A Chart Is Like A Conversation!
By Cliff Clark
Conversations are a bit like passages of music. The tempos rise and fall. Long speeches can be punctuated with short, sharp replies. And, most importantly, silent moments can add to a sense of drama and add emotion. When I encounter those silent moments I get eerily uncomfortable. We probably all do. You are probably thinking what to hell is he talking about.
This is supposed to be about trading. It'll become crystal clear. Let's explore.
I recently had a conversation with a long lost cousin who was my best friend growing up. We were glued at the hip. We did everything together. Then life happened. After high school he joined the marine corps and I went to college. The last time I spoke to him was at his wedding when we were both 22. I have recently been researching my ancestry and I managed to track him down. I decided to give him a call after 40 years. You would think we had a lot to talk about. But did we? After about 5 minutes of pleasantries came that dread long bout of silence.
I could feel sweat beading up on my forehead, I actually couldn't think of a thing to say, I just wanted the call to end. I finally did end it and then of course regretted it a couple of hours later. The guilt got to me and I decided to call him him back to apologize, he did the same. Time had passed us by and we just didn't have much in common anymore.
Isn't trading exactly like that. You take an entry and the stock goes up, then the stock goes back down. Then it comes the dreaded sideways pause. One minute, two minutes... you get the picture. Finally you can't take it anymore and you sell for a small profit or loss. Of course the moment you exit the stock bolts in your direction and you are kicking yourself in the butt the rest of the day and just full of regrets. To this day these pauses in the charts are still the thing that cause me the greatest frustration.
So how do you fix this? Easy, if the stock is routinely moving in your favor after you sell in these instances just hold on too it. Why are you selling? When the pressure to sell gets to be to great have a routine to fix it. Perhaps a short walk, relaxation exercise or meditation. Whatever it takes to learn to stay in the position. Oh, and when I said easy back there. It never really is, but it can get easier!
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.
