Monday, August 07, 2006

Paper Trade Update 2 Post-Mortem

After reviewing the trades that went against me last week, I have found several things I can improve. Of course it's easier to look back and critique a trade because you can see where things were going, but the critical statements I have of the trades are on information that I knew at the time.

Long #1 (HANS): I should have heeded an earlier exhaustion gap as well as paid attention to the declining nature of the trend. This was my biggest loss due to a gap down after an analyst report. Had I managed the gap the way I was taught, I could have shaved some off the loss ... maybe not too much, but certainly some. This is a trade I really should have avoided and probably shouldn't have been in my watchlist for the aforementioned reasons.

Long #2 (LBIX): Although this trade didn't meet the criteria that it should have upon entry and I critiqued myself earlier on all the flaws with the trade, it actually closed profitable for me. I managed this trade properly using a 2/5 EMA and got out for a profit and before it took the ~20% drop today. Although it isn't a trade I'd duplicate, I managed it well by following what I've been taught and even profited despite all the negatives.

Short #1 (AVT): Excellent trade. Perfect entry and had I not tightened my stop on the second day, I'd still be in this trade today for a small gain. I was just a little excited that I could tighten my stop, but it actually wasn't how I was taught to manage the trade. It hadn't achieved quite enough movement for me to tighten yet.

Short #2 (BZH): Would have been a good trade, but I put my entry too tight and got filled at the very bottom of the dip while it was still rallying up to the 50 day moving average. I've since begun to evaluate using a looser entry (and stop) to avoid false entry like this. If I hadn't been filled that day I would probably have kept attempting entry and would have been filled today, but the trade left a bad taste in my mouth.

Short #3 (YHOO): Honestly, I'm not sure what I was thinking when I entered this trade. It hadn't settled down after a breakaway downside gap. I should not have entered this trade.

Short #4 (BBBY): Could have been a good trade, but I was a little late to the party. I decided to enter the day after the rally pullback high because there wasn't much downside movement. This could have worked for me but the stock decided to rally up a bit more before making a proper down turn today. If I was just more patient, I would have avoided the trade and possibly entered for a better reward:risk this week.

So, what looked like bad luck to me last week now reveals weaknesses that I need to work on. These are practice trades and I'm glad to know there is room for me to improve. It's also encouraging to see that if I had not deviated from what I was taught I would be in a considerably better position today.

2 comments:

Anonymous said...

Mark, I've been looking at your blog for a couple days now. I'm interested in your success because I have recently signed up with WIA. I like yourself have never traded and was completly taken by the program/opportunity when first introduced. I will be starting with a couch next week and am looking forward to the adventure. Sounds like you are well on your way to reaching your goals and I wish you continued success.

TS

taocode said...

Thank you TS, I'm glad you've found my blog useful. I am on my way and am tuning my trades to discover my style. I've already adopted the daily routines than are necessary and am learning how to be a professional trader. I'm applying the systematic approach and am replacing the warm blood in my veins with ice (at least as far as trading goes).