decent support and held up well at first. It wasnt' really "bad stuff" on the earnings and certainly not nuclear. Yes, this one had climbed a lot and that explained the exessive gap down for the open. The climb was based on strong growth estimates and even though they beat earnings and revenues nicely they lowered that growth estimate by a bit. But really there was nothing indicating an additional $20 drop was coming.

Now I agree that the lower high was the signal to take your profits or go short, but if you didn't do that and if you either didn't have a hard stop or had a stop in place with a large size position, that selloff would easily have cost you a chunk of change.

 

[oraclewizard77]

Poor Robert, just blew his account out on this stock and you are being an armchair quarter back. What matters is the hard right edge in real time, and sometimes we don't take these trades because we know from experience why the probability of success is low vs extreme risk and little reward.

Quote from NoDoji:

Wait minute, there was no "nuclear bomb". This stock started the day as a solid "dead cat bounce" trade. It had a serious gap down on slightly lowered guidance, and established decent support and held up well at first. It wasnt' really "bad stuff" on the earnings and certainly not nuclear. Yes, this one had climbed a lot and that explained the exessive gap down for the open. The climb was based on strong growth estimates and even though they beat earnings and revenues nicely they lowered that growth estimate by a bit. But really there was nothing indicating an additional $20 drop was coming.

Now I agree that the lower high was the signal to take your profits or go short, but if you didn't do that and if you either didn't have a hard stop or had a stop in place with a large size position, that selloff would easily have cost you a chunk of change.

 

[NoDoji]

Quote from oraclewizard77:

Poor Robert, just blew his account out on this stock and you are being an armchair quarter back. What matters is the hard right edge in real time, and sometimes we don't take these trades because we know from experience why the probability of success is low vs extreme risk and little reward.

OW, your commentary is armchair quarterback as well. There are many ways to trade and trading the news is a very common profitable strategy. You can't predict an SWM move like that. It's extremely rare.

Lescor lost a chunk on SWM too today; the setup it fit his trading strategy very well; he's an amazingly profitable trader overall. It's not taking a trade like this that makes or breaks you, it's how you manage it.

Robert and thinkfirst both said they violated their rules. I have no idea if Lescor violated his rules or if he simply bailed at his max loss. If you take a large loss because you jump in without a plan, change your plan, or violate your rules, you can correct that.

Trading news-based gaps is a huge profitable strategy that many traders make a living on. If SWM suddenly bounced back 50% and these guys made $14,000 gains, would you still have made your comments about what a poor decision this kind of trading is?

 

[oraclewizard77]

Yes, NoDoji, I would have. I know most people don't like Cramer, but I am sure if someone called his show today and asked what to do about SWM after it reported a bad earnings, he would say sell the stock on the lightning round. The reason is this is what hedge fund managers are doing and that is what he was someone who successfully managed $ millions for rich people and made them profits over years of trading. Hedge funds MOVE the market, so they are more than happy when some trader or investor takes the opposite of their trades. Don't you think they can manipulate TA just so this happens? They need people to want to go long so they can unload their shares.

Also, point of fact, every trader who traded this stock on ET lost money, so saying you would have made money going long is correct, is silly. Its like saying if you were the QT on the losing side of the super bowl game, your team would have won.

I remember once I was short a stock, an analyst came out and recommended buying the stock, I bought it back at break even, but I forgot the golden rule, analysts don't work for us they work for the hedge funds, if I stayed short I would have made the profit target.

Quote from NoDoji:

OW, your commentary is armchair quarterback as well. There are many ways to trade and trading the news is a very common profitable strategy. You can't predict an SWM move like that. It's extremely rare.

Lescor lost a chunk on SWM too today; the setup it fit his trading strategy very well; he's an amazingly profitable trader overall. It's not taking a trade like this that makes or breaks you, it's how you manage it.

Robert and thinkfirst both said they violated their rules. I have no idea if Lescor violated his rules or if he simply bailed at his max loss. If you take a large loss because you jump in without a plan, change your plan, or violate your rules, you can correct that.

Trading news-based gaps is a huge profitable strategy that many traders make a living on. If SWM suddenly bounced back 50% and these guys made $14,000 gains, would you still have made your comments about what a poor decision this kind of trading is?

 

[Redneck]

TF

You made your rules when you were of a sound, quiet, logical mind..., and when you were away from the market - I'm certain…

You get trading and emotion takes over (imho) then you throw your rules (your sound, quiet, logical thoughts – which YOU established to protect yourself) out the window


There is going to come a time (if not already) where you’re going to quit trusting yourself, where you’re going to quit listening to yourself, and where you will start to question yourself - to your very core... Then the shit WILL hit the fan…


Step back…, get grounded… and get it in your head to follow your rules come hell or high water...

Then follow them

If you don’t like your rules – rewrite the damn things – otherwise follow them to the letter…, without question…, and without hesitation… 100% of the time….


Please feel free to tell me to go “f” myself if you wish Sir

RN

 

[thinkfirst]

Day 1

Lately I was wondering how to get to the point where I would not care about my p/l and look at it at as just numbers. Guess what, for some strange reason -$14K from yesterday is just a number. Don't give me wrong it still hurts, mostly because I ave $300-500 a day and right now have no idea how to recover from it fast. But it is just a number…

Trading was easy today. I was just like robot, executing my rules, no thinking, no emotions, cold execution.
Why? Because I got it, SWM loss was 100% because of my own mistakes, I'm my own enemy and if I want to
stay in this business I have to stick to my rules.

Long BGC - didn't reach my target, got stopped out, had no signal to re-enter
Long RIG - same as above
Short MSG, IB didn't have shares so I had to use Tradestation to short it, covered at target

-50 total

 

[thinkfirst]

Quote from Sean McLaughlin:

Ouch. It hurt just reading your post.

Dial it back. Don't give up. But MAKE SURE YOU LEARN A LESSON FROM THIS EXPERIENCE.

Without knowing ANYTHING about your trading style. The above numbers just don't add up. You have three trades that are +/- three figures or less. And then you have a loser that is 5 FIGURES!?!?!?

That should NEVER happen.

You don't need me to beat you up. You will do that all by yourself. Take tomorrow off. Enjoy the 4 day weekend. Spend Saturday or Sunday morning reassessing what you're doing. And put together a plan. A real plan. Write it down.

Best of luck.

Sean

You are right it should never happen. I have max loss per day now also.