EXITS! Thought I Forgot???
Tuesday, May 15, 2007 at 10:16AM Case Study#1 PLCE
I didn't catch the entry point, but here is my take on the exit.
My take: PLCE: As I look at this chart I didn't see any reason to exit this trade. Sure, the big rally up to $35 was uncomfortable, but if you look at a longer dated chart you'll notice the symmetrical triangle I tried to point out several weeks ago. Since your support line is ascending in this pattern, I teach that it is imperative to use the apex of the triangle as the breakpoint. If the stock remains below the apex, it is a good trade. $36 was my stop point based on this rule.
Since the rule was to wait for a break of $53, you were well within your rules, but this rule didn't give the stock much of a chance to move.
Case Study #2 BBY
Entered trade on the intra-day dip below support. Stopped out on 2% rule.
My take: This is why I use closing prices.
Case Study #3 BGC
4/26- Entered trade
Target- $67
Stop- $55.85
My take: See case study #2.
Case Study #4 ISIL
4/26- Traded a bull flag breakout
Target: $34.50
Stop: Close below flag break
My take: I am not sure how much this one can be argued. Use a weekly chart to see this breakout and you'll get a sense of where I want to go with it. Yes, a rule is a rule. However, I looked at this as $30 being the magic number, which held well. I thought the longer term break out had more merit than the little flag as of late, so make sure when you are planning your exits to see them from the long term perspective as well.
Case Study #5 BIDU
Rules: 4/13 enter on resistance bounce
Target: $92
Stop: Close above resistance
4/24 Exit at mechanical stop
My take: Follow your rules!
Case Study #6 BUCY
Here is what I clipped from the original e-mail...
Here is a great example of not sticking to the plan. I saw a move to around 62.50 for an exit and re-adjusted the stop loss way too tight at 57 to lock in profits. It was a winner but I cut it short. At 64 I could have sold half or more and let a couple, or even just one contract, continue to run. Stick to the plan and don't get tight on stops just when things are going your way for fear of losing what gain you have. Plan the trade, trade the plan, fear will destroy you just like in any other part of life. DUH!!!
My take: That particular day was a healthy re-test of a prior high. I hate to see one down day in the middle of ten up days to be a reason to exit a winning trade.
A recurring theme I want to keep discussing is patience. Whether it is riding though a day where price doesn't exactly move in your favor, waiting until the end of a day to exit a trade or confirm a new breakout, or just taking a breath and focusing on what the trade will look like weeks from today, you must develop a level of patience. Profits are not made in just a few days worth of work (unless you're into that whole brevity thing). I'll look under the mattress for a few good articles on the topic.
Reader Comments (102)
i was wondering if you could tell me the ticker symbols of case studies 2-6. i cant click on the picture for a bigger view and it is really blurry on my computer for some reason. sorry for the trouble.
stephen
#1 PLCE
#2 BBY
#3 BGC
#4 ISIL
#5 BIDU
#6 BUCY
What do you all think about AVB thus far. It is only just around resistance, but it has had some big moves, with some substantial volume the last three days. Are you staying in?
Jodi
Canuck
BYD< NYX AKAM MGM HWCC AIV
also nice bounce on PBR,SBS
Have a look at DRYS. I got in at the beginning of April on what I thought was a good bounce. At the beginning of May it dipped back a couple of dollars and I was tempted to get out and take my rather substantial profits. I did not. I exercised patience (which Catherine tells me is a virtue.) The stock has gone from $22 to $42 as of today and we are looking at incredible profits (up about 500%.) If I'd decided to take my profits I'd have been happy with 200%. There will be times that the little dip will become a big dip (much like my mother tells me I have become) and you might lose some of those gains, but by letting the winners run.... hooooeeeeyyyy!!! it feels so nice.
Wish I had more time today to chat and read all the posts. I'll have to catch up when I get to Edmonton at 3:00 tomorrow morning.
It's a good day. Even LCC is still going down.
As i was waiting in line at CMG, i was overcome with the strong desire to post something. As luck would have it, Jeff opened the exit thread and this is the perfect opportunity to make this point:
Some of you are not equipped to trade price patterns.
That may sound harsh, but it's true. That doesn't mean you won't ever be able to become equipped to trade them, but right now, a lot of you are bailing on great trades, missing out on big moves, or taking losses you shouldn't be taknig.
The bottom line is this: If you're going to trade a pattern, you need to know the pattern and know what can happen as the pattern unfolds.
How many of you bailed on AVB today? I know at least one of you did because I got an email. ARE YOU GUYS NUTS? Not only did the upgrade fail to keep the stock over $125, but as I type this, the stock is about to go RED on the day. Pattern intact.
I know someone (I won't single her out again) bailed on AKAM because she didn't like the dojis. Look at the price action now. Pattern intact.
These are just 2 examples. Do yourselves a favor please. If you're not ready to trade patterns, don't trade them. Trade bounces instead. Otherwise, KNOW the patterns. Take Jeff's classes. Fight with your own emotions to sit out these daily blips.
Oh look, AVB down already.
OK Brett, the truth is I AM nuts. I got into AVB at the exact wrong time and have ridden it up to the exact right time to get in. I was hoping to keep that a secret (especially after my posting on patience) but now you've RATTED ME OUT!!! Oh the pain, the embaressment... the agony. I did AVB on my own and asked for input after the fact. Both entry and exit. I will learn. Please, please, PLEASE don't tell Catherine. Beware the bag of hammers!!!
Oh and Tonya I would love to know how your index trading is going but if you do not want that to be a blog topic please email me at bob@noburnca.com - THX.
But when calculating R/R, I don't use that emergency stop because, again, I don't expect to ever use it. I know that this leaves me exposed to a little additional risk in the event of a catastrophic emergency, but I think that's just the risk of trading options in the first place, and I hope to combat that risk with other things like being diversified with bearish trades which will do GREAT if the sky actually does fall.
So, to calculate a R/R, I've done two things and I'm trying to determine which I like better. 1) I just use a range for my risk instead of a hard number. So, I might say I'm willing to lose anywhere between $100-150 on a trade. 2) I split the difference between my mental stop and my emergency stop. So, I may take where my mental stop is and multiply by .985 or 1.015 and use that to calculate the risk. I like this method pretty well.
Again, I think the bottom line is that everything is a range. I used to try and nail everything to the dollar and it just doesn't work that way, I don't think.
Another thing I've discovered I like doing is using OTM options on earnings plays and such because with those, I just risk it all and don't ever think about stops. That's a nice feeling, but of course, I don't think you should use all of your capital that way as it would then be possible to lose 100% of everything. But it's nice in a limited portion of the account.
Hope this helps. I'm just learning with all of you guys but this stuff has helped me a lot so I thought I would share.
And, by the way, it is absolutely true that doing this will keep you out of a lot of trades that you wish you could take because the risk is too high. So, I just don't take those trades, and it's hard.
Now repeat after me: My name is Chris, and I'm a bailaholic.
"We love you, Chris."
Learned my lesson on AKAM, thank you. The good news, at least I bailed for a profit, albeit too small. I'm still in AVB but this morning was soooo hard to watch as it went way beyond what I was comfortable with. I think part of my problem with AVB is I was a little late on my entry so naturally it's tougher to wait it out.
Doji Grrrrl
I'm not buying at those prices.
MikeH
I agree with you. The spreads on AVB are huge and even though the set-up is good, it is not worth it.
On MRO, the candle means that the bulls pushed it up, the bears pulled it down to 109, and the bulls are keeping it back up there?
Am I reading this right?
Randall and Michelle