Following my loss with $AMLH on the 5th, I got back into trading and ended up taking another loss, though I don’t consider this to be a mistake and my exit was in order to cut losses due to the of the market at the time of exit.
The Process
Here is the intraday chart for this play:
I entered this position following a Tim Alert which reinforced my conviction in the possible movement of this stock given that I had been watching this pump-like stock (I was told this is actually a type of promoted stock, not sure who is promoting though).
Given the very nature of this type of stock, shorting it was a no brainer, as it would eventually crash. Unfortunately, the promoters thought it’d be better otherwise and I “squeezed” myself out of it, once again following a Tim Alert in chat. I think this was the right move to make, as I was also looking at L2 and not feeling confident that this would do well. Below is a screenshot of the L2 at the time of my exit:
While not apparent on this screenshot, everytime the price would go below a certain level a big 5k+ order would pop at $1.51 and immediately disappear once the price got back up. Additionally the screenshot above clearly show strong support points (probably set by promoters) with big orders at $1.46, $1.53, making it difficult for the price to drop on a such a low volume stock, adding to a couple of 1k-2k bids all over the board.
This was the reason given by Timothy Sykes for exiting his trade in chat:
“11:08 – timothysykes [Trade Update] Covered 6035 of $CLRX at 1.53 – Got a morning panic but now tons of big bidders in the 1.40s and 1.50 area, no thanks, could still be Friday short squeeze, I don’t like holding stocks short that fail to stay red on the day” ~ Timothy Sykes Challenge Chat
I followed the initiative and shortly after exited my position, as this was confirming my own preoccupations regarding the price movement of this stock. I took my small loss and moved on to better things. The price spiked a little throughout the day, and, at the time of writing, is still holding flat at $1.59. This will eventually become a nice short, but unfortunately for this instance, that time is not now.
This is another reminder that dealing with pump and dumps must be done with care and attention; when something doesn’t feel right, it’s probably because it isn’t (not really a scientific approach, but I’ll give my gut a +1 on this one.).
In terms of rating the process, I do not believe that I was mistaken entering a stock on my watchlist, especially considering that my conviction for taking the position was reinforced by the actions of a way more experienced trader than myself. When the price didn’t move as expected, I took my losses and got out quickly.
The Trade
Contrarily to the events on $AMLH on the 3rd-5th of February, I mostly stuck to my risk management strategy, although I exited before given the confirmation technical confirmation that this stock wasn’t going to go my way in the immediate future. This is my second full trade this week, which is already a vast improvement from the previous weeks where I had no positions at all.
My trade settings:
U% = %1
U = $122.18
N = $0.207
P = floor(U/N)= 590 Shares
$P = $902.7
Trade Type: Short
Entry price: $1.53 LMT
Exit price: $1.59 LMT
Absolute Stop: $1.73 (1N absolute stop)
Loss: $38.97 (including commissions)
Self Check
Entering this position felt more natural; I am finding my trade anxiety easier to manage, and while I still feel the sting of it, I no longer feel paralyzed by the idea of pushing the “Transmit” button every time I prepare my orders. Having a good plan and accepting my loss prior to taking the position has also been a very helpful experience in dealing with this anxiety. I feel that as time goes, I will be able to further detach from the idea that the numbers I’m trading actually represent money. This will make me a more objective, and consequently a better trader.
Gut Feeling
As I do with every trade, I follow relentlessly the movement of each tick on the tape and keep an keen eye on the Level 2 board. When I started seeing the “popping” of big orders above the bid as price was evolving downward and noticing that big orders were accumulating below on the bid on the L2 board, I was no longer feeling comfortable with keeping the position. Big orders on the bid would mean support levels therefore potentially limiting the downward motion of the price and therefore my ( and that of other short sellets) profits.
My gut feeling got reinforced when Timothy Sykes posted on the chat that he was getting out. That was my cue to do the same and just felt right.
Gut Score: 100% (2/2)
Conclusion
This is my 4th loss in a row, however I do feel like the last two were not losses resulting of mistakes, but instead losses created by the unpredictable behavior of market and the chances of it going against my bet becoming a reality (some people call it luck, though I don’t really believe in luck). The logic behind both this and my $AMLH trade were consistent with my strategy in regards to reasons to get in, entries and exits.