Traders Ask (FOSL):
After making money at this level, i added a small amount with entries at .51 and a .47 stop. I have never had problems with these stops before, but as the bid dropped, i got filled at the .09. How do i avoid this in the future? Was it just one buyer in the stock? Was this stock not liquid enough? I don’t want the answer to be limit stops because when i am wrong, i want out, i don’t want to fight the position.
Any advice you may have would be helpful, as I am a “home alone” trader without proper mentorship options and I have been struggling to find the right setups for myself. I have had some moderate success with Morning game plan, and appreciate the education i get from watching SMB on stocktwits regularly as well as the blog and “One Good Trade” book. Dealing with Roy has been a pleasure also.
Bella Responds:
I checked the charts from that move right around noon in FOSL (8/10). You can see the wick on the candle. There are three things to consider: 1) Manual stops, 2) you just got screwed, 3) you didn’t understand your risk.
I hear it on the desk. I couldn’t get out. And then the banging and cussing commences. I might be in the same stock and I am thinking that was not hard to exit. With manual stops and quick reactions, fast trading skills, you often can exit your position without these rips. And you sit flat wondering what the heck is everyone complaining about. You weren’t fast enough young fella. We use sweep keys on our desk, with price limits, to exit most of our positions. Speed matters.
Sometimes in trading you get screwed.
There are times when a stock has tremendous risk that it will drop out. You need to spot this. Generally you need to reduce your position. This occurs mostly on the open, after a steep upmove, near important technical levels, in stocks with light volume, or volatile stocks. Does FOSL have a history of offering these intraday wicks?
I am leaning towards you got screwed. One of our better traders, MoneyMaker from One Good Trade, was in the same move and lost a quick 1k. It happens. Consider the other points above, but my sense is there was nothing you could have done about this one.
Congratulations on joining the league of traders who have gotten screwed!
Mike Bellafiore
Author, One Good Trade (Wiley Trading)
