Don't Get Married To You Stocks!
By Cliff Clark
How often do we see somebody throwing a out a stock symbol as an idea in the trading room three hours into the trading day? You know the type, you look at it and it tried to break out in the morning and fell significantly. Since then it has just been floundering around with little to almost no volume. Is it just me that thinks, “why is anybody in there right mind looking at this stock”? Probably not, to be honest I don't think this trader is in his right mind. What I think is, he likely played the breakout, it failed and he compounded the problem by not taking his stop loss. He is now sitting there on a 3R+ loss just hoping when he throws the symbol out somebody will tell him it's going to be OK, the stock is going to bounce any moment.
His problem is he got married to his stock. He most likely became a longer term holder of the stock. Why? Because he is afraid to take a loss. So now he is willing to hold this stock for weeks, months or maybe even years. He'll sit on dead money hoping that someday it will come back. Who knows someday it might. But how much more is he losing by holding that stock and not putting his money to work elsewhere. My guess is a lot.
When a stock on your list does the opposite of what you expected or nothing at all it's time to let it go. Focus your energy one other stocks on the list or on scanning for new ideas. You don't want your day trades to become swing trades or your swing trades to become core trades. Just learn to take your losses when a trade reaches your stop loss and learn to remove stocks from your list when setups are no longer happening anything soon. Don't be the guy in the trading room calling out TSLA or AMZN every hour of every day!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
