Need some help to analyze a simulated position that didn't work out (BJRI 10/25/2019)

S

stevenmac22

Hi Everyone,

I am not sure if this is the correct area that I can post this, but thought since it is related to Technical Analysis, I considered it may be the appropriate place to make this post.

I am trying to go back to analyze some simulated trades to see why they didn't work out. For stock: BJRI on October 25th, there was a gap up. So my simulated buy was at the open the next day then on October 26th. You can see days after it pulled back and then began losing.

https://www.tradingview.com/chart/?symbol=NASDAQ:BJRI

It resulted in a simulated -7.61% loss with the stop loss being triggered within 4 trading days. Not good.

A few questions I have been trying to answer for lessons learned are:
1) Should I have stayed out of this all together? but why?
2) Should I have stayed away from a gap up like that? Will it have a tendency to most likely pull back with gap up like this?
3) Is there some sort of indicator or support/resistance, something in the volume that said I should have stayed out? Was there something on the bigger weekly chart that said not to enter the position?
4)Should I have not entered into the position if the stock opens down?

Thank you for any insights you can offer through your experience and mastery to help me understand where I failed and what I could have looked at to make a decision. I am trying to be diligent before putting money on the line.

Lastly, is it okay if I continue to bring additional stocks that I am studying to get insights and advisory for lessons learned from the community? I have never attempted to study from a post-mortem perspective and actually feel like I am starting to learn by digging in deeper.

Thanks to all for any help with this,
Steven
 
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You definitely need to find constants.
The only ones are mostly probabilistic.

Why a coin landed head or tail ?
It’s a fool errand’s game.

You bought a gap up.
A bull ain’t always hidden behind it.
What’s the likelihood of X or Y knowing Z ?
You can think of more priors (Z1, Z2, Z3) ...
(Contextual Analysis)

You might look for a counterfactual.

As @deaddog said ...
A good bet can have a bad outcome.
Does your bet had a positive expectation ?
Did the bet size was appropriate for its risk, advantage ?

Adjust dynamically.
Increase, decrease your position,
Based on the expected value of the bet.
As you update informations about the situation.
 
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Correct, I did follow the trading plan/rules. In simulation of 30 trades, I had 19 win and 11 lose (8 that just immediately turned against me with no chance - hit right to the stop loss, with 3 that had gains and then resulted in a loss).

For the 3 that made gains, I need to see how I could have kept those gains.

For the 8 that just turned south right off the bat. BJRI was one of those. Also, I found that I exceeded my stop loss risk to 1.75x the amount I planned for.

Hopefully, I can determine how I could have removed some of those 8 losses based on technical reasons. Thanks for responding.
 
You need to sharpen your TA skills then.
But be careful because you might find reasons for your losses while some gains share the same attributes.

In your exemple, the stock was weak and 45 was certainly technical level. You simply bought the top of a retrace.

Sh*t happens.

19 winners for 11 losers is great.
Even with a 1:1 risk, reward.
 
Hi Sekiyo,

Of the 19 winner:
Total R: 136.21
Average R multiple: (expectancy) 4.54
Average # of days positions held: 40.50
Total Gain (percentage): 452%

- 22 stocks (73%) hit break-even 1R (1:1)
- 22 stocks (73%) went on to hit 2R (1:2) - 1 stock hit here and then turned to a loss based on stop-loss hit.
- 21 stocks (70%) went on to hit 3R (1:3) - 1 stock hit here and then turned to a loss based on stop-loss hit.
- 19 stocks (63.3%) went on to hit 4R (1:4) - 1 stock hit here and then turned to a loss based on stop-loss hit.
- 08 stocks (26.67%) went on to hit 10R+ (1:10)
- largest R were on 3 stocks (20.35R, 12.77R, 11.26R)

Also, I was able to determine that I had 4 stocks that hit 10R, but by holding for longer, the plan actually gave up a total of +6.7R as they resulted in less R between (8.36R - 9.04R).

Of the 11 losers: (stop loss was set to daily ATR)
Total R: -18.11
Average R multiple: (expectancy) -1.72 (per point above, -1R violated and was not held, slipping to almost -2R)
Average # of days positions held: 13.64
Total Loss (percentage): -1.85%

Out of the bag of marbles, my winners helped to cover the losers. I am generating a lot of insights by looking at the data in this way.

What I recognize is that this is all before the craziness in the market. Eventually, some sort of forward test has to be done as I will more than likely need to create different trading rules for the condition of the market.

30 is such a small sample and somehow I need to test a 1000 of these just to see what will happen and do a forward test. I recognize I could be months out from actually getting to put any real money at work, but I am looking for confidence that my trading plan will preserve capital, make at least a 1:2.

If I can remove some of the losers from the list or keep the gains made before they turn into losers, that will be a goal for me as I make improvements.
 
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Sekiyo said:
You need to sharpen your TA skills then.
But be careful because you might find reasons for your losses while some gains share the same attributes.

In your exemple, the stock was weak and 45 was certainly technical level. You simply bought the top of a retrace.

Sh*t happens.

19 winners for 11 losers is great.
Even with a 1:1 risk, reward.
More...

Also per your point, this was strictly upon technical indicators flashing a signal, so I didn't use any other TA (weekly or daily support/resistance evaluations, divergences on the indicators vs chart). My TA skills are weak and am deciding to sign up for a few courses to close the gap and incorporate what I learn into my trading plan.
 
The gap up was event driven(earnings) rather than anything technical. It's always good to find out why something moves, especially a gap. All you'd need to do would be look at a historical chart of how the stock did after earnings reports in order to formulate an opinion of what might happen next, but still, earnings moves are pretty much outside of normal daily action/reaction. 3 months of regular activity, one day of earnings driven activity.
 
Old Coot, that is something I have not looked at regarding any earnings announcement. As a general rule, should you avoid a stock until those announcements are given?
 
I used to make a lot of money straddling options at earnings. There are some horrific moves!! My favorite day of all time was July 16, 2004. On the 15th, NFLX was set to report earnings after the bell. On into the afternoon, it was trading at 32.50, and I bought 35 calls and 30 puts for 25 cents each. At the close, it was trading at 32.00. Options expiration was on the following day, too(16th)
Lot of action after market, but I was sitting on 20 contracts of each, and I knew I was likely to be in the green, The morning of the 16th, NFLX opened just under $27. And drifted down all day long. All the was to $23. A 28% selloff on earnings.
No TA could have predicted that, but looking at a chart, you would know that there was a good chance at a big move. After all, the April earnings call brought on a move from 37 to 30, a 19% cut. The following earnings, October, brought a 41% haircut!!! Clearly earnings are a whole different animal.

You definitely don't want to get caught by something that obvious.
 
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