Wednesday, September 24, 2008

Examples of impulsive trading

Average Jay asked me what's my criteria for entering my trades. Yesterday I had a bad start and was down over $300 by 11:30 am. Here is a screen shot of my trades and charts of 2 stocks that I traded.

In the first stock, I think I went long PX when I saw a bounce in APD. PX did not bounce and made new lows. I shorted at the lows and it bounced. After I covered, I saw it drop again so I went short and lost the 3rd time. If you look at the higher time frames, 5 min and above it was ugly. There is no reason to be in the stock yet there I was.

The other stock I have up is JEC. I had 200 shares and made some money on my first trade. My avg price was 60.10 and stock drops to around 59.50 and makes a bounce back up to 59.89. Since I was down over $200, I was trading my pnl instead. I wanted any little profits I could get and was afraid that I would lose it all so I covered. After I cover the stock goes lower and I thought I might break new lows so I shorted again only to get a 35 cent squeeze on 300 shares.


  • I let my pnl affect my trading.

  • I have not adjusted to the decrease in volatility. A week ago stocks would move down $1 or more with little or no pull backs. I still think I can get such moves out of the market. I have loosened my criteria for entries as well as my stops.

  • No clear trading plan. When the market was volatile scalps and tight stops worked out for me. Now that the market slowed down I am getting chopped up by poor entries. I have abandoned my rules and acquired some bad trading habits.
Solutions

  • Have a clear trading plan with entry and exit criteria. Follow the plan.

  • Trade only when the criteria for the entry line up (confirming market action, supporting chart pattern, and tape action) When I do not see a trade I have to sit on my hands.

2 comments:

JMJAtlanta said...

IMHO: This will probably be your post of the month. It contained a good analysis of your day. It also included possible reasons for your decay and possible solutions to resolve them.

Perhaps a few attainable goals will help...

For the rest of the week, I will do X when Y happens.

For the rest of the week, I will not let Z happen.

The Average Jay said...

HI OB

I am by no means a pro just another guy learning like you. I looked at your charts and where you got into your short entries. I would wait for a pull back up to the area (line of supply) that was the line of support that is now turned into resistance. Had you waited for it to come back up and then shorted you would have been in on the good ride. Looking back on a chart is not the same as trading live so it is a lot harder then I am making it sound. I went to a class last night that talked just about waiting for a pull back to the supply and then take the trade. I hope this helps. I had a tough go at it this week too.

About Me

I have been trading for 5 years. It took close to a year before I became profitable. I find that I am improving gradually each year. My method of choice is scalping. My edge lies in tape reading NYSE stocks and staying on the side of the specialist. That is the method I learned when I started. As I build up my capital I will try new styles and trade new markets. In late 2006 my trading hit a rough patch after the introduction of the NYSE Hybrid system. For most of 2007, I have been on a search for new strategies that would help me adapt to the market.