Neke, Regardless of what I have mentioned, I just want you to make the money back (either in a month, a year or in a few years), and not take those huge hits. You are one of the most successful traders on ET and I know you will be able to do it! PA
how come no one screams its papertrading when its a loss? (this is sacarsm, since anyone does well ppl post how its just a papertrade)
Yes, it was. If you're familiar with the stock, you would know the play was likely to the upside. To short something just because it's up "too much" is frankly an amateur impulse.
Both Neke and Robert Weinstein are really successful traders and they both got hit by BIDU. Doesn't that tell us something about this trade? PA
It was definitely in an uptrend, but how much more could it go given that these items was floating in our subconscious mind: 1) BIDU could be a ponzi? 2) China's may be in a bubble? 3) BIDU was historically weak 4) Price is showing overbought In hindsight, I think the best thing anyone could do was just sit out or cut loss quick. I think only the masters of the universe could have gone long on that. PA
If all those things are so obvious then there's not a lot of money to be made on the downside but if it does the unexpected and goes up you'll get lots of short covering further increasing price. Which trade had a better R:R? The herd get's slaughtered, right?
Of course it was possible because the vast MAJORITY of traders were going long BIDU on Thursday, which is why the price was rising. Was it easy for a counter-trend trader to go long BIDU on Thursday? No. Neke and Robert trade counter-trend quite often. The counter-trend trade is my personal favorite, especially when a stock has hit new highs or lows and appears overextended. The key phrase here is "appears". If enough people want to buy or sell a stock, appearance means nothing, because the buying and selling can easily continue. So if you attempt to pick a top or bottom, place a stop above the high, or below the low. You can always get back in! Although I sometimes try to pick a top or bottom, my most successful trades follow confirmation, a higher low or lower high after several legs in one direction. The stop can be above/below the high/low or above/below the lower high/higher low, depending on the amount of loss you're willing to accept. My two trades on Monday demonstrate the value of waiting for confirmation on a trade. Monday I shorted ETN when a strong uptrend pulled back a bit from a new high, stop just above the new high. The pullback continued and I moved my stop near break even. Price reversed, took me out for $4 net gain, and continued to uptrend, making yet another new high. In the meantime while ETN was busy doing that, I saw that a strongly uptrending ESRX had made a new high (a 52-week high no less), pulled back to the 20-period moving average, then moved up to make what should've been another new high. When it failed miserably to test the high and pulled back from a lower high, I shorted there and covered $2.40 later for $1200 net gain. Why does the confirmed trade work so well? Because trend followers realize that the strong move is now exhausted and it's time to take at least some profits, and conservative counter-trend traders jump in expecting to catch the beginning of a multi-leg reversal move.
The third/fourth leg up is usually the most powerful move on all time high, why? Because most people like Neke was trapped to think it is too high and were short, already double/triple down and have to cover, fueling the move explosively. It has nothing to do with News/Upgrades etc. News only caused the gap and it can go either way from there, and if it does not go down hard, it will definitely go up harder as soon as short stops are triggered. Nodoji is correct; the best way is to wait lower high with tight stop, since usually there is no way to know how many âlegsâ the stock has, like SNDK did lately. Classic example of the danger of averaging down. You have the large positions on when it moves again you the hardest since more people are wrong with you the same time and have to bail. Short term/Day trading is a physiological warfare. Think how to take advantage of your opponent and you will win, and the most importantly, if you are wrong and trapped by your opponent, escape with a small loss, and NEVER average down.
I totally agree about the confirmation and how stop loss need to be set. However, I believe price move not because traders were going long, but because stop losses were getting hit. Thursday was a short squeeze. PA