Architrader Blog Central

Trading Journal for Jan 25, 2011

A very important skill for an intra-day trader, especially if you are a momentum trader is the ability to re-act quickly and ask questions later. Perfecting this skill for most will take countless hours if not years of experience to develop. But, it’s an essential developmental skill that you will need to hone upon.

Here are two of the challenges I had to overcome to improve on this skill:

1. You will need to “Trade in the now”. This requires trading in the “moment” and being fully aware of your own best interest. Letting go of any biases, potential profit targets or any other distractions that might prevent you from pulling the trigger if the stock does not do what you expect it to do.
2.  Managing your expecations…
   • You must be able to accept that NOT all trades regardless of how perfect the pattern/setup might be are going to work out. This is a game of probabilities. We play the odds when they are in our favor and we manage RISK! The rest is out-of-our-hand. We can’t force trades to do what we want or expect them to do.

This morning I came in with a long bias in TRV. It was a pretty bullish gap as it cleared 56.00 (an important level) and was holding above 57.00 at the open, another important level. If it cleared 57.50 which it did, there was not much resistance holding it back.

My plan for TRV was to get long above a 2 min high or wait for a pullback with confirmation of a Bullish tape. As I saw the Bids hold there price I began to accumulate some shares in the mid 57.40’s. I added some more above 57.50 and was targeting the whole number for T1. My plan was to give this stock plenty of wiggle room and not adjust my stop, unless T1 was hit at which point I would have moved to a BRB trail on 1/4 of my position. My “Expectation” for this trade was huge! Unfortunately, I got stopped out for a 1 R loss when TRV dropped pretty violently below 57.50. When I saw this happen, I “reacted” immediately and closed this position. I didn’t think or allow myself to justify holding this trade as the reason for holding was no longer valid for me.

I moved on and took a few other trades, which resulted in small losses. I accepted this was not panning out to be a good day, but I needed to remain focused and wait for the next opportunity. With one of my 5 min charts still pulled up of TRV, I noticed the 5 min was triggering a Buy setup above 56.75. So, I picked up a few shares and averaged up to 57.00. I continued to build into this position and when 57.04 got taken out, I added quite a bit, brining my average cost to 56.96. My plan was to Sell half my position in the mid 57.20’s and hold the rest for a re-test of the highs. I was feeling pretty good as 57.11’s were printing and the upside was even greater now. Then all of a sudden a flush of sell orders must have come in and the Bid was suddenly at 57.00. It happened so fast, I was actually caught off guard with the reaction. They held for a bit and I held onto my long. But, this was not the type of price action that made me comfortable. So, I gave myself to B/E and as you can see from the chart I had to stop out.

These are two examples of a few trades I took in TRV that had a lot of upside. I was very bullish on this stock today and was expecting some nice trading to take place. But, as you can see the stock fell apart after the strong initial drive up.

 Living to trade another day

 ~David Guerrero