People who are adept at exiting a losing trade and sticking with their stops will always stick around this business. That’s great. But you can really up the performance, yes with more risk, by fighting thru a losing position, and trying to sell into the next bounce in a losing long side trade (visa versa short side). And again why it’s so important to use solid technical tools to enter trades, like springs, absorption, etc, so we have a way better chance overall. And we have more room to be wrong and likely to get some good bounces at the least.
Two examples with my trading on Tuesday, SPY calls and EBIO. Over the last few days, I discussed the great rally in the stock indexes, my continued belief in this whole area being reaccumulation, but the SPY was back into a big resistance area. And this is where to get concerned about an upthrust. I did a bit more individual stock selling (and try to buy into the next reaction setup), and was looking to buy puts on SPY into the new highs. That did not set up, so I waited for the next opportunity, which was into what I believed was a long side bounce trade, 123 bottom with a “terminal shakeout”. And yes, on a 1 minute chart basis. What is a terminal shakeout? It is basically a spring, but a spring of a real good setup already. So that is why I bought the calls there as shown on the chart. But the selloff kept going, I knew I needed to get out, so I fought thru it and the calls got hit hard, but I was able to hold on a bit longer and exit the calls on the next rally, even pulled a few ticks out of them.
Also, I always plan all aspects of my trades, the plan was outstanding, overall did what I expected, just too early on the entry, terminal shakeout type trades are very tough. The explanation is on the charts.
For several days last week, I discussed the absorption area in EBIO, that worked beautifully, I was up 15% on the trade at one point, I tried doing some selling into the top area, but no fill. And into the reaction, I did not scratch it like I should have. It got away from me, tho I did try to buy some at 1.02. Anyway, I stayed with it, and instead of taking a pretty big loss, I scratched the trade.
thank Scott , I understand your plan in buying the call for a bounce from “terminal shake out” in SPY . However could you pls correct me if I am wrong that I do not see a 123 set up at your buy point ? Thanks
Here is what I was looking at. It is a very short-term setup, not a great one, to me, unless a good break below support.