If you took a look at my previous swing trade posts and followed up, you’ll see that a few of them have hit their targets within a day or two.
That is the best part of trading breakouts with a reasonable target. They are usually hit within a week, and if you are lucky, within a day or two.
Here’s the follow up to my swing trade posts with a few additions.
MU – target hit in 2 days. Entry was at $30.01. Using the 3×3 method, first target is +3% so, $30.90. Hit on the second day and I actually took off the full position. Usually you should take off 3/4 and let 1/4 ride to 6% or more if you can. I didn’t want to sit through the pullback and actually my available margin was all used up so I wanted to concentrate on other trades.
Next trade was AAN. This method was the pullback-consolidation-breakout with my first target at 1.5x risk. So the way I handle these are wherever my stop is, let’s say $1 away, my first target will be 1.5x risk (+$1.50) and I will take off 3/4 of my position there. This means that my original risk of $1 @ 100 shares =$100 is now actually positive since my first target profit will net me $1.5 * 75 shares = $112.50.
If you’ve studied anything about your expected R, it dives into your expected return. If you are always risking $100 per trade and you make $150 on your winners and 50/50 win to loss your expected R stays positive. By making a first target that exceeds your maximum loss and having a 50/50 win to loss, you’ll always make money. And then leaving 1/2 or 1/4 position on to run will sometimes get you that home run trade with little to no stress as you’ve already banked a profit exceeding your original stop.
So if you use this method and your first target is the only one that is ever hit and you only win 50% of the time, you will still be profitable.
*One thing I’ve learned is to not chew off more than I can eat. Most technical analysis books preach you need a 3:1, or 6:1 or whatever target. And I used to subscribe to that. Only, my targets were rarely being hit, and the losses piled up. Or a trade would go my way 2.5x my risk with target at 4x and start pulling back and I would panic and end up selling at .8x risk and my profit is less than my original risk. Doing this while taking full losses will net you a losing trader.
In my experience, the 4:1 or more trades is a tough game to play. Your winning percentage will be lower and your patience tested. Are you confident and patient enough that if a trade went your way 2x your risk and is now pulling back to take you out for a full loss, that you aren’t just going to take that little bit of profit before it goes to your entry price? You keep doing this and you’re screwed. If you don’t mind striking out 4 or 5 times to hit 1 home run then great. Me? I like hitting singles and doubles every day with an occasional home run. Keeps my confidence high and my draw downs light.
Also, taking off 1/2 or 3/4 position at a reasonable target that is below the recent swing high or swing low ensures that even if you were wrong about the trend, you’ll still profit. That is a very powerful thing – to profit even when your expectations were wrong. Expecting price to exceed the previous high or low not only takes patience but a very confident mindset.
Enough rambling. Great trade. Took off 3/4 of my position at the middle red line which ended up being close to 2x my risk. So moved the stop to break even and my next target for the remaining 1/4 is at the top red line.
CSX. Another 3×3 breakout trade. The middle red line is the +3% target. Reached in one day. Yesssir. Love these quick hitters. I actually took off the full position on this as well rather than leaving another 1/4 in play. Reason is like MU, if my target is reached in a day or two, I’d rather just take it all off than sit through an impending pullback. If the pullback happens before my first +3% target, then I know it has room to run again and I’ll take off 3/4 in that situation with the remaining 1/4 hopefully netting me +6% or more.
SBUX. On a roll here. Just about .10 from my first +3% target. It is tough not to just take it now, but if you do that, you’re risking messing up your whole system. So, stay diligent and only take profits when your targets are hit.
My stop loss is also up to break even ($61.99) since it surpassed the +1.5% mark (middle red line). If it goes through a pullback before reaching the target, I will take off 3/4. If the target is hit today or tomorrow, I’ll take off the full position. Again, if it hits the target without a pullback first, I usually take the full position off. Don’t like sitting through pull backs and risk it tapping the entry point to take my out. Also frees up capital for other trades.
Next up is EXEL. This was on my list back on the 15th to enter. Luckily I wasn’t following it and it actually had a false break down at around $19.50. Since I missed it (luckily, because I would’ve been stopped out) and it pulled back, I placed a small order of half my normal size at $21.99. Price shot down the next day and re-tested the new break down point. I had my normal size here at the break down (top red line) and was triggered and first target hit in one day.
Took only 1/2 off at the first target of -3% (middle red line) because I had bigger size on it than usual (since I used a front-running entry in addition to the break down). The next day showed some weakness, so I took off another 1/4 position at the bottom red line.
The last 1/4 position I moved to break even. Price eventually shot back up and took out the 1/4 position. Great trade.
Last one in progress is DKS. Posted this with trigger a few days ago. The top red line was my first entry trigger. This is using the pullback-consolidation-breakout method. I was triggered in on that big red candle down. Just missed my 1st target for this method, which is the middle red line.
The bottom red line is the break down point. I am contemplating whether to just leave the full size on in anticipation of the break downor to take some size off at my first target to lock in some profits in case it bounces or to even add to my position at the break down point.
I think what I will do is just leave the full position on in anticipation of the break down and if it bounces, I will take off 3/4 of my position. If it re-tests the break down point, I’ll add 1/2 of my normal size for the 3×3 break down play.
So you can combine the 3×3 method with the pullback-consolidation method for good results. Just don’t get too greedy.
DUDE, YOU’RE SO FULL OF SHIT. You only posted your winners. Anybody can do that. Yes, I know. I called these trades out a few days back and am following up now – there was no editing or additions made to that post.
BUT, inevitably, I did take a few that I didn’t post and I will share those with you. And yes there are losing trades.
SBGI. Failed immediately. Was triggered in and the day closed at kind of a doji. The next day when I saw the momentum shoot up, I exited before my full stop was hit. So I took about 75% of my full loss. Lucky me as later in the day it shot up even more so it would’ve taken me out at my full loss anyway.
I think when you see this kind of momentum going against you and your play is a break out or break down, it’s better to get out early than to sit and hope and pray. And keeping losers smaller than winners never hurt anyone.
And the last stinker I had was NWL. Again, played the 3×3 break out on this and it pretty much failed immediately. I exited after the day finished down a solid red. So, again, I took less of a loss on this than the full -3%.
I think if you are triggered in and the trade kind of oscillates at that break out point, you want to stick with it. These strong bounces off of the break out point is a good sign to get out with a smaller than usual loss.
In Summary: 2 losers, 5 winners, 1 trade in profit. Every winner’s first target was at least my full risk. As I mentioned earlier, shooting for 3:1, 5:1 targets is, to me, a really really tough game to play. Trust me, I’ve played it for the past 5 months. My advice – keep your targets reasonable (1x, 1.5x) and take a partial. If you think it’s a 4:1 trade, let the last 1/4 position go until your 4x target. If you’re wrong, you still profit. If you’re right, you profit even more. Don’t trust the market to stick to technical analysis rules. You’ll be disappointed A LOT. Squeeze out what you can and don’t get greedy.
Long post. I’m up about $1500 this past month on my swing trades on a $10k account. Not bad. This is the second month in a row for profitable swing trades. I think I’m starting to hit my stride.
Hope to keep this momentum going. This is a good way to journal as well. I hate journaling but I don’t mind posting my charts on here. And I like bragging. Just kidding. I hope some of you can take what I’m journaling and put it to good use.