Not a Black Swan, But a Greyish One
September 28th, 2006I’ve been dummy trading thanks to MaoXian, TraderMike, Ugly, and Trader-X. Up until today my biggest loss was in BOOM on 8/30 at -1.14R.
Today was another wake up call (kind of like the previous one). I took a long position in TSO shortly after 10AM when it formed a tight 15 minute candle after gapping up at the open. As I’d hoped, the price headed up in my direction for several minutes.
Just after 10:30 the stock plunged quickly and I realized I was going to be stopped out. (Dang!) The price flew right through my stop and several hours apparently several seconds went by before my order was filled at a price well below my stop. I was pretty upset until I saw the price continue to plummet. Here’s all the charts in this trade that StockTickr captured for me.
The first one is the 15 minute chart that I traded off of:
Here’s the 5 minute chart that shows the precipitous decline:
Now, I know this comes with the territory - but that doesn’t make it less painful. What does make it less painful is to realize how bad it really could have been. I feel extremely lucky that this swan only had a hint of grey in it! It wasn’t nearly as painful as Ugly’s trade in FWLT the other day. Ouch.
It’s these types of setbacks that I actually find strangely comforting. What I really worry about is a long string of successful trades that would, no doubt, lull me into a false sense of security and make me do something stupid. The market is in control and there’s not a thing I can do about it and it’s good to be reminded of that often.
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butterboy Said,
September 28, 2006 @ 8:53 pm
Why were you looking at TSO? It was volatile but from a volume perspective I like it to have much more than average. Either way, I remember reading somewhere that Maoxian personally doesn’t get in after the second bar. Not like we have to do the exact same thing either, but I’ve learned the hard way that the earlier you get in the more likely you’ll get chopped. I know hindsight is 20/20 but it’s good to note that the next two signals would have made the trade profitable. Most trades won’t give you a signal off the second bar anyways, but in my experience, it’s not worth taking it.
Dave Said,
September 29, 2006 @ 4:11 am
@butterboy
Thanks for the comments, butterboy. I was looking at TSO as a gap play. You’re absolutely right - if I’d have waited until at least 10:30 there’s no way I would be in that trade.
Your comments have me looking closer at my trading on the 15 minute charts versus the 30 minute charts. I’ve made a couple discoveries which I’ll try to post about soon. Thanks again for the motivation!