After that, the next most important thing is sticking to the plan you created. If you break the plan there’s no point in creating it in the first place.
In a stock market era with commission-free brokers, like TradeZero, being a trader isn’t as hard as it once was (although it is still very hard). Now, you have to beat the markets, but you no longer have to also cover $5.95 for each trade you place, as you once did.
So here’s a trading plan I made today, November 16, for $BIMI, so others can see the thought process that goes into one.
Technicals
$BIMI has run in the past, just in October, on around 200 million volume, so it’s a former runner. After that first green day, though, it gapped down massively (leaving a very sour taste in any long’s mouth that tried to hold on for day two.
Verdict: Indicators are conflicting: it’s neither bullish nor bearish to me.
News & Fundamentals
On Yahoo they actually announced positive earnings with revenue increases and news that they were turning a profit as a company.
The float is higher, at around 30 million, which means a lot of people might be down on their position from when it ran in October – and a higher float means more demand is needed for it to run.
Verdict: News is very bullish – the float is more bearish – this stock needs a lot of volume/demand to run.
Wider context
We’re not seeing crazy 200 – 500% runners daily in the market right now, so a lot of stocks are providing good short opportunities.
Also, $BIMI is a Chinese company, these can be “avoids” for traders as the price action can often be tricky to trade, with traps and random price action.
Verdict: more bearish or, put simply, an avoid.
Pre-market action
$BIMI is one of the top % gainers of the day and holding trend/consolidating quite nicely. At this point, pre-market, it had just perked above VWAP so I decided to take it long risking VWAP.
Verdict: To hold this gap it needs a lot of volume, but if the stock ignites with more volume right now, it could make a great trade and is worth taking with a tight stop.
Overall trade evaluation
If volume really comes in at any point in the morning this could make a great long trade given the news – but volume MUST come in as the float is higher and longs are trapped on the longer-term chart from a previous failed multi-day move.
Let it shake out over-eager traders in the morning then try any long if volume comes in after a long period of consolidation. Trade a small starter position – not full size – as Chinese tickers tend to trade unconventionally at times.
Evaluating my trade
The pre-market long worked and I managed to take 13% on my initial sell. The fact that it didn’t take off there and then, however, was a sign the trade just wasn’t going to work. We needed volume and that was a good spot for demand to come in.
I didn’t let it shake out in the morning which generated a few unnecessary losses and I should have waited for a lot more confirmation since so many indicators were conflicting.
By 10:30 the stock had rejected VWAP with quite a hard sell to the downside. At that moment I had conviction the plan had failed and everyone was going to be pushed to sell.
I reacted quickly to the price action, creating a new plan, to short from the 1.09s risking VWAP knowing that a failed long with a high float could generate a lot of selling pressure.
Overall, on the ticker, it was probably a break-even trade or a small win. With conflicting indicators the trade was likely an avoid all together, until it had confirmed one way or the other.
In this case the learning is I’d lacked patience, a good lesson for future trades.
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