In review of today, the SPSN trade had me spooked. At first, I could not get a fill on IB although I moved the indicator to "market". No fill for 5 minutes. Then I got a fill and had a stop placed. The price wondered down to the stop, but the stop did not execute. This scared me so I closed my position.
However, the trade went almost as planned. The V bottom wasnt as fierce as a I liked and the chart was simply moving too slow.
These are the problems with real daytrading. Not everything works as planned like IB not filling the order or the stops not working. You think and believe there will be a good retracement, but the price action looks stale and spooky. I think SPSN will retrace up to the 50% Fib line, but I was just interested in trading on the day. I didnt want to wait a few weeks to see if my thesis comes true.
About an hour or two later, I looked at the screen and saw how the SPSN price was at 10.2. The reaction on my face was "f*ck".
The SOLF trade is not over yet. On April 12th, the low of the day was at 12.66. Then on April 16th, the high was at 17.69. Retracements are usually 50% the height of the advance.
17.69-12.66= 5.03
5.03/2= 2.52
17.69-2.52= 15.17
On April 17th, the price was at 15 dollars. So the price retracement has been achieved. However, we usually see a double or triple bottom before we move on to the next leg. That double bottom will probably be achieved tommorrow at 15.
Once the price target of 15 is reached then we can move forward to 20.
15 is my price-line and no lower. This is not my theory, but the DOW theory and it shall be tested.
I have a lot of knowledge, but real trading requires more then just knowledge. Its like football. Knowing about football is one thing, but playing the game is a different story. It requires coordination, timing and not being afraid to make a decision.
My next trade might be in MNT. There was a waterfall selloff in the afterhours. Again, we are looking for a double bottom. When the price inflects at the double bottom, we go long and set a tight stop underneath the bottom point.
I will be looking through the scanner tommorrow to see if this is the equity to trade. I love earnings season because these equities can be pushed down to, for example, 9.75 and then rally up to 10.25 in a matter of an hour. 5% in an hour, not bad. You just cant get that kind of predictable price action.
We know that stocks usually dont go to 0 and they dont keep falling. A massive 20+% fall is usually followed by a bounce. Here is a famous example.
Sept 3rd 1929 DJIA HIGH= 386.10
Nov 13 1929 DJIA LOW= 195.35
Height= 190.75
Dec 7th, 1929= 265.65
190.75/3= 63.58
63.58+195.35= 258.93
This is so easy to calculate on paper, but when your in the middle of a market crash during the Great Depression, its a hard call to make.
Just like today was a difficult call where I got spooked and closed the trade before it could run.
This is the challenge behind trading...This is why hedge funds and institutions like to employ former athletes. They want people who have the balls to make these decisions. This is my biggest fault right now. I have to get my emotions under control.
Those who threw themselves out of windows in 1929 were wrong. The price of stocks do not go to zero. Instead, they could have just taken the loss and sold. Then waited until the inflection point. They would have made some cash back. I wonder if the Fibonacci concept or the Dow theory was widely popular back then.
During panic sell-offs, we will see a bottom. The bounce will usually be 1/3 to 1/2 off of that bottom. Using 1/3 as the bounce point and selling right before then is the safest.
The hard part is determining the bottom. I say a stock has to double bottom before I have confidence, but it can also have 1 bottom or 3 bottoms. Finding the bottom is the difficult part, but the rest is easy.
