Yesterday I lost my trading virginity so to speak. Something that is, I suppose, bound to happen to any trader who regularly takes a position overnight. On June 28th I saw a nice breakout opportunity in Entrust Technologies. As the stock broke above resistance at 71 there was a good amount of volume which I felt could sustain the move, so I entered the position long at 71 3/16, with a target near the April resistance near 80. My stop was right under
67 1/2, which I thought provided a good risk/reward rate on the trade. I held the position into the 30th and exitited MOST of the trade as the stock went up to my target near 80.
Due to the extreme move day I was suspecting a pullback to 75ish where I would pick up more shares for later move to 90ish. I had most of the factors that I want to see in a trade going for me, a good uptrend, a fairly nice moving stock. The market had been acting as well as it has over the course of the summer..so I held some shares. On Monday the stock opened lower by several points from the close on Friday...but having changed the rules in the middle of the game I didnt follow my own rule of closing the entire position (profitably) when the stock broke to new lows on the morning. On Monday the stock looked bad, and a twinge of nervousness set in, so I covered another small amount..but having desided this one would be the one to go to the moon, held on to a good number of shares.
Then there was Tuesday. I turned on my level 2 screen at about 750CST on Tuesday. I saw some crazy quotes which I didnt think where the correct numbers, so I restarted Quotes and took a look again. It felt like I had been kicked in the nuts and smacked in the face at the same time. I took it all pretty well...I puked..twice. I have never made it a habit to trade much in the premarket, and i didnt think this would be the time to do it either, so I waited until the open and came up with a plan. My thinking was that most very large gaps will fail, so if I was just a little patient I could cut my loss by a bit so I would see what happened after the first several minutes of trading. I had thought it could see a bounce to 43 to 45ish, before falling again, but just in case I set a stop under the 5 minute low of 39 13/16. When the stock didnt rally as much as I thought it would, but my stop was hit, I got out for a loss of 31 5/8 on the remaining shares. Shares which the day before I had no intent of taking a loss of any sort on. Shares which at the entry I had not seriously thought of losing more than several points on.
The end result is that this didnt kill me, so two kind souls have told me to learn to enjoy it, just be sure to learn. I think a few things i have learned, and when my head clears ill probably learn better than I am now, is that A) I always need to stick to my plan. The plan has been what has led me to the success i now have and deviating from it, especially midway through the course, is counter productive and really puts me in a class with novies. B) keep practicing proper risk control because it really saved my ass. Had I been a real dream chaser out to make a million bux on every trade I could have easily lost everything I have gained in five years on this one trade.
Hopefully some one can read this and learn something or another from it. I think I have.
Brandon |
