By Cliff Clark
Have you come into trading thinking that this is going to be an easy game? Thinking maybe you'll win 80-90% of your trades? That is what all those advertisements tell you, right? Well, what happened? You probably got smacked down the very first week. If you were one of the lucky ones it probably didn't take much longer than that. The problem is that there is much uncertainty in the market. Unlike most professions things will always be in flux as a trader. But that is a good thing, because without uncertainty markets couldn't function.
Basically you have two sides you can play. Stock prices (or whatever you happen to be trading) are formed through the action of supply and demand. Demand buys stock based on bullish expectations. Supply sells based on expectations of lower prices. Each group has different expectations and one has to ultimately win. This environment is your playing field. The environment presents uncertainty and you need to recognize that you are in a constant state of not knowing what's going to happen next. All you can do is find a reliable pattern, enter a position, and then manage the position hoping you have more winners than losers.
How can you eliminate the negative effects of uncertainty? You can't, but you can try to minimize the effects that uncertainty will have on you. You need to have a trading plan. You then need to gain confidence in the validity and odds of your management system. That's also why you need to test your plan through paper trading and trading with small risk until you are confident it works at producing profits. You won't be eliminating uncertainty, but you will be putting the odds on your side and reducing your anxiety at dealing with uncertainty by gaining confidence in your ability to trade during times of uncertainty.
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.
