Setting stop, Averaging down 1 time, whipsaw

Discussion in 'Trading' started by innovest_11, Feb 13, 2010.

  1. hi NoDoji

    Here's an example of my recent trade wfc:

    wfc3.gif is intraday 1 min interval chart
    wfc2.gif is 20 days chart

    At 9:35am, i rush to buy wfc at 9:35am at $27.64, size 500, the reason being on seeing 20 days chart, it has been beaten down quite badly, so today it is gap up +1.5%, so i thought today is strong rebound day, bought in without any stop, and don't want to miss the boat

    Then 9:39am it goes to $27.45, then 9:47am, it goes higher to $27.68. Then started to go down $27.37, then up to $27.5, then down to $27.3 at 10:07am.

    At 10:12am, i average in 1 time at $27.38, size 300, thinking this is quite low price, and also thinking now at 20 days chart, it is quite low in price, cannot drop lower.

    Then it drop to $27.2 at 10:30am, then goes up to $27.44, then down to $27.35.

    At 11:21am, on seeing the environement turning bad, i intend to cut loss and take a loss -$202.

    The above is just an example of how i bought without stop, and did 1 time average down. I will try not to average down more than 1 time, because i have encountered too many average down monsters

    Pls comment thanks.

    ps, any good chart software to recommend, now i'm using prophet.net charts

     
    #21     Feb 15, 2010
  2. wfc3.gif, this is intraday chart
     
    #22     Feb 15, 2010
  3. this is 20days intraday chart
     
    #23     Feb 15, 2010
  4. hi limitupmike2,

    Currently i'm not using stop at all, but at least i'll still cut loss at midday if it is really that weak.

    Yes, i use small size now, but wondering how to avoid the day when suddenly, i thought it is the bottom day, and i buy with all my buying power, forgetting about the small size rule, i mean the act of buying impulse, how to have some hard control to avoid sudden buying sprint

    Thanks
     
    #24     Feb 15, 2010
  5. NoDoji

    NoDoji

    Above all else, this stock is in a major downtrend. The professionals are going to be shorting the rallies until the trend is no longer their friend.

    Short the rallies, don't fight the trend! Short that delectable double top that set up just after 9:45!

    If you want to counter trend this puppy intraday, at least wait for confirmation via a higher low (which occurred around 9:39). And then take at least half your profits quickly in case the trend is still everyone's friend (which it was).

    Your key mistakes can be found in the words "I thought" and "don't want to miss the boat".

    What YOU think is irrelevant. Watch the price action to determine what the biggest crowd thinks, then let them carry you along!

    As for missing the boat, I've churned SO MUCH money away getting into trades before they're confirmed. Trust me, if you're a day trader trading short time frames and brief moves, another boat comes along every 10-20 minutes :cool:

    Look at SWM's chart on 2/10. Now look at SWM's chart on 2/11 to find out what happens when you average down because it's quite low and can't drop lower.

    If you put on technically confirmed trades, you can use really tight stops. Your losses will be small and you'll start to enjoy catching the big waves that the market offers.
     
    #25     Feb 15, 2010
  6. You are making the dangerous assumption the trader is dutifully following the market rather than fighting it. If a trader is against the market, which almost always the case in fast blowups, he/she should pay a stiff price for taking a poor trade. Trading so small as to not "feel" anything in a trade is a recipe for careless trades. The tiny size becomes an excuse for carelessness.

    I say use a small stop and wait for better trades.
     
    #26     Feb 15, 2010
  7. spinn

    spinn

    that is the worst advice ever posted to the internet; anywhere.
     
    #27     Feb 15, 2010
  8. YOU SHOULD NEVER HAVE A SITUATION WHERE YOU LOSE YOUR IMPULSE CONTROL... of course not using stops you still muse be aware of your target profit and your exit threshhold.. or pain or loss threshold... if you are afraid of blowing out by using all your buying power then pull out 75 % of your account .. and trade with 25 % so if you do blow it all it is only 25 %
     
    #28     Feb 15, 2010
  9. Rashid brought up a very valid point.. and i was absolutely assuming this guy "knows" his forecastign ability.. i am often counter trend trading shorter time frames and longer term trading .. with the trend.. all intra day.. but I always KNOW exactly what i think the market will do.. sometimes i am wrong and sometimes I am right.. most of teh time I am correct in my assumptions.. OBVIOUSLY if you have no clue as to how you think the market will react in in the next hour to 3 hours or by the close then you have no business trading at all..

    p.s. I never assumed he was going with the trend.. I assumed he or she knows what they believe the market will do for their time frame.. you can use all of my rules trading counter trend as well..
     
    #29     Feb 15, 2010