Hopes and prayers as a trading technique
Today was an interesting trading day. We went through the daily gapper list at the Bear and Bull Traders room with Carlos and Norm (https://bearbulltraders.com), and my eyes were set on WSM that gapped 12.33% and was trading at around 57.95 with a previous day closing price of 51.59.
My thought process: the stock has gapped up huge, and I figured whoever bought the stock premarket will sell at the open and I was ready for a quick scalp trade to the downside.
What I did: About 2 minutes after the market opened, I shorted 300 shares at 58.02. It was a good one, and the price went down to 57.05, and I covered half of my position at 57.29 with about 100 bucks of profit. Then it started to go up... and I was frozen like a deer in a headlight. My plan was a quick scalp on the short side, take a quick profit and let it run if it has to and re-short when it finds the top. Did I do that? No. I left 150 shares short, and it went above my entry price. I was red now, and while it was still going up I added to my position (something that NO ONE SHOULD EVER DO - ADD TO A LOSING TRADE). I added 200 shares at 58.40. It still kept going higher and higher and reached the top of 59.40 (a dollar higher after my adds). I froze again. All I am thinking is it will go down and thus needed to increase my average price. Added 30 shares at 59.02, and it still kept going higher. I couldn't add anymore - reached max buying power, and started praying and hoping (best strategies of a losing trader that works some times). This time it worked and started selling off. Covered half at 57.76... and the rest at 57.16 and 57 for a total realized profit of about 400.
What followed is even more pathetic (and still green). When the stock got closer to the VWAP from the lower side, I 'knew' it was going to reject the VWAP without any valid reason or indication from the price action. I shorted 150 shares. . I just 'knew'. It stalled at around the VWAP and because I knew it was going to reject it, I added another 150 shares in a panic when I saw red on the P/L for the trade. It cruised through the VWAP, and I was down about 200 bucks on the trade and I resorted back to my true and tested technique - hopes and prayers. Once again, it worked and I covered below my average price for some profit. Ended the day with a 465 bucks of profit after commissions but like anyone who has ever traded knows, this was the worst trade anyone could have for several reasons:
1. Trades at the open on a gapped up ticker shouldn't be more than a scalp if it is a short.
2. When it comes to your average price or you are red - get the hell out. Why add?
3. VWAP is great to look at but how the hell can you decide or know a ticker is going to do around VWAP? NO ONE KNOWS for sure.
I got lucky this time, but any ticker that goes bunkers for whatever reason and shoots up will one day wipe my account if I don't get my shit together and learn to trade well.
Until next time,
Daniel
My thought process: the stock has gapped up huge, and I figured whoever bought the stock premarket will sell at the open and I was ready for a quick scalp trade to the downside.
What I did: About 2 minutes after the market opened, I shorted 300 shares at 58.02. It was a good one, and the price went down to 57.05, and I covered half of my position at 57.29 with about 100 bucks of profit. Then it started to go up... and I was frozen like a deer in a headlight. My plan was a quick scalp on the short side, take a quick profit and let it run if it has to and re-short when it finds the top. Did I do that? No. I left 150 shares short, and it went above my entry price. I was red now, and while it was still going up I added to my position (something that NO ONE SHOULD EVER DO - ADD TO A LOSING TRADE). I added 200 shares at 58.40. It still kept going higher and higher and reached the top of 59.40 (a dollar higher after my adds). I froze again. All I am thinking is it will go down and thus needed to increase my average price. Added 30 shares at 59.02, and it still kept going higher. I couldn't add anymore - reached max buying power, and started praying and hoping (best strategies of a losing trader that works some times). This time it worked and started selling off. Covered half at 57.76... and the rest at 57.16 and 57 for a total realized profit of about 400.
What followed is even more pathetic (and still green). When the stock got closer to the VWAP from the lower side, I 'knew' it was going to reject the VWAP without any valid reason or indication from the price action. I shorted 150 shares. . I just 'knew'. It stalled at around the VWAP and because I knew it was going to reject it, I added another 150 shares in a panic when I saw red on the P/L for the trade. It cruised through the VWAP, and I was down about 200 bucks on the trade and I resorted back to my true and tested technique - hopes and prayers. Once again, it worked and I covered below my average price for some profit. Ended the day with a 465 bucks of profit after commissions but like anyone who has ever traded knows, this was the worst trade anyone could have for several reasons:
1. Trades at the open on a gapped up ticker shouldn't be more than a scalp if it is a short.
2. When it comes to your average price or you are red - get the hell out. Why add?
3. VWAP is great to look at but how the hell can you decide or know a ticker is going to do around VWAP? NO ONE KNOWS for sure.
I got lucky this time, but any ticker that goes bunkers for whatever reason and shoots up will one day wipe my account if I don't get my shit together and learn to trade well.
Hind sight - right trade:
1. The stock gapped up - shorting at the open is alright but it has to be scalp only trade.
2. It is okay to short again vs VWAP but one has to be ready to be wrong and avoid unnecessary headaches by cutting losers short / quick.Until next time,
Daniel
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