A STEP BY STEP GUIDE
02/11/2021
Brett Martin
“Your father never told you there would be Buick’s like this”. Pure chart porn. This is a 1-minute daily chart that looks like a 10 year!
After-hours trading:
Leave this to the market makers using other people’s money. What I did wrong: There are no stop losses after hours so risking size and leaving it unattended is well, Dumb. After hours is thinly traded and illiquid which can leave you trapped with no buyers. “Never hold overnights” should be a trader’s mantra. Risking a gap down for a gap up is not prudent money management- it is gambling and, in this case, creates an opportunity cost by tying up this money for the next 5,012 years. But this trade worked the past couple of days, and I was simply taking the kids to school- I would be on the bid at the open, right? I’m a shorter by nature- what the hell and I doing? Now I’m buying highs and selling higher because it has been working.
Warning signs I ignored:
I like drawing channels. They tell you when the direction changes and they complement the holy grail VWAP indicator. Even though this instrument was in an upward trend overnight, repeating recent days' history, its trajectory weakened. It broke the downward arm of the channel once as a warning, then a second time for good. You often get double-channel breaks and double top VWAP warnings- don’t ignore them- sell out ASAP and buy it back if it was just a shaking of the trees by a stop hunter program. I hoped it would repeat the prior days' action, but hope is never a successful strategy.
Greed and multi-tasking:
I glanced at this position at the worst possible time in the pre-market, right when it was holding VWAP and I was $300 up. Within minutes of this cursory look, it double topped at the VWAP where the price was rejected and it collapsed for good, reminiscent of my position in Luken Coffee when they missed an SEC filing that I chose to ignore because that thing was my daily ATM machine. Luken was my greatest loss ever. Oh, and the shorter in me attempting to short Zoom on the way up with put options. Rather than heeding the warning signs above, I was greedy in this market that only seems to go up. I wanted my usual quick “base hit”- $2k for every $20k risked, with my first cup of (not Luken) coffee and be out of it by 10 AM at which time I would repeat the trade. I had a plan! I failed to review the pre-market volume which was ominous. Worst of all, I failed to review the industry group tickers. They were all red. The whole damn thing was rolling over and the money was obviously going to rotate out today into the next group. This market doesn’t go down, it just rotates. It does however tell you if you choose to listen.
Final mistakes:
When I sat down to start the day the opening “lights out” candle had me down 36% per share. I should have immediately liquidated the position and shorted the same position size from that opening candle. It ended up dropping another 32.5% and I would have broken even. Why didn’t I? Lately, the opening gap downs have been buys that have swiftly recovered and gone back to the overnight’s new highs. I like the best in class company, and I’ve done well trading it for over a year- I thought I had a “feel” for its action. I’ve seen the shares at $300 before and still think they will $100 by 4/20 so I’m holding my loser at a tremendous opportunity cost. Only price action pays…repeat Only Price Action pays. It doesn’t matter what you like, what you feel, EBITA, P/E Ratios, earnings, etc. Stay on the right side of VWAP or DIE! When VWAP tells you that your plan is going awry, GTFO right then and there to preserve your capital.
Now, I’ll be changing my name in my signal room to “TopTicker” for a week as a shaming reminder not to think or feel but follow the price action.
P.S. Tilray, can I least get a joint since I am now a “long term investor?