Losing trade — managing a short
BPA trading room Q&A: February 10, 2016
Question: I shorted the 7 high on bar 10, betting that the rally would end up as a wedge top. I shorted more around the 12 high, Ok, and I was stopped out at near the top of 13. Can you explain how you would have managed my trade better if you were in the position?
Video duration: 2min 41sec
Look for measuring gaps
So he sold above 7 betting on a wedge 1, 7, and maybe 12 or 13, and here’s the problem with selling the 12 high. I don’t know if you can see it. I’ll go back here, maybe it will be more obvious. It’s the same thing with buying anywhere down here — there’s a gap — 72 high, 65 low. Here, there’s a gap, 12 low and 7 high. I mentioned that as it started to turn up. Then I said it might result in a measured move up. So if I sold above 7, I am not going to sell more above 12 because at that point we would have had a potential measuring gap here. And why sell at the 12 high when I’m probably going to be able to sell higher.
I don’t know if the measuring gap is going to be from the 1 low or from the 3 low, but I think there’s going to be some kind of a measured move up based upon this gap 12 low and 7 low. So in a situation like that, if I sell the 7 high on bar 10 and — who knows, I sell more — let’s say I sell the 11 close, which I would not, but let’s say I did. As soon as the market tested down 12 and started to turn up, I’m going to buy back my shorts above 12. And guess what? That’s why 13 looks like that because as soon as traders saw that gap below 12 and above 7, they decided it was going higher, so everybody bought back their shorts on 13, and that’s why 13 is a big bull bar.
Possible measured move up
When 13 formed — when 13 closed, I talked about the possibility of an exhaustion gap compared to a measuring gap. So if anything, I would be thinking about shorting around 13 or below 14, or over the next several bars if we start to trade down. But to me, everyone got out on 13 and that’s the place to get out, so I would not be selling more at the 12 high because we have a gap and it’s probably going to result in a measured move.
A lot of that stuff, you have so little time to decide. 13 went up very, very quickly. But if you were aware of what 12 was doing, possibly creating a measuring gap with 7, you would be much better prepared to get out quickly by 12. And if you’re flat, you can quickly buy above 12, expecting the market to go up for some kind of a measured move.
Al Brooks
Information on Al’s Online day trading room
Hi Al, I’ve been studying your method for two years now and been losing money for two years. But up until recent months, I started making money, everyday. My judgement for every single trade was rarely wrong. My winning percentage was almost 90%. It was so scary that I started intentionally bailling on good trade to ease my fear. You must know what I’m going through. The fear of greatness I guess. What did you do at those transitioning times? Any suggestions?
@admin I second Julian’s question! An idea for an Ask Al perhaps? The psychology of moving from losing to winning! 🙂
Hi Angus and Julian,
Yes, a good topic for an Ask Al and I am looking through my records to see if anything close. Do have several that may help for time being:
https://brookstradingcourse.com/ask-al/still-learning-getting-emotional/
https://brookstradingcourse.com/ask-al/problems-on-road-to-trading-profitability/
https://brookstradingcourse.com/ask-al/making-profit-then-passing-on-trades/
I’ll be back!
Richard
Thanks a lot for the reply and the links. They are very helpful. I guess there are mountains to be moved just every step of the way with trading.
Hi Julian,
I will put up another psychological Ask Al this weekend where Al talks more about ‘how long before consistently profitable’, a common query. Your own 2 years is impressive, and I feel your “The fear of greatness I guess” comment is likely the culprit. We all have self-talk with such comments being embedded from childhood and life in general.
Solution? I suggest you talk to yourself. Seriously! When those thoughts come to mind just say ‘Thank you’ and listen for what ‘you’ then say in return. A lot more complex of course, but the starting point is to acknowledge our inner beliefs and discuss/build alternatives. Mindfulness meditation is useful.
Hope that helps rather than hinder your excellent progress. Mountains to move as you rightly note. 🙂
Richard
Hi Richard,
I totally get what you are saying. I think it’s what mature people do. They talk and listen to themselves everyday, especially late at night when everything settles.
I guess what helped me a lot these two years is that I spent a lot of time reading historical charts bar by bar, guessing what the next bar might look like and what trade I would be taking, is it a scalp or a swing. I have detailed notes of them for ten years now.
Al’s understanding of price action is so fundamental and profound. I’m lucky to have stumbled upon his books and dug through. I know from the beginning that it will work. I look forward for Al’s talks.
Thanks again for taking my questions into notice. What you said about meditation self-talk resonate with my experiences. I know I’m not alone.