Panic is not a good thought for a trader. And during really crazy moves in a stock, when you may be tempted to panic, calm is required. I had such a situation on the Open with MHS. Let’s discuss.
So we start the day and Alexander gets me into this MHS. I wanted to trade something else but he just bullied me into this MHS as most subordinates do (no they don’t!). MHS is doing this above below nonsense noise at 52, which for all those who carp about the programs understand. 51.90, 52.10, 51.93, 52.05. Yeah, yeah, yeah. Nonsense noise.
But 52 is an important technical level. A hold above 52 might be the catalyst for a significant upmove. And in fact MHS 52.10 holds the bid and makes an explosive upmove to 52.65. I wasn’t in this move. I am certain this was Alexander’s fault I just cannot remember how at the moment.
So I missed the move. But then MHS dropped out to 52.20 quickly. I bid 21c, long. I bid 11c, longer. I bid 52.01, even longer. Here I had 3 lots long of a stock that had just shown its strength, right near support. This was a good position. Or so I thought.
And then the fun began. Remember that 52 support level? Well apparently the buyers at 52 didn’t. 51.60 was MHS’s next stop, where it slowed. I was long 3 lots 40-60 cents out of the money. Awesome!
What do I do? Do I hit the bids and take my rip? No. Do you scream, “Alexander what have you gotten me into?” No. The odds of the stock trading up next are near 80 percent. The odds of MHS trading up near 90c are very high. So you remain calm. You focus on taking the best sale possible. You will take your rip. But you must remain calm so that you take the smallest loss possible.
If MHS did not trade up near 52 like it did and next headed below 51.60, then you hit the bids and take your rip. But when a stock falls this quickly, you missed your exits 40c ago, and now the stock has slowed, then you try and sell the stock into the next upmove. And this is what I did.
Out 93c. Out some more 97c. Flat 52.07. Crisis avoided. I took a rip, but nothing to ruin my trading day.
There are times when you are in such a bad spot that I would never even consider panicking. Immediately I know that I am so screwed that to spend any energy on anything else but processing the best way to exit would be irresponsible. I need to focus and right now so that I don’t take a rip that will ruin my week.
My mind is quiet. I am not angry. I am indifferent. My mission is to take the smallest loss possible.
This experience reminds me of Eddie Murphy’s character in “Bowfinger”, a paranoid, delusional basket case of psychological problems. His mantra to avoid a mental breakdown is “Keep it together. Keep it together. Keep it together.” And as a trader so must you. Don’t panic. Take the smallest loss possible and get on with your trading day. There is a chop right around the corner.
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24 Comments on “Keep It Together”
Its an unfortunate side-effect of trading the first 15 minutes of the day. Great opportunity and greater risk (than later in the day when trends and levels are more established) With a stock that violent you felt comfortable enough to throw a 3xs lot in a stock that had a 20 cent range (albeit that was the noise before the pop after 52.10)? When you entered the trade did you not have a mental exit if the trade went against you? Had the stock not gone back up was there a worst case scenario exit? I’m sorry if this sounds aggressive and attacking.
Its an unfortunate side-effect of trading the first 15 minutes of the day. Great opportunity and greater risk (than later in the day when trends and levels are more established) With a stock that violent you felt comfortable enough to throw a 3xs lot in a stock that had a 20 cent range (albeit that was the noise before the pop after 52.10)? When you entered the trade did you not have a mental exit if the trade went against you? Had the stock not gone back up was there a worst case scenario exit? I’m sorry if this sounds aggressive and attacking.
Its an unfortunate side-effect of trading the first 15 minutes of the day. Great opportunity and greater risk (than later in the day when trends and levels are more established) With a stock that violent you felt comfortable enough to throw a 3xs lot in a stock that had a 20 cent range (albeit that was the noise before the pop after 52.10)? When you entered the trade did you not have a mental exit if the trade went against you? Had the stock not gone back up was there a worst case scenario exit? I’m sorry if this sounds aggressive and attacking.
i’d like to hear your rationale for the 80%. had it gone down another 50 cents what would you have done? down there would the chance of going back up have been 90%?
i’d like to hear your rationale for the 80%. had it gone down another 50 cents what would you have done? down there would the chance of going back up have been 90%?
i’d like to hear your rationale for the 80%. had it gone down another 50 cents what would you have done? down there would the chance of going back up have been 90%?
Wonder what you thought of the collapse in V this afternoon. Never seemed to stabilize. I took small rips when it dropped 68.50 and then 68. Why I did not get short when it broken 68.50 is beyond me.
If you had traded V the way you traded MHS you would have gotten demolished.
That was a twittered trade idea btw, with no stop mentioned.
Wonder what you thought of the collapse in V this afternoon. Never seemed to stabilize. I took small rips when it dropped 68.50 and then 68. Why I did not get short when it broken 68.50 is beyond me.
If you had traded V the way you traded MHS you would have gotten demolished.
That was a twittered trade idea btw, with no stop mentioned.
Wonder what you thought of the collapse in V this afternoon. Never seemed to stabilize. I took small rips when it dropped 68.50 and then 68. Why I did not get short when it broken 68.50 is beyond me.
If you had traded V the way you traded MHS you would have gotten demolished.
That was a twittered trade idea btw, with no stop mentioned.
David,
Two lots would have been better. But 52 was an important technical level for us. It exploded from this level previously. This is a play we trade aggressively. But I agree with you I had one lot too many.
My exit was below 90c but the stock skipped from 52 to 51.50. I was just stuck out of the money with MHS.
Worst case scenario I would have hit below 51.50.
Great questions. And thxs for reading.
David,
Two lots would have been better. But 52 was an important technical level for us. It exploded from this level previously. This is a play we trade aggressively. But I agree with you I had one lot too many.
My exit was below 90c but the stock skipped from 52 to 51.50. I was just stuck out of the money with MHS.
Worst case scenario I would have hit below 51.50.
Great questions. And thxs for reading.
David,
Two lots would have been better. But 52 was an important technical level for us. It exploded from this level previously. This is a play we trade aggressively. But I agree with you I had one lot too many.
My exit was below 90c but the stock skipped from 52 to 51.50. I was just stuck out of the money with MHS.
Worst case scenario I would have hit below 51.50.
Great questions. And thxs for reading.
Moop,
Since 52 was such an important level and MHS went down so quickly, the chances of the next move being up were very high. If the next move had not been up, then I would have just exited.
Bella
Moop,
Since 52 was such an important level and MHS went down so quickly, the chances of the next move being up were very high. If the next move had not been up, then I would have just exited.
Bella
Moop,
Since 52 was such an important level and MHS went down so quickly, the chances of the next move being up were very high. If the next move had not been up, then I would have just exited.
Bella
Thanks a lot Bella. I understand the trade much better now… 5:1 risk reward… if the stock breaks the day high (in an ideal trade) then the risk reward only improves… Perhaps cover 1/3 or 1/2 at the initial high and let the rest ride…. Solid risk/reward trade that didn’t work… look forward to your next post I learn a lot from you guys. Thanks again. @killaarmy (twitter)
Thanks a lot Bella. I understand the trade much better now… 5:1 risk reward… if the stock breaks the day high (in an ideal trade) then the risk reward only improves… Perhaps cover 1/3 or 1/2 at the initial high and let the rest ride…. Solid risk/reward trade that didn’t work… look forward to your next post I learn a lot from you guys. Thanks again. @killaarmy (twitter)
Thanks a lot Bella. I understand the trade much better now… 5:1 risk reward… if the stock breaks the day high (in an ideal trade) then the risk reward only improves… Perhaps cover 1/3 or 1/2 at the initial high and let the rest ride…. Solid risk/reward trade that didn’t work… look forward to your next post I learn a lot from you guys. Thanks again. @killaarmy (twitter)
David,
Yes @killaarmy. All we can do is make excellent risk/reward trades. We cannot control the results. And sometimes something goes wrong and we have to the best we do with the trade. If you like golf then we must play the ball where it lies.
Thxs the for the feedback.
Bella
David,
Yes @killaarmy. All we can do is make excellent risk/reward trades. We cannot control the results. And sometimes something goes wrong and we have to the best we do with the trade. If you like golf then we must play the ball where it lies.
Thxs the for the feedback.
Bella
David,
Yes @killaarmy. All we can do is make excellent risk/reward trades. We cannot control the results. And sometimes something goes wrong and we have to the best we do with the trade. If you like golf then we must play the ball where it lies.
Thxs the for the feedback.
Bella
Like many of your readers, I’m learning a lot from your posts, especially those on trades that don’t work out. (Other traders who blog just don’t seem to have any at all.) What I’m curious about are your views on the use of hard stops, which I gather you don’t. Is there a technical reason why you don’t? Hope you consider this late question. I’m learning a lot from you guys and am very grateful for your blog.
Like many of your readers, I’m learning a lot from your posts, especially those on trades that don’t work out. (Other traders who blog just don’t seem to have any at all.) What I’m curious about are your views on the use of hard stops, which I gather you don’t. Is there a technical reason why you don’t? Hope you consider this late question. I’m learning a lot from you guys and am very grateful for your blog.
Like many of your readers, I’m learning a lot from your posts, especially those on trades that don’t work out. (Other traders who blog just don’t seem to have any at all.) What I’m curious about are your views on the use of hard stops, which I gather you don’t. Is there a technical reason why you don’t? Hope you consider this late question. I’m learning a lot from you guys and am very grateful for your blog.