CMI Exits

CMI: Here is something that happened to a funded trade of mine that I will share to see if any other traders can relate to this, which I'm sure many can.

In practice, it's fairly easy to set protective stops, as well as stops to take profits. No real money is on the line and I zip through weeks and months of trading in a relatively short period of time. So, this also helps one to not be emotional as the markets are not dynamic at the time of when you're doing your practice trading or backtesting.

The 140 mark is an all time high for CMI. Keep in mind that my opinion doesn't matter and I have no impact on the market whatsoever. Hope = Dope in trading. What does the chart tell you?

Friday reaches up to tag the 140 point and since I was not home or had any computer access, this was a broker assisted trade. I told my broker when it got above 139.50, begin trailing my stop. However, since I wasn't sure if it would break 140 and continue up, I only had him do this with a portion of my trade. This is the "What If it continues in my favor?" scenario, which has happened to me a number of times.

Keeping in mind, my opinion doesn't matter. I also had him set my protective stop for the remainder of my position at around $133, just in case.

At the close of Friday, we end up with a doji, where the close is about the midpoint of its trading range. That signifies to me, very indecisive. The traders do not know whether to take this stock further up or bring it down. Doji's make more of a difference when they are at major resistances and support. We are at an all time high, so this doji does make a difference.

There were several ways one could look at this, but in my normal practice trading, I would've said, jam up my stop to just below the close of the doji day. If it heads back up, I'll rebracket and get in at a different price with a different option, start over. If it heads down, then I'll be glad I got out at a good price. For gaps, well, you just have to take them as they come if you cannot watch the market.

What I could've done here was also scale out of the trade. I could've put part of the trade at just below the close of the doji day and held the other part of the trade back for the "what if it should go up?" scenario.

The intuitive part when I looked at the position before the market open was to jam my stop up and to get taken out just like that. That was my gut feel. But, often I do not like to trade emotionally. Sometimes it is a challenge to distinguish between intuitiveness and feeling, which I'm learning to do.

As CMI continues to head down, my stop at 135.75-136 is hit, while I'm sitting there watching intraday. I didn't actually have my stop set with the broker, and thought (hoped) that at a pullback on the down I would get out rather than getting down in the momentum, which means I won't get filled at as good of a price. My position is still up in the account with a profit, just not significant as at the beginning of the market or on Friday. I'm about 1 hr into the market at this time watching CMI going down against my up position.

The better thing here was probably to just be taken out at the beginning and replay this at a pullback, if it should decide to go back up. I'm glad that I did execute by getting myself stopped out and taking profits off the table. I can start again, but when I get the gut reaction to get out, I should just get out and start again.

Look at what the chart is telling me. Traders are indecisive. When they figure out what they are doing, then I can get in, because as a momentum trader, I want the most bang for my buck and not having to get in and out of trades unnecessarily or too often, as commissions do eat into your profits. That is a part of slippage and we all have to be concerned about that.
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