Finally I am out of the trade when my stop at 720 hit around 7.00 P. M. today. See the screenshot taken around that time. I entered and exited at 720. So brokerage tax etc. would be the loss that I will have to suffer in this paper trade.
Nevertheless, trade does not end when I get out. An unbiased postmortem is absolutely necessary to see how the anticipation at the time of entering the trade materialized, how the trade was managed, what are the mistakes committed and how it should have been avoided.
Anticipation part was the breaking of the low of the inside weekly bar and entering a short trade upon the probable swift down move. This anticipation had the support of weakness in the background.
What happened? Well there was a break of the low, but it was not on convincing volume. Alarm bells rang and it was promptly noted. But the mistake committed by me was that I should have curtailed my expectations with regard to the target of the probable downside move (or extent of the down move) as soon as that alarm bell rang.
Was there a mistake in my short entry? Short should have been made either upon the break of the prior week low (as a breakout trade) or upon the price reaching the high of that beakdown bar subsequently, i.e. upon the fifth bar from my entry. I must confess, all this is easy on hindsight, but next to impossible in realtime. You might have noted my thoughts as and when those bars were being formed on the right edge of the chart. When I entered the trade, on a higher timeframe (i.e. weekly chart) I had huge volume on the incomplete bar and the low of the inside bar was taken out with weakness on the background. Only sour point was that breakout bar itself, which was on a shorter timeframe (15 minute chart). Naturally, I would have given preference to the larger timeframe. Also note that the bar on which I shorted was an inside bar and that bar as well as its immediately prior bar had long wicks and huge volume when compared to prior bars. These thought process is quite legitimate and to deviate from them in realtime is next to impossible. So I am quite ok with my entry tactics.
Now the stop placement. As I was eyeing larger trend on weekly bar, I placed initial stop at 732. Slightly wider stop, but it was necessary. If the stop is placed away, I prefer to reduce my trade size so that I am not taking too much risk in monetary terms.
Was the stop moved and if yes, was it moved in the right direction? Answer would be yes. But the question is why it was not moved further down from 720 level as and when price reached below 710 level? Answer again would be eyeing larger trend in weekly chart and hoping to catch a larger move especially when the trade has moved in my direction. Here when the price first reached sub 710 level, I was fully justified in keeping my stop at 720 level. But the mistake came when the price reached below 710 level for the second time. The chart posted by me is cluttered with line and drawings. But please note that the second time when price reached below 710 level, the low of that bar was lower than earlier lowest low (below 710 level). Notice where that bar closed. I have numbered this candle as 1 in the chart. Also notice subsequent bar to bar numbered 1. It rallied indicating very clearly that earlier bar was a test and it was successful. Here I should have prepared myself for closure of trade upon right signal. What could that signal be? It could be break of trendline or it could be another successful test or it could be higher pivot bottom formation or it could be any other legitimate signal which signified end of downtrend. Even at this time also I was having larger trend in the weekly chart in my mind, which was a mistake. This mistake is now evident because after entering the trade on 15 minute chart, I should have remained with that time frame or if I were to switch to another timeframe to exit, it should have been a further shorter timeframe and certainly not a longer timeframe (such as weekly timeframe). Once exited, I could have entered in to the trade again upon the right setup. It is the greed that clouded my vision. Greed of larger profit from a presumed trend in a larger timeframe. My mistake is now noted and now it is entrenched well in my memory. I must take care that I should not repeat it.
After bar numbered 1, there was another test which too was successful. I have numbered this bar as 2. The test at bar numbered 1 was on lower volume when compared to the volume on the earlier bar which dipped below 710. Test at bar no. 2 was even on lesser volume when compared both these bars which dipped below 710. Test no. 2 bar also closed well above the middle. Basically test mentioned in bar numbered 2 involves testing on the low of its immediately earlier bar also. What I mean to say is that this area of below 710 was tested on bar no. 2 and its immediately earlier bar. What happened next is even more important. Price broke above the down sloping trendline. I should have closed my short at least by this time. I did not. That was not right.
Then there was one more test of this area below 710. I have numbered this bar as 3. There was absolutely no doubt upon the close of that candle. It was crystal clear that price is not going to break 710 level at this point of time. So virtually that weak initial break down bar (below 721 level) was confirmed. When the chart was speaking so loud and clear, why did not I close my short position? That is greed my friends.
Finally I paid my price. My stop was hit and I was out at the entry price of 720. But last saving grace in the whole trade was that I did not allow my greed to move my stop above 720 so as to give some more room to see whether this trade works out or not. I stuck with my stop and took the hit.
I learned a few lessons from this trade. Hope after reading this lengthy episode, you too might have picked up a point or two. If you have found out any other mistake than what I have mentioned here, please point out them in this thread. So that myself and every one else may learn.
Nevertheless, trade does not end when I get out. An unbiased postmortem is absolutely necessary to see how the anticipation at the time of entering the trade materialized, how the trade was managed, what are the mistakes committed and how it should have been avoided.
Anticipation part was the breaking of the low of the inside weekly bar and entering a short trade upon the probable swift down move. This anticipation had the support of weakness in the background.
What happened? Well there was a break of the low, but it was not on convincing volume. Alarm bells rang and it was promptly noted. But the mistake committed by me was that I should have curtailed my expectations with regard to the target of the probable downside move (or extent of the down move) as soon as that alarm bell rang.
Was there a mistake in my short entry? Short should have been made either upon the break of the prior week low (as a breakout trade) or upon the price reaching the high of that beakdown bar subsequently, i.e. upon the fifth bar from my entry. I must confess, all this is easy on hindsight, but next to impossible in realtime. You might have noted my thoughts as and when those bars were being formed on the right edge of the chart. When I entered the trade, on a higher timeframe (i.e. weekly chart) I had huge volume on the incomplete bar and the low of the inside bar was taken out with weakness on the background. Only sour point was that breakout bar itself, which was on a shorter timeframe (15 minute chart). Naturally, I would have given preference to the larger timeframe. Also note that the bar on which I shorted was an inside bar and that bar as well as its immediately prior bar had long wicks and huge volume when compared to prior bars. These thought process is quite legitimate and to deviate from them in realtime is next to impossible. So I am quite ok with my entry tactics.
Now the stop placement. As I was eyeing larger trend on weekly bar, I placed initial stop at 732. Slightly wider stop, but it was necessary. If the stop is placed away, I prefer to reduce my trade size so that I am not taking too much risk in monetary terms.
Was the stop moved and if yes, was it moved in the right direction? Answer would be yes. But the question is why it was not moved further down from 720 level as and when price reached below 710 level? Answer again would be eyeing larger trend in weekly chart and hoping to catch a larger move especially when the trade has moved in my direction. Here when the price first reached sub 710 level, I was fully justified in keeping my stop at 720 level. But the mistake came when the price reached below 710 level for the second time. The chart posted by me is cluttered with line and drawings. But please note that the second time when price reached below 710 level, the low of that bar was lower than earlier lowest low (below 710 level). Notice where that bar closed. I have numbered this candle as 1 in the chart. Also notice subsequent bar to bar numbered 1. It rallied indicating very clearly that earlier bar was a test and it was successful. Here I should have prepared myself for closure of trade upon right signal. What could that signal be? It could be break of trendline or it could be another successful test or it could be higher pivot bottom formation or it could be any other legitimate signal which signified end of downtrend. Even at this time also I was having larger trend in the weekly chart in my mind, which was a mistake. This mistake is now evident because after entering the trade on 15 minute chart, I should have remained with that time frame or if I were to switch to another timeframe to exit, it should have been a further shorter timeframe and certainly not a longer timeframe (such as weekly timeframe). Once exited, I could have entered in to the trade again upon the right setup. It is the greed that clouded my vision. Greed of larger profit from a presumed trend in a larger timeframe. My mistake is now noted and now it is entrenched well in my memory. I must take care that I should not repeat it.
After bar numbered 1, there was another test which too was successful. I have numbered this bar as 2. The test at bar numbered 1 was on lower volume when compared to the volume on the earlier bar which dipped below 710. Test at bar no. 2 was even on lesser volume when compared both these bars which dipped below 710. Test no. 2 bar also closed well above the middle. Basically test mentioned in bar numbered 2 involves testing on the low of its immediately earlier bar also. What I mean to say is that this area of below 710 was tested on bar no. 2 and its immediately earlier bar. What happened next is even more important. Price broke above the down sloping trendline. I should have closed my short at least by this time. I did not. That was not right.
Then there was one more test of this area below 710. I have numbered this bar as 3. There was absolutely no doubt upon the close of that candle. It was crystal clear that price is not going to break 710 level at this point of time. So virtually that weak initial break down bar (below 721 level) was confirmed. When the chart was speaking so loud and clear, why did not I close my short position? That is greed my friends.
Finally I paid my price. My stop was hit and I was out at the entry price of 720. But last saving grace in the whole trade was that I did not allow my greed to move my stop above 720 so as to give some more room to see whether this trade works out or not. I stuck with my stop and took the hit.
I learned a few lessons from this trade. Hope after reading this lengthy episode, you too might have picked up a point or two. If you have found out any other mistake than what I have mentioned here, please point out them in this thread. So that myself and every one else may learn.
