Back to Rational Thought

Guten morgan!

I thought I would try something new today - live blogging! I will see if I make clearer decisions and stick to my rules better with my conscience on display. No cheating, just truthful reporting on my daily trading moves, thoughts, experiences, and decision-making. Plus, perhaps the excitement level will go up, dear reader(s), if you and I can share the anticipation of the unknown together. Who knows? I realize this isn't the 7th game of the Stanley Cup Finals, but it is kind of sporty in a geeky sort of way.

So, if you will remember back to yesterday's market bloodbath, you will remember that I lost my head. I let my overnight hold (TSYS) fall well before support before selling at a big loss. I then day traded a couple of stocks hoping for a rebound. I finished the day by reclaiming my position in TSYS and looking for a bounce back to the upward trend.

With the benefit of a night's sleep - albeit a short night's sleep as I was up late skiing and the markets open early here in the Pacific Time Zone - I realize things could have been much worse yesterday and I am happy for the lessons. I am happy with my decision to start this blog. I feel good for my future prospects.

7:15 AM: I had a closer look at my position in TSYS. There are a couple of ways of looking at things. The first is that the market pushed almost all stocks significantly lower in the first 90-120 minutes yesterday. If we look at TSYS without those first two hours, it has been quite stable. I can hold my position, establishing support at 7.30, and ride the 15 minute charts to whatever happens. Or I can exit and try and start fresh.

I sit and mull my level of support. 7.30 was the low of the last pullback, but 7.26 was the low of the move yesterday. As I waffle over which support level to respect, bam, down goes the stock. It shoots right through both levels of support and within minutes is below 7.10. This is too risky, it is time to cut bait. I exit at 7.11 and don't look back. Bye bye TSYS.

There is always the benefit/agony of hindsight. Of course I could look back at TSYS and watch what it does from now on, but really that will do almost no good. I let the stock slip through support yesterday at the open and foolishly bought it agan near the close. It was likely to continue lower and it did. My bad.

So now what do I do? I have $2,638 CDN sitting in my account. (For the record, my trading over the past two days has lost me $362, a little over 10%. Do you see what happens when you don't follow rules?)

My options are:

1. Wait for the last hour and check the Pullback play candidates. Enter of there is a candidate.
2. Become a day trader and trade the Superheroes strategy which basically plays interday trends.

I am going to do both but I am going to be smart about it. It is time to go back to my original idea of papertrading. I will papertrade the Superheroes strategy today to make sure I understand the principles and that I can make money trading it. I will exit my "live" trading platform and login to my demo account. Stand by.

Okay, TradeFreedom's demo account isn't working for whatever reason. I could call the support line but I actually am a little tired so I am going to change my mind about the Superheroes strategy for today and check back in the last hour to see if there are any Pullback play candidates worth considering.

Stay tuned....

12:30 pm Okay, back again. I have run market scans for Pullback Plays, Overnight Holds and Hitting Floors and nothing is looking particularly inviting. I have gone back over some watch stocks from the past few days and MGI caught my eye. This is a stock that has been flirting with resistance for the past few days. It seems like it has pushed through it, just eclipsing the high from back in October in the past couple of days. It is up through resistance today, although it has pulled back just below it, and I am going to enter a position anticipating a breakout.

My rationale is that this stock has broken through resistance several times over the past few days, has not backed down from it and looks like it wants to go higher. It is just a question of shaking out some skepticism.

So I am entering a Position trade of 175 shares at 11.79. I will hold this stock through resistance or until it breaks through support of $9.74. The next major resistance is at 16.75 giving me a reward-risk ratio of 5-1.

If I am wrong on this stock it will be because my prediction about this resistance level was wrong.

In the meantime, I will work with TradeFreedon to get my demo account live so I can continue to practice my papertrading.

Until tomorrow!

Mike The Skeptical Trader