Trade The Journey

Trade The Journey

The Trade Monster!

Therefore, I must be in a trade. This mindset has caused more harm than benefit. Recently, I cashed out of a couple of positions that showed a profit. My premise was that the market was due for a correction.

Of course, no one knows when a correction will occur, but I believe the signs are there. Premature exit, maybe so. It’s a known fact that the economic numbers show a downturn after it’s already in progress. So, I took the chance to free up some excess cash for any opportunities that may come my way.

I was able to sit on my hands for a week, and then I saw a trade. For the first time in my young trading career, I purchased one-hundred shares of a penny stock. I brought the stock taking a chance, a big chance.

The company, based in China, had just been dropped from the google play store. In my haste to trade, I ignored my due diligence rule and placed the trade. The stock was in limbo and then moved quickly to the upside with no clear explanation of why. I thought the move was overextended, and the headline for the stock read, “No reason why the stock is moving higher.”

I thought this news article to be an ominous sign to sell a call. I sold my first call thinking the stock would fall off the highs quickly. I got crushed.

However, I was hedged because of the stock position.

I brought back the call option at a loss and kept the position in the stock open. The stock hit a support level of $3.36 after rising to nearly five dollars in the premarket.

First, let’s Look at the Volume. Thursday looks like mostly buying action, very low selling. The second day showed a buying and then a small-sell-off. Volume fell off, maybe the traders took their profits.

The index compared:  S&P/BNY Mellon Asia 50 ADR Index. Outperforming the index at the moment.

 

What happened? Support was formed at $3.36. What did not happen? It didn’t fall. The buyers tried to continue the trend and break the high of $5 but alas there were not enough buyers.

 

On the daily chart, it’s a heavy volume day with selling involved. Two gaps up with increasing volume.

Lastly, we can get a feel for the trend by looking at the long-term chart. I think this trade will be short-term.

After I study charts, I try to conserve my energy for the trading day. I have a tendency to overanalyze, which can lead to an unwillingness to cut losing positions. Every action and thought needs to be centered around risk management.


I’m learning to manage my trade, watching for any signs of a changing trend. Inevitably, I will leave money on the table because I don’t expect to pick a top. But when do you do so?

I’ve experienced trades where I closed the trade prematurely and the stock skyrocketed another ten bucks. I’ve also experienced getting out just before a sudden fall in the stock.

There’s literally no way of knowing what will happen next. My style of trading is based on reference levels, mainly support, and resistance. Everyone can see those levels, and the really good traders can see them quickly and accurately.

A good support and resistance line should hold for some time. Ideally, the line you draw should be good enough to be revisited. It won’t hold forever.

Lastly, there’s the skill of exiting. Finding the opportune time to exit relates to managing the trade. I try to keep it simple and find two reference levels. The first level is an alert, the second is an exit, no questions asked.

With every trade, I learn more of the trading nuances that Jim Dalton speaks about in his webinars.


This past week:

My cash flow varied throughout the week.  I found myself looking for the next cryptocurrency to make a millionaire.

I’d like to give myself a “D+” for looking for a get rich quick scheme and not embracing the value o of waiting your turn.

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