Trendlines - what did I do wrong here? (pics)

Discussion in 'Technical Analysis' started by IronFist, Jan 23, 2007.

  1. So I was watching YHOO today on my lunch break, and it seemed to be in a definite downtrend. At 12:38 I took a short position @ $27.21. It looked like it was about to hit the top of the trendline I had drawn and I expected it to go back down to one of the lower trendlines. Those are 2 min candlesticks. I got in at 12:38 (first red one in that time period)

    (ignore the indicators. I wasn't using them)

    http://img.photobucket.com/albums/v326/ironfistx/shortloss1.jpg

    But I was wrong. My lunch break was ending and I covered my position at $27.28

    Of course, had I held my position, I would have made money:

    http://img.photobucket.com/albums/v326/ironfistx/shortloss2.jpg

    But I had to go cuz my lunch break was ending.

    So what did I do wrong? Were there any signs (volume?) that the downtrend wasn't going to continue as I expected?
     
  2. Q12

    Q12

    What was your exit strategy going into the trade?
     
  3. Exit when it hit my lower trendline that I drew or broke broke away from the top trendline that I drew.

    After it broke the upper trend line, it kinda just hovered there and didn't go up or down. Once it started to move away (up) for sure I covered.
     
  4. ecritt

    ecritt

    I once worked next to a guy that was a self proclaimed "trend line professional". One day during a string of frustrating losses he started pounding on his desk and announced to the whole trade room that XYZ stock "...just blasted through that trendline like it wasn't even there!!!..."

    I remember wondering if anyone else thought it was odd that a grown adult became physically angry because the stock market wasn't honoring some pixels he drew on his screen. I wanted to point out to him that it WASN'T really there, but he was a veteran "true believer" and such would have been a waste of time.

    You seem young; perhaps you aren't a lost cause yet.

    You asked about where you went wrong. Start with this statement, "...and I expected it to go back down..."
     
  5. nkhoi

    nkhoi Moderator

    simple, think vol as energy pill in an arcade game, high vol = market move fast, low vol = market move slow, and you know lunch time = low vol = slow move = wait longer. If you can't afford a wait look for high tide.
     
  6. Well, I used to try using indicators, but that didn't work. Then I tried trendlines, which seemed to be a little more successful.

    I'm trying to find a good system...
     
  7. That makes sense, but I always see big moves (candles) with low volume, and vice versa, too.
     
  8. If you have an actual edge it will play out over a series of trades. To assess your system based upon one trade would be wrong on my or anyone elses part. This is of course going on the assumption you are consistently applying a system.
    Otherwise chalk it up to a good setup that did not work out. Happens all the time.
     
  9. So was my setup good then? I'm trying to see if I'm on the right path or not.
     
  10. helopolis

    helopolis

    In my opinion, your problem was the entry. A bit of an obvious statement but at that point there was no clear direction in price action. Your trendlines are okay, but you did not follow them.

    To my way of thinking (trading) the price points at 12:38 would have been buy at 27.26/sell 27.19/15 . On the sell side .19 was a bit unclear and I would have put only 1/4 of the trade on and loading up as the price went my way to the full position on breaks in key price points.

    From 12:25 there was some retracement which implies conditions have changed for the period not to mention volume dropped for lunchtime leading to no real evidence to put a trade on (for me anyways) unless it broke much more relevant price points. You had a timing problem.
     
    #10     Jan 23, 2007