A Small Win

Today I made slightly less than 10% on $ECOR and I’d like to go into detail on how I was able to do that, and why I cashed out with less than 10% profit. If you truly want to better your trade strategy, before you continue reading this article check out my other work in progress post here.

Now with this in mind, you see that I have written a set a rules.. these rules were originally written a few years ago when I had just begun my trading journy. Over those years I have slightly deviated from those rules, and they have been revised and added to with the increasing knowledge I’ve gained from learning from my mistakes. Emotions while trading are your biggest adversary, especially greed.

Taking a look at my Rule #1 I talk about having an entry and exit strategy. Well here is how emotions get the best of you. Let’s take a closer look at the price action of $ECOR

Now let me begin talking about what is going on in the above chart, for it can be alot to take in. Circled in purple shows I am looking at this chart on the 5 min timeframe for reasons as you hopfully read in the link above to the Getting Started In Today’s Market tab. The blue line represents the VWAP during earlier pre market hours before the price broke through and reached a new high of day( NHOD. ) The white line represents the 200 day SMA on the 5 minute timeframe. Circled in white is where the price ultimately did hit this level.

The price declined to the blue support line during pre-market hours, so anticipating a usual opening dip and by that I mean the majority of times when a stock has substantial gains in pre-market, upon opening it will have sell offs. This is due to the people who were holding overnight and waking up to substantial gains thus cashing out as soon as the market opens. I decided the next level of support was represented by the 200 day SMA and I confirmed this by checking multiple time frames as seen below.

As you can see the 15 minute timeframe slightly varries from the 5 minute timeframe, but one thing remains true the average between the two support levels was around $1.10 . So my ideal target for entry was $1.10 .

Why is this so important? Well here’s a great example this morning the stock opened @1.27 and immediately hit a high of $1.40 . Here is where trading with discipline and without emotions come into play. Previously I would have let emotions get the best of me and essentially freaked out cause the price was rising knowing it had potential to reach the HOD @1.70 so even $1.35 would seem like a good buy right? Well, here’s what I’ve learned from failing with that sort of thinking. Below is a longer term chart for this stock.

It is clear to see that during the current uptrend of this stock that it has had its gains early, but failed to hold those gains before declining back to the white support line, in this case represented by the 20 day SMA on the 6 month 4 hour chart. Given the fact the stock showed substantial pre market volume, in this case around 10% of the float. I felt it was going to continue it’s current trend illustrated above, although it would ultimately create the chance for a nice little gain given that pre market volume and overall interest in the stock.

Ultimately I was right and I cashed out with slightly less that a 10% gain. I bought in @1.13 and sold @1.24 minutes later. I didn’t let emotions get the best of me as I would have in the past, and Buy on the open because it looked like it was going up. I evaluated, I mapped out my support and resistance levels, and I created my strategy. I’m sure alot of you may have done the same thing, but bought somwhere between 1.30 and 1.40 on the opening bell, for you let greed and FOMO (fear of missing out) get the better of you. Take this as a lesson, and improve you trade strategy!

Click to rate this post!
[Total: 0 Average: 0]

Leave a Reply

Your email address will not be published. Required fields are marked *