"ah ha" moments 17,678 and 17.679

Before I get started, I made up those numbers.  Thats way too many "ah ha" moments to keep track of although I have had quite a few.  I've been studying a new book on trading.  One of the things discussed is swing highs and how to use them.  Much more detail than that sentence but maybe my charts will help explain it a bit.  Note:  I will use a few 1 minute charts in here for simplicity, but no I do not trade of the 1 minute time frame.

So it is easy to see that for the first 30 minutes or so Facebook was in a down trend.  One of the concepts in this book is about changing trend and what to look for to confirm that.  This is explained thru new swing highs or new swing lows.  Well what do we see on this chart.  The white lines I drew represented in my mind swing highs.  As you can see the 2nd one was higher than the first.  This got me interested in a long.  I waited for a slight pullback and when I saw a wick to trade against, I bought.  Very simple and an easy $1 gain on 15 cents of risk.  

Next is Netflix 

In this example, each swing high was higher than the last.  Although these flags are not the prettiest, they provided me with all that I need to trade, 1. a clear bias (once a new swing high is made, it represents a difference in trend) so I am only looking to long the stock, and 2. a wick or candle to trade against.  

It's that simple.  Well nothing is ever that simple in trading.  It's only ever easy in hindsight.  But to me, this represents my style and strategy to a T.  

Trade Review: Netflix- When its a scalp vs when you can go for more

If you read my latest blog post about "Trading on Emotion", you'll have some background on the emotional mistakes I made on this NFLX trade from Friday, Feb 19th 2016.  Comparing it to today's trade Feb 23rd 2016.  They both were short set-ups, one dropped about $1 the other over $2 on the initial move.  Besides the monetary amount, there were certainly big differences in the charts.  The trade from today where I had over $2 in gains was what I consider really easy. So easy in fact, my add dropped the second I added to my short position.

Below is the intraday chart and 30 minute chart from Friday

What do we notice from these charts.  My idea was correct, but price moved right into a bigger time frame support.  My idea in my head was if it could get thru this support it would be a home run trade.  Obviously what I want to happen compared to the reality is a completely different story.  Home runs and bigger moves happen when the chart is clean and doesn't have areas of support like this.  Compare this to the next set of charts that I am about to post, you will see why I had much better success with this trade.

Netflix ran right into resistance on the bigger time frame.  I was watching level 2 and how the stock reacted every time it got up to this level which confirmed my thought process on this stock that it was going down.  As we can see the 30 minute chart had much more room to drop until the next support (which it finally found at the end of the day)  The bear flag I added on was almost too easy looking back on it.  As soon as I saw a red candle, (some weakness and a confirmed risk) I was able to add to the position which worked immediately.  I have always thought and said, flags move much cleaner when it has room to run and not stuck between support and resistances.

Anyone that knows anything about technical analysis knows that stocks move from support to support and resistance to resistance.  Stocks that have the most room in between will be the best traders and move the cleanest.

Self-talk: The brain while trading on emotion.

Reviewing my trades from last week, February 15-19th 2016, I would have to say I had some really solid entries.  But my P&L will tell you a different story.  It was my worst week since I have become profitable.  How you might ask?  Well, overconfidence, greed, FOMO, stubbornness, lack of plan, you name it, I made every emotional error possible last week when it came to trading.  How else can you explain having a $1.40 winner turn into a .30 cent loser (I'll get back to this in a bit)

Day 1:  I can remember how it all started, last Tuesday (phew, thankfully it was a short week).  I actually started out the first 1/2 of the day with some gains.  Then I became frustrated missing a cover because I was on a phone call.  This outraged me.  Instead of taking decent profits 15 cents higher, I figured lets just hold, it will get down there again, I am sure of it.  To make matters even worse, I added to the position, even though the bigger time frame said this was a bounce area.  The stock bounced.  But then it came back down.  I was in green on every share that I had.  The market bailed me out phew.  Well, I had my greedy pants on.  I knew it was going lower!  We know the end of this story.  I covered for a much bigger loss than I previously expected.

Day 2:  I had in my head the market was going lower.  I started out with a $450 gain in FB short.  See, I knew it.  I'm so smart we are going lower today.  So I looked for every short opportunity there was.  Unfortunately the market had other ideas.  All the stocks that I was watching, FB and NFLX for example, all held 30 minute support and had perfect trends.  Instead, I became the trapped short (See chart below)  I made my eyes see what they wanted to see instead of reading price action.

You and I can clearly see how foolish I was by taking shorts in these spots.   My eyes wanted to see short set-ups so that is what I saw.  By the time I figured out what was actually going on, it was too late and I had given back profits and then some.

Day 3:  Made 1 very nice trade and quit for the day.  I was back on track right.

Day 4:  I had in my head we were going lower once again.  I was in 2 positions by 9:33.  My anxiety was at it again.  I was early and covered pretty much at the top of both positions.  I quickly realized my mistake and had to re-enter.  This time the stocks dropped quickly and I had nice gains in both positions.  But I lost more than I wanted to in my first 2 trades so these quick gains weren't good enough.  We were going lower I wanted a home run!  Before I knew it the stocks held their 30 min support and bounced, I had to cover now with a small loss.  When I saw what the market was doing I then decided to go long a stock.  And was up 1.40$ on it.  But I KNEW it was going 30 cents higher to my target (where I had a sell order already out)  Plus I HAD to get my money back.  I let it go, let it go let it go, HOPING it would bounce before I finally had to sell for a loss.  I took 5 trades, 3 of the 5 I had really nice gains.  And ended up with a loss on all of them.

If you read this entire article of my jumpy thought process, well, kudos to you.  As you can see from the way I was talking to myself in the head, every mistake I made was all emotional.  If I stuck to a realistic plan, I know for a fact I would have had another nice week of gains.  Unfortunately, I traded my hopes and dreams and was incredibly greedy.  This is not how I became a successful trader.  I will chalk last week up as a learning experience.  When I start to feel like this and have the anxiety to go along with it, its time to take a break or shut down completely.  All I can say to myself after reviewing that is WHAT THE FUCK WERE YOU DOING?!  My mentor Kunal always says "If you chase, you die"  Well If you chase, are greedy, emotional, stubborn, don't have a plan, you die.  Its that simple.

I will not let that experience happen again.  I come into this week with a fresh start and know what I need to do.  So far it has worked, I had a decent Monday. 

Watchlist 2/17/16

Watch-list 2/16/2015

As I write this the S&P is up 32 points and the DOW is up 262 points over night.  Expecting a pretty big gap up tomorrow.  My 2 thoughts as of now are 1) gap up, pull back and run or 2) gap up into resistance and fade.  Will see where the market opens but price action will ultimately be the answer to where the market goes.