My first review of TRS - Feedback welcome

[darkhorse70]

Ok so I thought I will do a quick review of my trading plan/strategy and thought process. Firstly Id like to thank tech/a and canoz for always answering my noobie questions and helping me get my bearings. So this review is of TRS (the reject shop) On friday afternoon i saw that the TRS had dropped 32% due to sales forecast for the yr being dropped as a result of bad christmas sales, weaker aussie dollar etc. My main strategy is following mike bellafiores setup/strategy style from one gd trade and the play book which canoz recommended. Anyway on friday the stock plummeted and with higher than average volume. Since it was about 2 million i think thats acceptable and liquid enough for an intra day strategy. All the support and resistance lines were drawn on friday. The price on fridays big drop closed at 11.50. I used that as my support lvl and that was sort of a support lvl over the last few years. I figured that 10.50 would be the next support lvl just because it looked like a resistance lvl the last few years well to me anyway. Friday trading was a bad day for american indexes like the dow, nyse and nasdaq. They were all having a horrible week and i thought thats defenitly going to translate to the aussie markets on tuesday. Monday trading for america was not good either. So Tuesday opens and prices open at 11.30. They drop to about 11.05 comes find support hit 11.75 then come back to 11.50. At this point I would hypothetically have got into that position if i saw the offers hold with signifcant volume. Anyway the bids and offers held at 11.25,11.05,10.95. I would have taken some size off my trade to cover my intial risk and still held the rest for a better move. Anyway at 2:30-3 the prices broke below 10.95 eventually hit 10.56 and then closed at 10.80 or so. All in all it was a good risk reward ratio. I planned to risk $50 (playing with hypothetical $10000 account). This would give me about 1000 shares. So end result $50/800 or some thing like that. Obviously this was all hypothetical and i was paper trading and i wrote my plans in my journal. I didnt base my results on my profit/loss but if i followed my plan etc. Anyway thats just a brief analysis on my trade. I thought i might share it and if any one has any advice feed back please share. At the moment ive onlybeen paper trading in my head for 6-8months and i hope to be trading at a prop firm some times soon (i know sounds to optimistic but im working my but off every day to make it happen, and pushing my self to put more effort because if im not some one else is). Also i was watching the minute charts and trying to read the tape (watch and see what the volume is doing) to get a better idea of where the prices are heading, if should get out etc. Tomorrow if prices break below 10.50 Im thinking the next possible support is at 9.40. However im not sure if it has enough momentum to drop that low.


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Forgive my spelling mistakes loll.

 

[peter2]

Stating the obvious, you need to get access to reliable intraday data so you can print the chart and review your plans and performance.

TRS: Tuesday 28/1/14
Priced gapped down on open. Were you prepared for that?
Price could have down straight down after the open. Were you prepared for that?

I notice that price did fill the open gap (how often does this happen?)
What were you waiting for to give you the trigger to sell short? You mentioned order flow but there was a nice reversal candle on the 5min chart at about the same time.
What was your initial SL price (in case price turned against you?).

Note: You need to understand how to position size correctly. If your iSL was 11.80 and your selling price 11.50. Your trade risk is 0.30.
If you intended to risk $50 thats only 50/0.30 = 167 shares (not 1000). 1000 shares would have risked $300 + commission
Note: Commisson costs will take up a significant amount of your $50 risk.

Did you expect to see some resistance at the 11.00 level (round number)? That would have been a good level to cover some of your position. Did you have a target level in mind to take some profit and remove the risk in your trade? How much of your position would you have covered (bought), half?

After a while price did break below the 11.00 level. This would have been a place to add, although as a beginner leave pyramiding for when you have more experience.

Was this an intraday trade (exit before the close) or a trade-2-hold? Beware and prepared for huge gaps if holding overnight. I wouldn't recommend you hold overnight at the beginning.

Tomorrow's another day and anything can happen.

Keep trying to pick the stocks in play and print out the 5min charts and study them. You are trying to see repeating patterns that you can understand and build your playbook. The "opening gap fill and resumption of the trend" is a standard play in everyone's playbook and a good one to place in yours.

I asked a few questions for you to consider. I don't need to see your replies.

 

[darkhorse70]

Peter i feel like i missed out on some detail. Firstly my stop loss was set at 11.50. I knew prices could gap on open because of the large pre market volume friday. That didnt matter. My plan was to wait for the open to see if prices did open below 11.50. If they did and couldnt get back above 11.50 that would be a clear indication that i could go short. I would short at 11.45 and set a 5c risk. Since the asx game doesnt allow you to put all your eggs in one basket hence i can only buy $12500 worth of share. 5c risk and my maximum loss per trade which im confortable with would be $200. Thats much more than 1000 shares. So thats why i could only buy 1000 shares and put a $50 risk. I bought 1000 shares. At 11.25 i covered 250 shares which is about 90 dollars. That covers my risk of 50 plus 40 brokerage fee. Now 11.05 i said should i cover another 250 shares to lock in some profit but there is no point because thats only 50 dollars and the commision would take half of that. So id rather have 750 in shares and wait for a bigger move. My stop loss to get out was set at 11.25 so that way id bank atleast 300. However prices kept getting lower and offers kept holding lower. That was my thought and no my plan was not to hold over night because thats uncalculated risk. Im not going to risk some over night news etc.

 

[peter2]

Oh! You're playing the ASX share market game. Didn't know you could sell short in that game. Don't tell me the ASX is getting its act together?

My advice is to trade the price swings and compound like crazy.



Fancy trying to help a gamer. The boys will get a chuckle out of this and it'll be my shout all week.

 

[darkhorse70]

You cant short and the game hasnt started yet but im pretending like you can short. Im just paper trading in my head. Plus my goal is to try and do well in that game so I can evaluate me progress haha. Its abit stupid how you cant short in the game seeing as how the market can go down so quickly compared to up.

 

[skc]

While 1000 TRS shares isn't a large amount, a 5c stop is unworkable in real life for TRS given its spread and movement range (especially in the last few days). You may have got lucky that the 5c stop didn't get tipped this time, but the probability of such occuring would be quite low next time.

 

[darkhorse70]

Agreed SKC. Ill pay more attention to the volatility of the spread next time. Thanks