Trade Recap

Just sitting here running through some of my trades from the past week and thought I would share my thought process on one particular trade I was involved in from this past Friday. 

The stock I was involved in was Research in Motion(RIMM).  My thought process going into the day was this stock was a long only.  There was fresh news from the previous day about the upcoming release of a new touch screen blackberry that would be a direct competitor to the Apple(AAPL) iPhone.  Also RIMM on the previous day had shown very good relative strength to the market by not selling off, then when the market turned around RIMM rallied over 2 points.  The levels I was watching Friday was 54 which was very strong support and the 56 level as resistance which it had failed to close above.  I wanted to get long around the 54 level or find an intraday level where the buying was strong.  If RIMM got above the 56 level early in the day I could easily see it filling the gap to the 58 level. 

On the open I got exactly what I wanted as RIMM started to selloff and approach the 54 level.  I put a bid out there waiting for the price I wanted.  Buyers stepped in early, around 54.30, and RIMM started to consolidate at 54.50.  When the 9:55am number hit RIMM took off.  I didn’t hit the offer as I was patient knowing that RIMM would give me an entry.  I got that entry at 55.25 knowing that I would be out before 55 was broken.  I added into the trade once I got confirmation that there was real buying in this stock and bids were being supported.  I scaled out some at 55.90 as RIMM started to consolidate around the important 56 level I had identified coming into the day. 

One mistake I made was not taking this opportunity to put on some serious size.  I knew what the level was and the stock kept testing it.  At 11am when the range got to a very manageable .20 I should have loaded the boat and even mentioned it to my deskmate Chad.  I ended up adding some shares on the break but it was irresponsible not to load the boat as this was the opportunity I was waiting all day for.  I had planned for this early break of 56 and made a mistake not putting enough size on this trade.  In all honesty I didn’t follow my plan.  I ended up riding the rest of this trade till RIMM got above 57 and took the last piece off at 57.15.  This was another mistake on my part as my profit target was 58 and I shouldn’t have been so quick to give up on the last part of this move. 

Now don’t get me wrong getting 2 points on a trade, especially before the weekend, was very nice.  I planned this trade out well going into the day, and found some very nice entries by reading the order flow on Level 2.  But I still made mistakes on this trade.  I believe one of the most important things we can do as traders is to eliminate as many mistakes as we can.  This was a nice trade but I could have done so many things differently to make this trade better.  This was a trade that made sense to me, with patterns that made sense to me.  Now I can’t go back in time so what I am going to do is keep replaying this trade so when a situation like this trade presents itself again I will take better advantage of it.  I will go through my journal and take note of what I wrote going into the day.  I will write down details of the trade as it was unfolding.  I will also write down what I did right and wrong.  I will also watch the trade again using tick replay and take note of how I could have capitalized better on the price action. 

As traders it is very easy to beat ourselves up on our bad days.  What we need to do is reinforce our good days.  The good trades are the ones that need to be studied.  These are the trades where things came together and made sense.  These are the trades that you want to repeat.  Hope you all have a good weekend. 

Kyle