Stop gunning: The most frustrating aspect of swing trading

Here is a note I sent Trade Report members a few days ago related to "stop gunning". 

I have received a few questions about TWTR this morning.  Some of you set your stops around $45.70-90 and were stopped out.

In today's morning report I mentioned setting it around $45.50.  It got down to $45.57.  I have a mental stop in place, not a hard stop.  If I feel there is stop gunning going on, I will wait a bit to see if the level holds.  In this environment where market makers are not even trying to hide stop gunning, you have to be careful.

This is why I give stop ranges and not a specific number.  First, your stop depends on your position size and how much you are willing to risk and second, you don't want a bunch of people at the same exact level.  When "they" see that, they start salivating.  Therefore, you must always think about where everybody else is placing there stops and adjust accordingly.

The cat and mouse "stop game" with market makers/algos is the most frustrating aspect of trading.  If you do get stopped out, take comfort in the fact that you have taken only a small loss and it does not impact your account much.  Then go back and devise a plan to win the game.

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Trading "Leak": Impatience and the GS Trade

One of my mantras is to "set it and forget it" after making a trade. Once a trade is made, I set my stop and target, then forget about the trade until one of the price objectives is hit. At least I usually do . . .

My recent GS trade is a good example of a trading "leak" that many traders have, the error of impatience. GS was not a losing trade, but I could have done better. I originally entered at the bottom of the current trading range as an "oversold" setup as the stock neared support and was oversold. My initial target was hit, I took a partial profit, then moved my stop up just under the current support range. If I had stuck to it, the second half of my trade would see a profit right now.

Instead, I got tired of waiting for something to happen and exited on Friday before my stop was hit. Thus, I missed out on today's 2 percent gain.

We all must remember that we set out stops and targets for a reason, and little good comes from "micro-managing" trades.

RIMM Breakout and Pair Trade

Thus far the "pair trade" I outlined yesterday and entered on Friday is a success, as RIMM broke out in a big way today and AMZN (short) hangs out under the "failed breakout" resistance level.

I took a partial profit in RIMM today and moved my stop up to entry level to lock in gains.

Position Update and Lesson Learned

I am still holding my SSO position. I bought at $59.96 and it closed at $59.66. Although today did suck, remember that the lows in the S&P still have not been pierced. I am still playing the bounce until my tight stop is hit.



I am still holding PBR as well. The stock is sitting right at moving average support. We'll see if it holds.

Today's WYNN trade is looking good. I went short at $85.03 and the stock closed at $79.26. I covered half my position at $80.10.

I am still holding TRLG, which is holding up quite nicely in the midst of market turmoil.



I was stopped out of EWZ at $87.44 (entry at $90.06).

The lesson to take away from this position update is to understand how important it is to manage positions and control risk. If I were to take the 5 positions above and assume I had closed out all of them today, I would have three losses and two wins. However, in this shakey and volatile market I have close to a $1600 profit.

My number one rule is to manage risk by not only setting percentage stops, but making sure than stops are set in logical places by paying attention to price pivots and other support levels.

MTL Exit

I exited MTL today for an acceptable sized loss. It's not difficult to guess where I exited. My stop was placed just under the 50 day moving average.

I've been asked if I now think MTL is a short play, since it has broke below support. I definately will not short at the moment. This is only a price breakdown. Volume was weak on the move below support. This suggests a recovery could take place. In fact, if price mounts today's bar on good volume (closing above 52.50) the stock would again become a long play.

EOG . . .WOW!

I had much confidence in the EOG trade, but even I didn't expect the move to happen just hours after I entered. I took partial profits at my $127 target, exiting 100 shares for a $846 gain (+7.1%). I've moved my stop up to the entry point for the remaining 100 shares in order to "lock in" this gain.

Video: Sticking with the Trade (FSLR)

In todays' video, I detail my current position in FSLR to show how important it is to stick with the trade until your stop or target is hit.

Ain't No Glass Chin Here

I'm taking it on the chin today. Not only from the market, but readers as well. It's comforting to know that I can bring so much joy to so many of you. It seems some of you derive a lot of pleasure from my pain. I guess that comes with the territory, especially with the profits and win rate I've enjoyed this year. Yeah, that is a jab at the petty bastards that bombarded my inbox. May you rot in 10 feet of bull dung!

I haven't covered any of my shorts just yet. As I constantly preach, it's important to let your stops work for you. As of yet, no major S/R points have busted, so I remain in bear mode. However, we are getting close. For instance, my stop for AAPL is a tad above $181, and the stock closed at $180.22. My QID stop is around $37.60, PGJ at $34.50 and MER above $60.

While I'm not concerned about any losses I may suffer from the above trades, I am ticked off about not entering MA at $181 (it's currently at $195.60). I outlined it in Monday's video, and pointed out that it is a better bounce play than bearish looking setups like AAPL and GOOG. Note that MA was up 6.30 percent today , while GOOG moved only 2.77 and AAPL 3.09 percent.

My mistake with MA was waiting for too perfect of an entry. I've talked about this before. I am not usually all that precise with entry points, as long as risk/reward is good. What was I thinking!!!

Update on My Emotions: Arghhhh!

Arghhhh! While I made some spendid gains today, I can't seem to forgive myself for cutting ties with UA, SII and SWHC yesterday. Instead of taking small losses, I would have have made a little over $2000.

That's what I get for not adhering to my stops. All of you loyal readers have permission to call me a royal "wuss."

Trade: HDNG

I bought 500 shares of HDNG at $38.25. It's a low float stock that showed up on my "trend pullback scan" last week, which placed it at the top of my primary watchlist. The stock printed a tail at support on Friday with a strong close, so I placed a mental buy stop today above the close. My stop will be placed at around $37, with an intial target at $40. I will likely take partial profits at the initial target and let the rest ride in hopes of a breakout to new highs, with a new stop at the purchase price..

Trade: NILE

I sold 200 shares of NILE at $60.50 for a $410 gain (+3.5%). I am still holding the remaining 200 shares from yesterday's trade, and have moved my stop to the entry point ($58.45). This locks in my current $410 gain, while "letting the rest ride".

Today's Trades: GROW, MVIS, QID, EWZ, HOKU

I sold 600 shares of EWZ at $51.80 (entry at $50.43) for an $822 gain (+2.7%). I suspect that it will retest support at $50, which could provide another entry.

I sold 1000 shares of HOKU at $6.44 (entry at $6.11) for a $660 gain (+5.4%). There is not enough volume to think this price will hold. As with EWZ, I will re-buy on a pullback if it is on low volume.

I bought 400 shares of QID at $51.85. Take note of the stochastic indicator in the chart below. QID has rewarded buys after stochastics move out of extremely oversold territory.

I bought 1000 shares of MVIS at $4.04. This one is straight out of last night's watchlist notes. I like the low volume pullback to the previous highs. What's tricky here is stop placement. Should I use a tight stop at the previous highs ($3.95), at the high volume breakout (3.8) or the 50 day moving average ($3.50)? I'll probably go with $3.80. I move back down to the moving average would put the stock back in an ugly trading range, and I ain't got that kinda time.

I bought 300 shares of GROW at $29.96. Last night I wrote that I was waiting for a deeper pullback, but decided to enter on a test of gap/breakout support. This stock is extremely volatile, and there is another support area at $28, so I decided to use a wide stop. To make up for the stop, I went with a smaller than normal position size.



Along with the positions I entered today, I am also holding TZOO and HES.

Patience, Trading and Profitability

I stumbled across this article on patience and trading via Trader Mike's links. Although it may seem like basic stuff, it speaks about an issue that has been one of the toughest for me to master. The basic message is you must be patient with your entry points and give your positions time to work for you.

I know it sounds like a basic principle. However, it's been a tough one for me to master. I can't count the number of times I've spent all evening researching my watchlist and identifying the perfect entry points, only to jump the gun the next morning and enter before my entry point is hit. Inevitably, the stock will end up reaching the entry point I originally identified, take time to get to my buypoint, and take even more time inching higher.

There's likely a very good reason that I identified a certain entry point, most likely a pullback to breakout level or a trendline tag of support. By succumbing to my emotions, I've ignored logical analysis, lowered my rewark to risk ratio, and actually created a longer and more frustrating hold time. If I would have just waited for the buypoint, I'd actually already have a nice profit by the time the stock moves back up to my original buy point. If the stock went the other way, I would end up with a smaller loss.

A good trader must also exercise patience once in a position. I've wrote about this before, about how important it is to let your positions work for you. Just as with entry points, there is a logical reason for setting your stop just below support levels. By "micro-managing" your trades, we usually end up losing out on big gains.

One way I combat the urge to micro-manage is by taking partial profits as they come. It keeps me in the game if there is a big move, locks in a small profit and feeds my basic emotional needs.

I know it's tough to be patient, but by gettting a handle on my entry points and allowing my positions to work for me, I've become much more profitable.

View the rest of this blog.

Freshly Squeezed

Days like today tend to turn smack talking bears into nervous nellies with itchy trigger fingers. This gives rise to a nice little stock market pop that makes everybody wonder if we really have seen th worst of it and bottomed. Maybe we have, though I seriously doubt it. More likely, what we have today is a good old fashioned short squeeze.

Take a look at the Nasdaq chart below. If today's price bar had been wide ranging, closed near the high, pushed through 2400 and been on high volume, I would be rethinking my game plan. As we can see, that's not what happened. Instead, we got a weak little pop on below average volume, which is certainly not cause to change our market stance.


If you are holding shorts and feeling a little pressure, look away and do something totally non-market related. Let your stops work for you. You placed them where you did for a reason. Covering now could just lead to trading yourself out of a good position.

If you are wrong, and we are in the midst of reversing, big deal. After all, you prudently managed your risk-reward and position sizes before the trade; so a few losing trades ain't gonna kill ya. You did do that, right?

Today's Trades: CENX, STLD, RL and LEH

I've had a busy day at work, so I'll have to detail the trades in more depth tonight. I bought 500 shares of STLD at $40.02, 500 shares of CENX $47.64 and 300 shares of RL at $87.10.

I also got stopped out of my 250 shares of LEH at $81.61 (entry at $82.64) for a loss of $257 (-1.3%) . This may sound crazy, but I'm actually happy about this trade. I originally had my stop placed under the 50 day MA at $80.40, but decided a better spot would be at the "fill the gap" point under $82. My thinking was, if the stock can't hold the gap support level, it will likely tumble. A tenant I try to adhere to when placing stops is that price action support is more important than moving average support.

An emailer asked my why I am placing so many long trades when I am short the Nasdaq. Take a look at my trades closely. I am not making any bets on tech. My longs have come from the commodity, broker (bad move) and retail sectors.