Trading for Dummies, Q&A #92 & #93

Nanogen, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Wednesday, December 3?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Wednesday, December 3?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Up. You'd be looking long.
3) Long at 5.29 on a buy stop above the 10:30 down bar.
4) Initial Protective Stop: 4.74. (max. 10.4%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could sell half, carry half, or just close it all at once.

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Sentiment was once again positive in the morning so I was looking long. And once again there was a huge burst of selling in the afternoon which made it difficult for the longs to stay strong into the close.

NGEN set up nicely but the initial risk was so wide that I only bought 900 shares. As the 11 o'clock up bar formed I moved my stop up to $5.06 to get the risk down to a more reasonable amount, and before leaving at lunchtime I uncharacteristically moved my stop to breakeven.

The stock closed at $5.74 (I sold a nickel above there) for a gain of 8.51% from entry giving a negative reward to risk ratio off the initial stop, which stinks. If I were less hard on myself, I would call it a 2 to 1 reward to risk winner from the tightened stop, but that wouldn't be terribly honest.

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Altair Nanotechnologies, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Wednesday, December 3?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Wednesday, December 3?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Up. You'd be looking long.
3) Long at 2.55 on a buy stop above the 10:30 down bar.
4) Initial Protective Stop: 2.40. (max. 5.88%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) Scratched during the noon bar.

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ALTI put in a nice hammer reversal at the midpoint and I bought 3000 shares at $2.55 with an initial stop at $2.40. The stock was doing OK until it started to falter in the reversal zone... it didn't feel right and I scratched out at $2.56. My instincts (also known as luck, lol) were good, since the stock crumbled in the afternoon.

I've been trading since 1995 so when I talk about "feel" it's something that one develops over time. There are people who have been trading for 20+ years (Linda Bradford Raschke is a good example) whose market instincts are so finely tuned that it's almost uncanny how good their reactions are.

If you're just starting out trading, you should expect to lose money for several years before you even begin to understand things. Most people don't have the time, money, energy, or fortitude to make it through of course.

Another reason why so many fail is distilled by that great line from George Goodman (a.k.a. 'Adam Smith'): "If you don't know who you are, the stock market is an expensive place to find out."

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Screen capture of my intraday Watch List:

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