During the calm until the next storm, it’s crucial to evaluate your best and worst trades to continue what’s working and stop what’s not – so here’s my best and worst recent trades. Also, if you want to trade more to the short side, here’s a discount using my TradeZero affiliate link.
What’s working for me: playing more parts of a big move
With more experience you develop more trading setups, which enables you to play more parts of a company’s stock momentum: from when it ramps up, over-extends, comes down and then bounces.
For example, see when $CEI ramped with 5 green days in a row, followed by a gap up first red day short opportunity around the 4.40s on Sept 30. This was followed by five subsequent red days in a row which led to a beautiful first green day in the 1.0s on Oct 7.
I look to short after an explosive move to the upside and long after a dramatic drop to the downside, so I took the first red day after the ramp up and the first green day after the drop down.
For the first red day short it was a case of waiting for confirmation that the front side of the trade was over, after the morning spike failed. Then, It was simple, shorting pops and covering dips till the end of the day and after hours.
For the first green day long, it was a case of waiting for a lot of consolidation, to ensure the back side of the move was definitely over and the chart had formed the structure to successfully reverse/bounce.
What’s not working for me: trading conflicting indicators.
My biggest mistake in recent months is trading stocks with conflicting indicators. For example, when technical analysis shows a weak chart/price action but fundamentals look strong.
Ticker $IO, on October 19,reported preliminary third quarter 2021 revenue increases of $44-$45 million, an increase of 125% -which I qualify as positive fundamental news. After gapping from the 1.40s to the 2.00s pre market, however, it was always going to be difficult for the chart to sustain the gap and then break through daily resistance in the low 2s, without explosive volume.
Due to the strong, holding intra-day price action, the long was worth a shot in my eyes. I took a small trade in the afternoon for small gains. Then, nearer the end of the day when the break out failed I took a random short. When support held, I sporadically flipped long into after hours. Here’s three questions I should have asked myself.
Why would you short a company that has held support all day after reporting good fundamental news?
Why would you long a trade you just thought was a short?
Why are you holding a Nasdaq gapper long overnight when the majority gap down the next day?
It’s important to not only learn from your losses but also your gains. It’s also important to evaluate your performance when you’re winning as well as when you’re losing – not only when something goes drastically wrong.
You’ve seen mine so I’d like to see yours – tweet me @jonk87 on Twitter.
If you’re looking for a broker that specialises in short selling you can use my affiliate link to receive discounted fees whilst gaining access to the hottest hard to borrow stocks.
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