My Fail. Trying to move forward.

Discussion in 'Technical Analysis' started by Growly, Jul 23, 2018.

  1. Growly

    Growly

    First, i apologize if this belongs to the journal forum. not clear on this yet.
    Second, Well, I decided i want to trade some of the money i had on the side which does nothing by being cash.
    I've into T.A for more than 11 years, reading and learning as much as i can, but haven't traded, at least not seriously.
    I decided to put myself into it. I feel i have a good grasp on money management, and i promised myself to be disciplined and control my emotions. Unlike most cases, at least as it seems to be by reading forums, twits etc. i lack in strategies or setups.
    Which brings me to the title. I've failed. I tried to play a bullish divergence, and i just got stopped. Here are the gory details:
    upload_2018-7-23_22-53-26.png
    Why i got long: macd was improving while price was in a range. Waited the breakout on a high volume (OBV was highest) waited for the next day and grabbed the pullback after the 220.6ish level held. put a stop loss at 217.5 and voila, a week later, price didn't surge, and this evening (i'm from Israel) my stop was hit and bam! i'm out.
    For those of you who made it this far, i'll appreciate tips and pointers, of what i got wrong, or any light oyu can shed on the matter.
    I am a bit disappointed i lost, but what hurts most is that i can't seem to have any other actionable ideas to play, in order to remain in the play, and i'm tad confused as to which setups work? as i said, i know most traders fail on money management or discipline, but i can't seem to find a game-plan to put my money management and discipline to work :/
     
    SimpleMeLike and murray t turtle like this.
  2. traider

    traider

    Try to quantify your rules, hire someone to program it or do it yourself. Test on a variety of stocks to see if your rules make money. 1 trade doesn't make or break a system.
     
  3. %%
    OK;
    GRO, may Want to do it like the pros do + measure by the month/year/10 years.{One day seldom means much unless trading to big. HINT; its a bull market, you know- do you know that, SPY, QQQ?? GE is still in bear market. The trader in charge, Fidelity Capital said dont run around in a bull market in shorts.:cool::cool: PS ;on a 52 week chart that stock is barely in an uptrend-keep looking!!!!! Welcome to elitetrader
     
    Growly and ironchef like this.
  4. ironchef

    ironchef

    It is easy for me to pontificate after the fact. Here is my opinion:

    The attempted breakout was around Jun 29th. If I swing trade that is where I might enter. But the trend is still down if you look at a longer time frame chart.

    I think there is a chance it will go down to ~ $175. Why? fundamentals for the past 4 quarters looked ugly. Specifically, I don't like the cash flow the last 4 quarters.

    But, what do I know, I am just a mom and pop amateur, learning to read charts so it is a W. A. Guess.

    Good luck.
     
    Growly, LS1Z28 and murray t turtle like this.
  5. ironchef made some good points. If you expand your chart, you see the 200-day moving average is sloping down. If you added the 100-day moving average, it was sloping down too and where the price hit resistance. Can't ignore the trend. If you're buying downtrending instruments, then IMO you generally need to make sure you're buying at extreme, low-risk levels, rather than using breakout strategies.

    upload_2018-7-23_17-20-45.png
     
    DTB2, ironchef, Growly and 2 others like this.
  6. Metamega

    Metamega

    Analyzing one failed setup is not a good start. If your method has a positive expectancy you just need to take the trades and put the losses in one pile and the winners in another pile, combine them for profit.

    If I analyzed every losing trade I’d never get anything done.
     
    Growly and Gotcha like this.
  7. Growly

    Growly

    Thanks for the insight!
     
    murray t turtle likes this.
  8. deaddog

    deaddog

    As far as I can see you didn't do anything wrong.
    It was a good trade with a bad outcome.
    You can't know what will happen next, you can only play the probabilities, take your losses and move on to the next trade.

    You defined your risk and had the discipline to take your stop. You won't win every trade and if you honor your stops you will have capital to trade again.
     
    Growly and Gotcha like this.
  9. I applaud you for being disciplined. However, I'm not sure that I would call this a good trade. From my perspective, trades should either be low risk, high probability and preferably both. You may have thought it was a breakout but the reality was that it was a weak, downtrending, overbought stock up against resistance. I'm not trying to beat you up over this but a planned trade with controlled risk still can be a bad trade if the strategy doesn't have a positive expectancy. Also, I think you misinterpreted how to use bullish divergence. The bullish divergence on MACD that you could have played was in early June when the stock made a new low but MACD did not. You could have used an oscillator like Stochastics or RSI to show you that it was oversold (and also relied on the candlestick pattern). Hindsight is 20/20 and it's easier for me to point out the flaws in the trade after the fact, but I just don't think you had a low-risk idea to begin with. But you didn't fail, you just learned what doesn't work and that you need to get better. Hope that helps.

    [​IMG]
     
    murray t turtle, Growly and vanzandt like this.
  10. Speaking of probability. This is my observation of the NYSE and NASDAQ market in general over the past 15 years.
    1. Start counting the number of days when a stock goes above 50MA
    2. Stop counting when it goes below 50MA
    3. Do a frequency plot based on the number of days
    4. Do a power curve fitting on the data distribution. It should be around X^(-1.8).
    5. 60% of the data points fall with 1 - 20 days. That is to say, only about 40% of the stocks stay above 50MA beyond 20 days. OP entered MHK on the 9th day when it went above 50MA.
    6. Beyond 20 days, there is a 30% chance that a stock will not stay above 50MA.
    Just being patient and wait for it to past 20 days greatly increase ones' odd.
    Additional things to consider.
    1. Look at the trend of its peers. In this case, Home Furnishing & Fixtures
    2. Wait for golden cross.
     
    #10     Jul 23, 2018
    murray t turtle, DTB2 and Growly like this.