Hey Guys, I have a major problem. As some of you may know I started trading as prop 3 months ago...been trading for 2 years retail ( swing trading mostly). Anyway I'm here because I am constantly stressed out and missing out on ALOT of right calls that I made, simply because I get in too early or because I get out too early. To get in, I always take liquidity on EDGA or BOSX ... thinking that if I add, ill get filled mostly because Im on the wrong side. When I get out..I usually add liquidity, and end up taking very little of the potential big winner I could've had. Now I am NOT asking for any secret formula, or a codex, or any of them, but I know there are several successfull traders here, that maybe you could point me in the right direction what I need to change. Below I will show you a picture of Micron, on a 5 minute Chart from Friday , and a typical scenario that happens to me many many times daily, and weekly. The 2 MA you see are the 5 and 8 period MAs to help out seeing a constant trend.. I got shaken out because right as I tapped out @ 8.40 ... I was watchin time and sales and level 2... and i saw soo many red prints just printing non stop, level 2 on the bid got soo thin...i was 100% positive they gona to take it out ....and I didnt want to lose additional pennies.....next thing you know the stock rocketed up 30 cents. How should I be entering my positions ? Should I be adding liquidity at the bid, or a few cents lower at a clear support level ? How should I tier in to my positions ?
You've only attached a snapshot of the chart, but from that piece of price action, I see a couple mistakes right away: 1) You entered deep into the first bounce off the previous low. You basically bottom-picked. When you bottom pick, you need to place your stop below the pivot low. You stopped out ABOVE the pivot low. Technically the bounce was shallow before sellers came back in and price left a MUCH lower high from the previous high. The moving averages are falling, so you should be either looking to short with the trend, or wait for a confirmed long signal, which would be a higher low. You got the confirmed long signal right about where you exited. Those 4 little bars of support above the previous low were telling you it's OK to go long now with a stop below that higher low or below the previous low (since they're so close it doesn't matter that much). If you want more confirmation on taking a long position, you could wait until price broke through the previous high of that very shallow bounce off lows. When that happened it also caused the moving averages to pivot up, meaning the downtrend has likely reversed. Now looking at the top of that run up, the big red bearish engulfing bar was another reversal signal. You could jump in short (top-picking), or wait for confirmation, shorting after the lower high left behind by the internal triple top (resistance tested twice and failed) results in selling and dragging the moving averages down. Hope that helps!
Are those broken horizontal lines floor pivots? or what? If meaningful S/R lines then why did you not respect them and loosen up your stop? If your scalping pennies why did you enter at top of a tight range and not bottom? Sit back, relax, trade lighter, be more selective, don't worry about scaling in to much at this early stage, once in set your exit limit in case of a spike and remember level II and charts get "painted" all day long in all stocks so you cannot believe every "show" or "tick". It takes most traders 1-3years to get consistently profitable if they last that long. I had my best $ day ever on 3 trades on 2 different stocks. No need to chase everything - just cherry pick and give it some room. Hope this helps good luck.
NoDoji , thanks alot that was really helpful. Yes I sort of bottom picked, I had a "feelign" its going to reverse, but like I said they were printing so much red... I didnt want to lose more $$ since I was down 2 pennies already.
for that entry.. .42 the stop should have been down to .35-.30, you had no business exiting at .40 if a 2cent move is gonna scare you off, then you shouldnt be trading
That bigger view was helpful. You really didn't have a "bad" entry, because in fact that pivot low was higher than the previous low (from the open). You just needed to place your stop below the previous pivot low. Just before you put on a trade make sure you're comfortable with the full cost of admission to the trade, which is your initial stop. That initial stop should be survivable, so you're not shaken out. If you are shaken out, don't give up. A lot of great trades start out noisy and you can get right back in if the setup still holds water.
Its not that its gona scare me off, my daily stop loss is 100$ , and I went in with 1000 shares... so I was down - 20$ already... plus I was down 40$ from a pervious trade... -60$ total.... i Didnt want to be stopped out for the day.
Yeah but having a stop, 7-10 cents lower, on 1000 shares...and possibly taking a 70$ -100$ hit .. is too much for me to handle, since Like I jsut said my max stop loss is 100$..... This mean.. I should trade with less size perhaps ?
Yes, you have to trade less size, so you can afford the cost of admission to the trade. Since you have a daily max loss that affects what you can afford, first choose the proper stop loss price, a price that the trade can survive, then size the position according to what you can afford to lose. You had $60 left to pay admission to your trade. It was a pretty solid setup and you needed a .06 cent stop at the very least (.07-.08 would've been better). So put on 500 shares with a larger stop. Now you have no fear because you've accepted the cost in advance. And you get to reap the reward of that great breakout!