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Month to Date Performance - June

|Includes:ABX, AGQ, AIG, AMX, APOL, ARCH, BBBY, BBRY, BHI, CAT, CCJ, CIEN, CLF, CMG, CSGS, D, DANG, DIS, EBIX, EQC, EXPE, FST, GM, HIL, HPQ, ITMN, JPM, LB, LO, MCO, NOK, PAY, PM, RIG, RLD, SEE, SINA, SLV, SodaStream International (SODA), SQNM, TGT, TSO, UPRO, USO, UTHR, VRTX, WFC, YOKU

 As promised, I am posting an analysis of my trading performance so far this month, with a game plan going forward. I have not done any of these yet, after about 4 weeks of trading, but I have the feeling it will become a regular weekend activity, whether I share my thoughts on the blog or not.

I made over $1000 (+1.62%) on the first day of the month, but right now I am down about 2.6% or about $2000. Last week was simply awful for me in terms of P&L as a result of poor risk management on certain trades. However, my week cannot compare to that one trade in SODA last month where I lost 3k in a few minutes. I am happy that even though I had two rips in a row to close out my week, I kept my loss to under $1000 each day. Still, this is unacceptable, and should not happen in the future if I implement and follow some new rules.

One of the issues I am seeing is that I let too many trades exceed my max loss. Usually when I initiate a trade, I plan to risk $50-$100. If the trade works in my favor, I will add to the position and tighten up my stop. This should lead me to either locking in my profits or maintaining a risk of about $100 with a winning position and greater size. So far this month, five of my trades saw losses exceeding $100. Two of them were losses of around $150 and I am not as concerned about those. Another two were losses of closer to $300 and the last was a loss of just over $1000. This excessive loss cannot continue. I can blame the losses on stocks that were too volatile and trades that were sub-optimal, but those are poor excuses to say the least. I should be able to recognize ahead of each trade the volatility of the stock and how thinly it trades. I should also be entering on better risk/reward setups. I have been taking too many "panic" entries, where I see the stock moving in the direction I anticipated, and instead of waiting for another setup, I rush to enter so that I do not miss the move. This causes my risk to be poorly measured ahead of time. Even if I do catch myself in scenarios like this, I should be very flexible and get right out or really dial back my size. It is much easier to get back into a trade than it is to get out.

Going forward I am going to be implementing new rules, which will be in effect for at least this week. Next weekend I will re-evaluate these rules and adjust them appropriately. Starting on Monday, I can only enter/add to positions in 100 share lots at the most. The eventual size of my position does not matter to me so much, as long as I only add if my initial conviction holds true, the trade is working for me, and I continue to manage my risk. Exiting the trade will remain a judgment call. One rule that I need to do better with is always trading with a hard stop and not just a mental stop. Other than that, I will decide how to close out the position (assuming it is profitable or flat) in a manner I deem appropriate for the given situation.

Another issue I have been struggling with is over-trading. This goes hand in hand with taking sub-optimal trades and not patiently waiting for good risk/reward setups. I plan to combat this issue with a couple rules. I will allow myself to take a maximum of three opening drive plays in the morning at 100 shares each. If the position is working for me after 10:30, I will allow myself to add on good setups. Other than opening drives, I will wait until 10:30 to take any other trades. This will allow me to get a better idea of where the market and the individual names I am watching are going. Finally, I will make most of my trades this week based on 15 minute candles. This will force me to patiently wait for stronger confirmation and better risk/reward setups. I will also get shaken out a little less, which has been a problem for me.

These are the two most important rules to me this week. They will effectively force me to trade less often with smaller size and at a slower pace. These rules will allow me to practice patience and will lead to better risk/reward trades.

I will keep you posted on my progress throughout the week and next weekend. Thanks for being a part of Swing-High.com! Always trade with a stop loss and manage your risk appropriately.

Happy Trading,

Jason