IBM Trade on Jul 21, 2020 09:36 from CapitalMastery: Tradervue User Stock Trades.

Summary

In looking back over this trade, I'm not even sure why I entered. My original plan was to wait for an opening entry signal, given that I had a long bias off positive earnings report. However, I entered the first trade as a dip bounce, once I saw the 9:36 candle get bought up on heavy volume; figured the initial bottom was in, and rode that bounce for a nice scalp, selling into the 1min 20ma/$130 whole number. Sure enough, that's where IBM failed from.

Here's where the problem started, I opened a new position at 9:55am, and looking back, I have no idea why... There was no entry signal for the long bias.... The only thing I can think of is the 9:49am wick, which was bought up on volume, that may have given me the impression that the real bottom was in, but given that this wasn't the first bounce, it's not something I really should have been playing, and certainly not at the high prices I paid. After this entry, IBM sort of gave us a 1min 20ma cup, but it wasn't above the 20ma, which given we were under the 5min 20ma, I should have been extra cautious and demanded a better entry signal before spending any risk on this trade. But in the moment, I used the higher low/higher high as an excuse to stay in the trade, and then used the pullback from the higher high as a reason to add to my position. This would have been fine except for the fact that the pullback already broke through where my stop should have been, and thus rather than adding, I should have been getting out of this trade per my strategy.

While I'm glad I did stop out, I should have stopped out at $129.06, with a single lot only. Instead, I sized up to 3 lots on a C- entry signal at best, and then gave it all the way to $128.38 for a stop... Aside from this stop not following my entry strategy, this setup this not deserve such a wide stop. With such a large position, and wide stop, I took a significant loss once I stopped out that gave back my gains from the morning, and put me red on the day a decent amount.

This is the moment my day went to shit; I let the loss + going red on the day put me on-tilt, and started trading emotionally and gambling. I threw out my trading strategy/system, and started trying to scalp anything that moved so I could "make it back". From there, I ended up blowing up my day, and taking a huge $620 rip.

In the heat of the moment, I recognized when I went on-tilt. As soon as I started taking losses on IBM, I could feel the frustration rising. I even tried to coach myself to stay calm, and not start trading erratically, but despite my efforts, I ended up going hulk anyway.

After taking some advice from a trading friend, and reading up on Trading in the Zone, I've come to realize that I haven't yet fully accepted the reality that trading is a game of probability, and that every trade is just a bet. I have not yet fully accepted the risk I've put on with these trades. I'm still trading as if every trade could work, and when they don't, I spin out of control trying to force it to work, and when I can't force it to work, I go try and force other trades to work. Oddly enough, I end up trying to fix the results of my bad trading with more bad trading. Not surprisingly, it always ends in disaster.

Thankfully my risk manager stopped me out for the day once I hit my $500 limit, plus some slippage. While I hated it in the moment, it was nice having it there to protect me from myself. At the end of the day, I'm at least grateful that I'm aware of how my emotions are affecting my trading, and even more so that I can recognize it in the moment. This is the first step to overcoming these issues, and breaking through in my trading development journey.

Did Right

• Went into this trade with a bias, and a game plan for entering it; even though I didn't follow it.
• Stopped out; despite my stop being way too wide!

Did Wrong

• Didn't wait for a cup above the 1min 20ma, for my entry signal. Given that we were under the 5min 20ma, my assumption should be that the trade is probably going to fail, but that maybe it's worth an entry attempt, with small size (1 lot, max 2 if confirmation) if we get a good enough entry signal. Instead, I went into the trade treating it like an A setup.
• Did not set my stop per my trading system/entry strategy; stop should have been at $129.06, not $128.38
• Was too big on this trade; should have been 1 lot, maybe 2 lots max.
• Didn't have a valid reason for re-entering the trade when I got stopped out. I should make the trade re-entry another entry.
• After 2 failed attempts, I should move on from the trade, and not revisit unless given an A+ entry signal.
• If I'm going to play the first bounce, then I need to treat that as a separate trade, and scalp accordingly. If the trade ends up turning into more than a temp bounce, then I can put on an All Day Hold long position.
• Allowed a trade that simply didn't work, to put me on-tilt, and ruin my entire day. That is not a valid emotional response given the dynamics of trading. Every trade is a game of probability; meaning I should go into each trade being completely comfortable with the fact that the trade might not work out. This way, when a trade fails, I simply move on to the next trade/setup with edge, and repeat my execution process; rinse and repeat. That is how you trade like a professional; not throwing a mental tantrum like a child who didn't get his way. Seriously? Come on man; grow the fuck up!
• Breached my position sizing guidelines at 10:53am, when I added additional lots because I thought the stock was finally bouncing for the day, and in my mind, I wanted to size up so I could make back the losses from earlier failed attempts. This goes back to the "making back" attitude; that's not a valid reason to size up. The only valid reason I should ever size up is due to price action confirming that the trade is working. My PNL on the trade is irrelevant.

Improvements

• Ideally, you only want to take entry signals when the 5min 20ma is on your side and aligns with your bias.
• If you're going to take an entry below the 5min 20ma, make sure it's above the 1min 20ma, and assume the trade will likely fail, so you can size/trade accordingly. Stay lite, and be quick to take profits if something doesn't look right.
• Remember, you can be picky in the trade you take; you don't have to take every trade you plan. You can literally just take the trades that offer up picture perfect entry opportunities. With so many opportunities these days, why would you trade anything less than perfect?
• When I recognize that I'm getting emotional, and going on tilt, Go for a quick walk around the block, and come back. This will help me sober up emotionally.
• Remember that every trade is a "potential" opportunity, that you're investing a portion of your daily risk budget on. Make sure you're investing in the best opportunities possible. Treat every trade like a startup; invest some initial seed capital, and then invest more as the startup shows more positive progress. Overall however, assume the startup will likely fail, as many do.
• Be more patient on the open, and wait for the chart to form. Unless you get a perfect up/down/up move above the 1min 20ma, while above the 5min 20ma, for a long, then wait for a few 5min candles to print, so you can get an idea of what's going to happen.
• Brush up on your targets, but in the meantime, look to take off at every whole or half, depending on the stock price, or any major levels like VWAP, 5min 20ma, previous high/low, pre-market high/low, etc...

Next Trade

I'd expect IBM to rally tomorrow once investors have a chance to digest the earnings info; especially the cloud growth performance. (fyi, this is exactly what happened the next day. IBM opened at $125.90 and made a high of $129.47, and ultimately closing near $129 - on this second day, the entry signal was above the 5min 20ma, and picture perfect up/down/up motion)