I made my first official profit on a day-trade today. (I've been doing longer-term stuff till now.) RIMM opened on a gap with no significant news. The gap was about .70ATR - not a huge gap, but big enough to be interesting. There was no obvious resistance level above the open, so I was hesitant to jump in right at the open. Instead, I chose to "pay for confirmation" and shorted it at 99.70 about 10 minutes after open. I set my stop at .25ATR, or about 100.50. The trade basically went my way the whole time. My target was to close the gap, about 2.70, but once I had hit a 1R profit, I trailed a stop and got stopped at 98.70 for a 1.4R profit in about an hour.
I didn't do this trade perfectly. For example, I just now realized that I had not checked the direction of the general market before I placed the trade. I should have checked to see if the S&P futures were against me. It would have been more risky to short into a rising market, but I got lucky. I won't depend on luck next time.
I also realized this morning that I won't be day-trading $100 stocks with such a small risk per share. Once I get kicked into gear, I expect to risk between $500-$1500 a trade., but to have done that on this trade this morning would have required purchasing something north of $60,000 worth of shares. That'll chew up the trading power in a hurry. I guess I am going to have to add some parameters for myself, something like:
- If the risk-per-share is less than $1.00, then the cost-per-share should be less than [some number I haven't determined yet]
. If the cost-per-share is more than [another number I haven't determined] , then the expected profit-per-share must be greater than [yet another number I haven't determined].
I don't anticipate tacking positions greater than $10k at a time, so that all by itself should help me with my selection process.
2 comments:
I too played RIMM this morning, I got in once it fell into the gap at 99.47. My mistake on this trade was moving my stop to quickly to capture profits once it moved lower. I was stopped out on a retrace for a small R. I need to stop moving my stop to quickly and let the trade develop.
dwight
Interesting, I did as well. It was a "Basket Gap and Trap." I went short at 99.69 near the open and covered at 98.85. These were my notes to myself on the trade - "Basket Gap and Trap - entry was weak, bought in close to the edge of the gap. Would have been better risk-reward if got it up around 100.25 or so. Exit - got tired of watching it so took off at near term support."
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