Your journal is the diary of your trades. You make it into whatever you want it to be. You can write up your trades, the thinking behind it, track you performance. In my opinion, the diary forces you to be more accountable for your trades. You also get helpful feedback from other traders.
4/12/12 Long GPT 120 shares at $3.57, stop $3.48. There has been a long term s/r line that was broken in September 2012. The stock been retracing past few months, while still respecting the s/r line. There was a breakout on larger volume on 3/12/12. I went long. Nearly got stopped out 2 days later...
IMD reached its target of $1.20 last friday. The move was strong and it closed around $1.10, I was expecting a few more days of panic selling, as I have seen it before. I also decided to keep my target of $1.20 as a stop loss. To my surprise, the stock started going up on monday, staid at $1.20 for a few days, and closed above it on Wednesday 5/12/12. I closed the position first thing thursday morning. Profit $50+, 3 rd stock to reach its target, and all have been short positions...
If I come across this situation again, when a stock reaches its target, but I think it will move further, I will be closing half of the position, and locking in profits, and then waiting for the next move.
So far December has been good, I am up $250 in my positions, however, this is presenting me with 2 problems,
1. Overconfidence - I am a beginner, so my current success is part my stock picking, part luck, and part right-time... So need to keep my feet on the ground
2. Paper profit - most of my stocks have had sharp moves, leaving my stops far behind, leaving me exposed... I have looked over all my charts, and currently can not move my stops...... Need to think about this one, open to suggestions from other too..
10/12/12 Stopped out of FMG short position at $3.95, I was able to move my stop lower , which limited my loss to $4.50. Happy with this trade, I followed my rules, stock has been going up strongly since.
10/12/12 Went long SGP 130 shares at $3.41, put my stop at around $3.31-3.32. Looking back at the charts now, I have no idea why I took the trade.... The stock has broke through the s/r at around $3.50, retracing back, but there has not been a significat break out yet... The stock kind of drifted out of the range on 2 negative candles some increase in volume. This is certainly a set up I want to watch, and should trade a breakout with target of $4.20 next major s/r. I must make my trading rules more clear. Have a firm idea on the set up, trades, and exits...
AUD/USD I have been watching aus dollar agains us for a few weeks now. My opinion is, if it breaks out of major consolidation/retracement over the past 2 years, next target is $1.20. The break out occurred 2 days ago. I would like to take the trade, however with 1 mini contract, my stop would still be about $75-95, I am not comfortable with this amount yet, even though the upside is around $1500. If there is a pullback to around $1.050, I may take the trade, otherwise will watch..........
If I am correct and the dollar goes higher, this may lead to further interest rate cuts in Australia, with Bonds going higher (they have been going down), but I dont know how to trade bonds
Also if i am correct , and dollar goes higher, it will hurt Australian miners, so I will be watching to short big miners such as BHP, Rio, Fortescue.
14/12/12 Went long RMD 175 shares at $3.96, stop $3.89, it has reached a new high, and has had a retracement over the last 2 months. Broke out on Wed, I did not see it till this morning. The stock opened lower, and gave me a much better entry point with a very small stop loss. Targets around $4.30 first, aand a long term target of possibly $5-5.50.
I am finding lately that I do not rush into the trade, I may see a buy signal, but still wait for an entry point that I am comfortable with.
I have also been getting a bit of anxiety before putting a trade on... Currently all 9 of my positions are positive (RMD is the 10th), and I seem to be scared of putting on a trade, and if turns into a loss. I might stick to very small positions for now to keep my potential loss to minimum, to get my comfort zone back. Ultimately I will have to increase my positions 20-30 times its current levels, to make any money out of the stocks.
I was having the same problem you are and I was setting my stops directly below the candle like you too. I now know that was the reason for my terrible win loss ratio. I think you just have it too tight for a swing trade position. To me it sounds like you have a shorter (daytrader) stop in place.
I have been using an ATRx2 stop. I let the volatility of the stock determine how many shares I can buy. That way your risk is accounted for also.
Example: risk per trade / 2 x ATR = number of shares purchased
Or $200/(2x .54) = 192.3
So I would round up to 200 shares and set my initial stop 2 daily atr's below my entry price. That's what I would say about stops. I also don't understand your usage of targets in swing trading.
Everyone has heard let your winners run right? I think you should try it! I really believe risk/reward ratio is a fallacy, particularly in longer term trading. I believe it has its place for day trading.
Just my 2 cents
Good luck and keep up the great journal
The following user says Thank You to Fourwedge for this post:
Thanks for your advice! I am not familiar with ATR, i have looked it up since, and will need some time to study it, and learn the formulation for it. My charting software has it, so will play around with it once I understand it a bit more.
Lately I have been thinking about the stop losses, and my current thinking about stop loss has changed. It is part of a much bigger picture. The way I am starting to see my trading now, is find a stock that has made a move (buy/sell signal) and enter into the trade. If I enter at the right time, then even the tightest stop should be safe. My stop loss now is a point at which I must realize that the stock is not ready to go where I want it to go. The actual loss amount is what I am prepared to pay for this realization.
In regards to targets, Unless the stock is at all time high, then there are usually areas of previous highs/lows that stocks tend to react to. It gives me an indication where it a stock may go... It is a guess, but it seems to be widely used in charting books, and by some pro traders as well. with time I may change my thinking, but for now i will stick to basic rules
ATR is average true range. It's the average range of movement a stock displays. The last couple months I have been setting the initial stop at the beginning of the trade ,2 daily atr's below entry price.