Trade The Journey

Trade The Journey

Learning to place Stops!

Top of the Morning.

I hope everyone is safe and in good health. The US economy seems to be healing both economically and in terms of sentiment. Everyone is eager for things to return to normal. As the country slowly opens up, I wonder how things might progress.

Will we see a new permanent style of work? New forms of retail shopping involving even less human contact? What will happen to the jobs of people who have been or are being replaced by technology? Will inflation make its anticipated return? Has the stock market reached its top?

One market that I have grown interested in is Cryptocurrency. It’s highly volatile and subject to huge drawdowns. However, the underlying technology fascinates me. Blockchain technology has the potential to disrupt how we store, keep and exchange data. This data isn’t limited to a form or single-use.

Blockchain has the potential to affect every industry that we know. Companies are already experimenting with this technology. It can reduce supply cost, provide transparency, and digitally secure information in the form of a block. Each block is added in sequential order, and with each block added, the chain is strengthened.

I won’t go too much into Cryptocurrency or blockchain because it can get quite complicated. I will say that investing some time in discovering how it works is a great idea.

Managing my Stops:

Managing my stops is challenging. I’ll admit, I am guilty of trying to do too much at once. I also thought I had a pretty good handle on price movement. I was always able to close my position before any major drop. Price, from my experience, usually stalled and then dropped. So, I never got into the practice of placing stops.

While I am working, I can watch the price movements throughout the day. So I placed a trade the night before and formed a price point in which I knew the trade was wrong. The stock opened higher and then dropped like a rock.

It dropped through the price point to the low of February.  I looked at my phone, and I couldn’t believe it. I really couldn’t.

I didn’t even consider placing a stop because I thought it wasn’t necessary. By the time I checked my phone, the move downward had already occurred.

It was a total shock. Luckily, my trading account isn’t large enough for me to do significant damage. My account balance is my tuition for trading college. So I expect to make major mistakes.

From then on, I pledged to always place a stop but how do you select where to place your stops?

I tried placing stops before but I always was stopped out. I didn’t take into account where I was placing the stop or the volatility of the stop, I just placed it thinking it was the right thing to do. It was but with little thought, it was the wrong thing to do.

Now, I am practicing placing stops on the thinkorswim platform. I placed my stops around major pivot points which can be tricky because everyone else can see those pivot points also. I try to place them far enough to escape volatility but not large enough to experience a significant drawdown.

Sometimes I’m tempted to move my stops because I believe the trade still has a chance. I have, and when I did, it didn’t end well.

Managing your positions means managing the trade with your stops acting as barriers to emotional triggers like doubt and hope. I only move my stops up as I track the trade and secure profits but this can be tricky as well. What if you move your stop too close and it’s triggered by a large move only to rebound and continue higher?

Being that I am not a full-time trader, I have to learn how to plan my trades by imagining scenarios and looking at the past history of the price action.

I will continue to practice until placing stops is second nature.

Help, I’m drowning, is the phrase I’d like to use. It seems like money is just flowing out of my pockets. I canceled all of my extra accounts. The problem is the automatic withdrawals from my accounts for investments.

Because my income fluctuates, I always suffer through the bad times. I’m a bit used to this type of living, and the sacrificing has paid off. I will continue to monitor.

Reason: Procrastination

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