This posting is a review of trade number one of the BestOnlineTrades Cheetah Trading System. The first trade of the BOT Cheetah Trading System was not the way I wanted to kickstart this project. It started with a loss of 1.71% and it was an absolutely silly loss and I can already see that I broke two important trading rules on the first trade of the project!!
I don’t know if this is a bad omen or not, but I will shrug it off in the hopes that this first posting offers something to be learned for FUTURE trades of the project.
By the way, I am also making it a requirement that before I initiate the next trade of the project, that I MUST read the postings of the previous trades to see if there were any important lessons that can be used to improve the next trade.
The first trade going long VG I made two very important mistakes which I hope will never be repeated again.
First, I went long VG after it was already moving upwards for 6 straight days !!!! This is a statistical probability that goes against anyone wanting to go long. Going long any stock after a strong of advances like that is always a mistake, ALWAYS.
Instead I should have WAITED for the stock to retrace.
This brings me to the second mistake I made with VG (Vonage Holdings Inc.).
The stock was fast approaching two very high volume swing highs. In that situation there is almost always a pull back and is another reason to WAIT before going long the stock.
These are two HUGE mistakes on my part and to be honest I am a bit concerned for the future of this project having started on such a wrong footing. But alas, I will shrug it off and attempt to not repeat this series of mistakes ever again. The ONLY way to get better at trading is to NEVER repeat the same mistakes again until you reach a probability zone that is much more in your favor. If you keep making the same mistakes, you will get the same results.
The third mistake is that I SOLD VG even though it was still in a valid uptrend and had not broken any up trending support line!
At the time of selling my reasoning was “I don’t feel like sitting on VG during the stock market general correction”. I remember at the time thinking VG would pull back all the way back down to the mid March 2011 swing low.
But despite this ‘fear’ or ‘feeling’ VG had not at any time busted the up trend line !!!
So there you see a trader making a decision based on a general stock market forecast and that general market forecast affecting actions towards an individual stock.
So in conclusion we see that my thinking was initially CORRECT on the trade. My thought process was correct that this was a good trade, BUT my ENTRY was horrible and my thought process on reason for selling was just as bad.
So I hope referencing this post in the future will serve me good NOT to make this same series of mistakes again as these three mistakes are some of the most common ones that should be avoided at all costs for longer term consistency !!
So for tracking I am not including commission costs for the trades of the Cheetah Trading System. It is simply too cumbersome and too variable depending on broker used. I realize that not including commissions can affect long term calculations of profit loss quite significantly so down the road I am always willing to calculate an adjusted rate of return if commissions were included.
The current tracking is here for Trade 1
I already have some ideas about Trade Number 2 of the BestOnlineTrades Cheetah Trading System and will start writing about it tomorrow.
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