Why were we watching HMNY in the first place? Have you seen the daily chart and the moves this stock has been making lately? The stock had taken a beating on the daily after a huge move, but now it was looking like it might bounce. Plus, it was gapping up on news. Take a look:
My first trade in HMNY didn’t work out too well to say the least. It was setting up as one of our A+ Setups. The range of the first 2 minute candle was wider than I would have preferred, but it’s HMNY (crazy mover at times) so it was worth the risk. The red to green was $10.48, big seller at $10.50, early high of $10.67 and the pre-market high of $10.67. That’s what we call stacked. We got the trigger as it very quickly popped through the r/g and the $.50 seller. There just wasn’t enough momentum/volume this early in the day to push it through the high of day. It quickly dropped, especially once bid support failed to hold. DEFENSE FIRST. Always protect your entry. Here’s what that looked like on the chart:
After that failed trade, HMNY briefly took out the early low but then started to climb its way back up to the same area I was interested in it the first time. As a Day Trader, this is where you have a tough decision to make. Do you take the trade again? Or do you stay away? What I’ve learned over the years (and it’s now one of my rules), is I will absolutely take the trade a second time. Just because it didn’t work the first time, doesn’t mean it will not work the 2nd. If a stock is setting up, meeting all of your parameters, and checking all your boxes TAKE THE TRADE. Every time. Even if it cost you before.
Emotionally, this is difficult for traders (including myself) to do, especially if you lost on the first trade. I find the bigger the loss the first time, the harder it is to take it again. You don’t trust the stock based on the earlier action. You question yourself and your ability to read the stock correctly. Do you really want to risk losing on this stock AGAIN? This is exactly the point when you must Ignore Your Last Trade. If you haven’t read my blog on this topic, just click that link. It’s worth noting that these “2nd Mouse Plays” happened several times this past week. We typically see this type of action in thinner markets. ROKU on Friday was another example.
Back to the trade idea. As it started climbing back up, we kept watching. It set-up again for the $10.50 break. This was not a revenge trade we were stalking. This was A+. This was 2nd Mouse. Click the image on the right and you can watch it unfold and hear our conversation that took place live in chat. Note, a new window will open for the video to play in, so please make sure you come back and finish reading the blog!
One other point I want to make. I see traders get frustrated all the time by trades they feel were missed. They come back to their screens after taking a break and see a stock that’s running without them. Looking at the chart, they see the perfect entry. If only! What a miss! Why didn’t I wait to go get that 6th glass of Diet Mt. Dew?
Really? Was it a miss? Any idea of what level2 looked like when it actually triggered? How were the spreads? Was there enough liquidity in the stock at the trigger point to get you in at your price with the number of shares you wanted? Would you limit order have been filled? Or countless other issues that would have kept you out of the trade if you saw it unfold in real-time?
Unless you recorded it and have the game tape to review, you’ll never know. Even then, you can’t judge what your executions skills and/or emotional state would have been in real-time.
Merely looking at a chart after the fact only gives you a small part of the picture. You can look back at ANY chart and clearly see the perfect entry. Twitter is filled with this. Hindsight is 20/20 when it comes to charts and why you can only learn so much from them. There’s a big difference between studying chart patterns so you can quickly identify them in real time as they are setting up and lamenting about some perfect entry you missed on something you weren’t even watching.
So, the next time you see that perfect entry you think you missed, go easy on yourself. Study the chart so you can identify it next time, but keep in mind you have no idea what the full picture looked like in real time as the trade was unfolding. Just because the chart looks great now doesn’t mean you would have pushed the buy button then.
Thanks for reading and watching!
Questions? Comments? Reach out and/or leave a thought below.