Do You Play the Blame Game?
By Cliff Clark
How do you respond when you are asked about a losing trade? Perhaps by saying it was the market, or that damn market maker grabbed your shares or even that the Fed was manipulating the markets on fed day.
People that respond in this manner whether novices or those that have been “gambling” in the markets for many years, are quick to point fingers at anything that will relieve them of the burden of having to take responsibility for their actions. Accepting responsibility is difficult, because we as humans don't want to deal with the consequences of our actions. Thus, we blame it on anything we think is causing us to act. But, as we know today, and as has been established by philosophers throughout history, we are free to choose our actions.
Choice in the markets boils down to determining whether to enter a trade, or to sit on our hands. If you enter a trade, then the choice comes down to when to sell for a loss (which is your stop loss) or when to sell for a profit (your target as determined by your plan). Not making a choice is also an action which we commonly refer to as sitting on hands. If we enter a stock, then most of the things that can happen with our position (including it being stopped out by those mean nasty specialists!) is our responsibility.
Understanding our actions in this manner and having a well defined plan to help us determine these actions will relieve us of the burden of having to come up with excuses, and will put responsibility where it should always reside, into our hands.
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.
