SS 200 at $1.64
C 200 at $1.58
The pre-market plan was that since we had somewhat stuffed at the $1.75 level twice I took the opportunity to short into a small bounce that appeared after a significant drop. My expectations were that this would fade of quite quickly, and therefore I got a bit uneasy when it held up, but I figured that that's what you'll have to deal with when you're trading pre-market. But I came up with the conclusion to set a specific time where if the stock hadn’t rejected by then I where to take off since my thesis would no longer be intact with the chart.
So, I set the timer for 20 minutes, since I figured we had already been back and forth some at this time, and we should see downside soon. But I failed to stay patient with my time plan and ended up covering just minutes after the plan was made, as I focused in too much on the level2 and TS.
Key takeaways from this part of the trade:
Still in the debate whether or not I should trade pre-market. And as I said before I probably shouldn't if it's not my bread and butter setup's. So, what I'll do in the future is to only trade pre-market with my real capital if it is any of my bread and butter plays, otherwise I'll trade with paper-money to track my performance.
Make sure that I work on my discipline of following my plans, even if they involve specific time frames.
Open trading resistance $1.75
SS 200 at $1.67 9:40
SS 200 at $1,63 9:42
C 200 at $1.67 9:57
SS 200 at $1.59 10:02
C 400 at $1.71 10:08
Going into the open the trade plan was simple, let the stock show you at witch resistance level it's going to reject at, and then try to short it as near the top as possible (sounds simple right... lol).
I Following the plan of letting the chart tell me where the top was going to be at, and not trying to guess it. and the chart looked like it was rejecting to the $1.75 level witch had been of importance at pre-market, so as the stock stared to struggle up in that area I took on a small size position. I had even before hand detriment that I wouldn't play this to big as it wasn't my bread and butter setup. I took on a small size and the fact that it was so near the $1.75 risk made me really comfortable. Then the stock rejected exactly as I had liked it to, so I doubled up into what I though was going to be a small bounce of that first drop.
But that turned into a bigger bounce then I had expected. This made me feel a bit uneasy, so I decided to take some of in the lower canal of it's consolidation area, as it defended multiply times just to save myself from the stress of holding the whole position.
then just minutes after we get that second rejection/conformation. So i said to myself "okey hey now we got two conformations in terms of "drops" ", so I was fast to add that size that I had just covered up. But... In hindsight I was a bit trigger happy and probably a bit influenced by the fact that I had just covered before that drop, so I didn't recognize the fact that the stock was now defending the previous drop's low and setting up for a double bottom witch later was the big trigger for the squeeze.
So yeah, I was a bit too fast to add, and then as we squeezed I simply did cut my trade as I always stick to my discipline of my risk levels no matter what.
props from this part of the trade:
That I waited for the stock to show me where the top was going to be/ where it was struggling at.
The fact that I took on the courage to "add to winners" was a really good move even though It didn't work out this time, because this is really the mentality that you have to have as your trading.
That I took some size of as the stock didn’t do as expected to keep my emotions in check.
The fact that I always follow the plan of cutting the trade if it breaches my risk level.
The fact that I recognized that this wasn’t my bread and butter setup and therefore played it with less size.
things to improve upon:
Try to stay emotionally detached from the chart to easier see how the chart is developing, and the possible outcomes of it. As I’ve argued earlier I think the main reason to why I missed that the stock formed a double bottom was the fact that I was emotionally attached to the chart, and therefore wasn’t able to see it clearly.
open trading Resistance $1.85
SS 400 at $1.79 10:09
C 400 at $1.85 10:13
The plan was still the same as previously (let the chart tell you where the top is and short as it starts to struggle).
I decided to take on my full position just after that brief squeeze as I saw the small pullback as a conformation that the stock was rejecting to that $1.85 resistance level. But as I was totally blinded by emotions from my previous losses I didn’t understand that this wasn’t a rejection, it was simply the stock consolidating after its first squeeze.
And also something really important to remember and take notice of is that not all of us have the discipline to cut their trades as there risk level is breached, so what usually happens is that when we get this type of squeeze, is that some short’s still hold their shares stubbornly as they think that it “has to come down”, then as the minimal dip recovers they start to panic and therefore covers, witch then leads to a continuation on the squeeze.
And that is probably the most key think to take away from this part of the trade. The understanding of how short squeezes truly work, of course I knew this in before hand but I had never experienced it.
It’s somewhat like reading about being careful not to lend out your phone/ computer to anyone because they can easily hack it and get access to your bank account. Of course, this brings you the knowledge to be aware of the risks, but you’ll never be as prepared/skeptical as if you had been exposed to this type of action.
And the same goes for the short squeeze, I’ve read about it, but I’ve never been exposed to it. Now I have and I’m glad that I got to experience it this early in my career. And the fact that I understand that this was an important lesson.
And ending wise I also see the problem of just setting resistance levels based of lined chart’s because this takes away all the wicks which is of big importance. In the future I will use both lined chart’s and candles to get a more precise level of where the resistance is.
The understanding of short squeezes
Understanding the importance of wicks at resistance levels.
The fact that I was sooo close to getting in at the top and understanding that I’m becoming better and better at trading even though I suffer from losses Is one very important aspect that I will take with me from this trade. Because I see that I improve upon every trade that I make and this is also confirmed in my executions where it's obvious that I'm getting closer and closer to nailing the trades.
End of day chart: