The Big One That Got Away

Discussion in 'Trading' started by Deb Trader, Jan 11, 2003.

  1. An analysis of how not to set Stop-Limits:

    In 2 days I could have made 50% on 2 stocks that I actually owned when they started to rocket up. Here's the setup:

    I created a stock filter using Ameritrade's Advanced Analyzer. Studied daily charts to find ones that were at a low ebb in the beginning of what could become an uptrend. Found 2: MEDC and MCTR. Charts on these are attached

    Scenario 1: MCTR

    1. Bought MCTR at .94 on 1/8
    2. On 1/9, MCTR started rising, so I tightened my stop loss
    3. MCTR rose to 1.10 so I'm doing a jig...that's 17% rise
    4. I set my stop to 1.08 (just a stop - not a stop-limit - bad move)
    5. Then the inevitable drop - I'm stopped out with average sell price of 1.04
    6. Take a look at the attached chart - it rocketed to $1.50. Damn! And it's still going. Didn't want to jump back in, because of fear it would drop like a rock any second.

    Scenario 2: MEDC

    1. Bought MEDC at 7.05 on 1/9
    2. At the end of the day, MEDC started rising, so I tightened my stop-loss
    3. MEDC rose to 7.50, so now I'm dancing again
    4. I set my stop-limit at 7.40 as it rose to 7.60 (This time I wasn't going to get burned by the plain-old stop)
    5. Naturally, I got stopped out at 7.40, so I'm very happy as I watch it hang there
    6. Not so happy as I watch it rocket up to $9 at the close
    7. Even less happy as it peaks at $10 in the morning of 1/10

    I've been burned by not setting a stop when a stock was zooming up and missed the profits on the spike. So I thought I was being wise to set tight stops so I didn't lose the bulk of profit from these spikes. However, I'm not sure what the heck to do now. I've been burned both ways.

    Any wisdom on this sad story of the big ones that got away would be appreciated!

    Deb Trader
  2. Maybe you should scale out of your position using limit orders as the spike progresses.
  3. omcate


    Welcome to the real trading world. A lot of things look good on paper do not work here.

    I believe the market makers keep records of the stop loss orders for the long and the short. They often raise and drop the prices to hit these orders. Hence, a lot of people use the mental stops.

    Several months ago, something similar happens to me. A market maker dropped the option price to the low of the day to take out my stop loss order. Fortunately, I was watching the screen all the time. I complained to the online broker and they complained to the exchange. My stop loss order was re-stated. I have been avoiding stop loss order since then.
  4. Deb Trader,

    Before I start with my comments...

    are you daytrading via BigCharts or was those just some convenient charts you found instead of using charts from your actual trading software?

    Now onto my comments...

    You need to relax and slow down.

    Your trading plan was to put those stops at specific prices to not let a profit turn into a lose.

    Your plan worked to perfection.

    However, for some weird reason you think you didn't follow your plan and you think because you didn't make more money or got out at the top...

    your doing something wrong?

    Greed will cause many beginner traders to fail and the attitude you have in your message post...reflects greed.

    You made profits and you consider this a sad story.

    You used trailing stops to protect those profits...and those trailing stops did exactly what you wanted them to do...

    to get you out at 1.08 (you got 1.04 because of the wrong type of order you wanted) and out at 7.40 on the other trade...

    they protected your nice profits and you consider this a sad story.

    Just trade...don't worry about buying at the bottom nor worry about selling at the top.

    To do so will cause you to over-analyze your trading and possibly start doing things that are no longer profitable.

    If the issue is still about you not being able to catch the entire trend or most of it...

    well...several traders...including I...have already suggested to you that you try scaling out of profitable positions...but only after you've been consistently profitable trading with the minimum.

    I consider scaling out an advance trading strategy that works for some and doesn't work for others due to different types of trading methodologies.

    Further, if your still too impatient...try mixing in some realtime simulator paper trades in with your real money trades.

    Then, try scaling out any profitable realtime simulator paper trades to see if its something that works for you and to see if your able to grab more of those profits at the top you seem to be greedy in capturing.

    If it works for you...slowly integrate it into your real money trades.

    Remember this...

    there are hundreds (understatement) of profitable trades every single trading day.

    If you miss one day...there's always tomorrow.

    P.S. I go into each trading day trying to hit singles. Home run days will happen on their own.

    Go Titans and Falcons!!!

  5. Babak



    would you mind telling us which online broker went to bat for you? Also which stock was this? TIA.
  6. omcate


    I have sent you a private message.
  7. Omcate you replied : "I have sent you a private message."

    Don't you want to give that broker a plug ?

    Often we moan and then when there is a bit of praise due we are silent. Doen't make sense to me.

  8. nkhoi


    repeat the same performance until you don't feel sad any more.
  9. At one point I suspectedthat market makers dropped prices to activate a couple of stops that I set.

    It was just too weird. There was a stock trading at $9 - $9.25 all day. I had my stop set at $8.50 (pretty low, I know, but I was even more of a rookie than I am now.) Anyway, in a matter of 3 or 4 trades, the price went down to almost exactly $8.50 and I was cleaned out. Then the price went immediately back to $9.25, and didn't drop below for several days.

    But I couldn't figure out how market makers could do that (with my limited knowledge). I thought it must be a fluke, but I stopped using stops for a while, just to be safe. Now I use them again.

    Do you think this happens much? I wonder if I should only keep mental stops, as you do?

  10. KavMan


    I don't put stops
    I have a mental stop, a dollar amount I am willing to lose on a trade before I pull the plug
    #10     Jan 11, 2003