20 minutes after I log on I see VRTX blasting into orbit making new highs. Lots of volume usually means a stock is in play so I grab some, then quickly double up as the trade starts working. Volume keeps pouring in, prices are making new highs.
In my morning visualizations I see in my minds eye this very trade(I don't know when or in what stock it will happen though, only that it will). I'm waiting for human emotion and robot action to play itself out, I'm viewing the scene as a detached observer trusting in these probabilities.
This gravy train won't last forever, I already have a $ 7 gainer, time to GTFO right now before a new 5 minute candle starts. Sell to the late comers and undecided. Nice trade. Nice plan following and profit I say to myself.
If I think the long momentum is stalling then there is only 1 option open to me according to my edge - take it short. Set a stop just above the high.
Sure enough I see a hint of a red candle. I double up immediately when it just hangs there. Down it plunges more than $2 for a $4 gain. As it falls below the former low of the last big up candle I can see all the stops get taken out placed by the hopers and dreamers thinking its going to keep going straight up forever. This is my cue to cover, take profits and go long again. Set a stop just below the low. It is an opportune time to do so. I went over the visualization of this exact play a hour earlier while laying in bed.
I notice the volume dropping. Less emotions in the market now, more control, be careful. Take another $3.50 gain.
Short it again with a stop above the previous candle high. It's wishy washy, tighten the stop, wait, wait,wait, get stopped out. Nice trade and congratulate myself for keeping the loss small. Recall the stop out visualization that I practiced a hour earlier.
This is my edge. Playing on the greed and fear until those waves get too small to be of any use. It's common sense to take profits like that when they are offered. Thats why were here. Watching the clock for candle changes, watching the volume for overall interest. Playing on the winning side by applying my simple method. 100 % focus on the clues. Taking action based on probabilities.
5 comments:
Thanks for this detailed explanation it's valuable to me. Pictures say their own story, words show details and subtle information.
How consistently do you find stops set just below the start of the final big candle? The fact that you do mental exercises that take this into account says a lot. Do you also find buy-to-cover stops in a similar spot after piledriver drops?
bct- Well I'm the biggest culprit to set stops above or below big candles but the difference is that I'll take windfall profits when they are offered up to me, looked to me that in this instance many traders didn't.When day trading I also constantly move my stops closer and closer as the time to exit comes nearer. When swing trading I'll tend to leave the stops where they first were.
Thanks for the insights - invaluable.
awesome analysis. i don't know how to explain this, but the concept was in one of the books dtf recommended. it is like, you (scott) are on the correct side of the trade, out maneuvering the crowd. almost doing what is opposite my instinct. it's like i have to re-wire my brain to think opposite in order to be on the correct thinking plane.
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