Bad Entries
By Cliff Clark
There are few ways to do greater damage to your account than to load up on the wrong side of the market at the wrong time. Before you know it your of original stops are hit, and hard won gains are lost. Provided you are choosing legitimate trade candidates, and utilizing proper stop losses, the biggest threats you account as a trader tends to be issues of poorly-timed entries. This is one of the worst account destroyers of all.
There is no way to prevent some draw down in your account from time to time. This is just a part of trading, and any trading plan you devise to take on the financial markets had better factor this in as an acceptable part of your plan. As long as the periods of account growth outweigh the losing, hopefully by a significant margin you will have a viable, profitable trading business. And if you are utilizing solid trading discipline, and only playing quality set-ups, then this is exactly what should happen. Except if you get over eager at the wrong time in the market cycle.
This is why your plan must address the issue of when to get more aggressive in the market, and when to pull back. No trading plan is complete without solid rules regarding when to trade aggressively, when to trade cautiously, and when to stop from trading altogether and just sit on 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.
