The Luck Factor!
By Cliff Clark
One of my favorite movie franchises of all time was “Dirty Harry” with Clint Eastwood. My favorite line from any of the movies is "You've got to ask yourself a question: 'do I feel lucky?' Well, do ya, punk?" The line was addressed to a criminal lying on the ground about to reach for his weapon with a 44 magnum pointed in his face. I guess he didn't feel very lucky because he didn't make a move. That was probably pretty smart of him. The line was from the first movie of the series and came out in 1971.
Do you think luck plays any part in trading? From my experience, I haven't found that to be the case. If it does, it surely isn't good luck. It seems every time I have tried to take a trade that I shouldn't take it doesn't work out. The same with breaking my plan. Have you ever had this experience? You enter a trade and it goes halfway to your target then goes sideways. 5 minutes go by, then 10 minutes, then 15 and 20 minutes. Finally in frustration and thinking you see a better opportunity you decide to sell. Almost to the second that you sell before you even see your confirmation the stock rockets higher. Has that ever happened to you? It seems to me that almost every time I sell too soon or break my plan in some way these things happen, although not always as dramatically perhaps. Was I unlucky? Perhaps, or perhaps I should have just waited and followed my plan because when I break my plan the stock will usually hit my target without me. This creates even more frustration and more chasing and trying to get lucky.
So I think the luck factor in trading is created by us. For most of us the luck we create is bad luck because we always seem to break our plans at the wrong time. In order to break this bad luck habit we have to have a trading plan that we follow religiously. With a great trading plan that you follow religiously along with experience you will see your bad luck go away and you might even hear people say, “that guy is so lucky”. I don't really believe you are lucky though, you created your luck with all the hard work you put in.
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.
