Tuesday, January 31, 2006

Reviewing my 2005 trading mistakes: TRE




This chart shows what I consider to be one of my biggest mistakes in 2005. I didn't lose much money on the trade because my position was very small like how I always start, and I cut my loss around 10%, but the reason it sticks out so well in my mind is because I made two mistakes instead of one. If I hadn't made either one of these mistakes, I would have made a very large profit from this stock.

The first mistake was buying wrong. I usually don't buy at the top of a handle like I did here, I buy at the bottom of the handle. In this case, I bought TRE at $2.95 expecting a "gap up" breakout the following day. When it didn't happen the next morning, I should have exited the trade and waited on the sidelines because the range of the handle was already greater than my pre-defined "max pain" stop of 10%. So I didn't make a mistake in selling for a 10% loss when the stock travelled back down towards the bottom of its range, the mistake came from buying hope and paying too much for it.

The second mistake came later on the day that I sold. After my sell, the stock quickly reversed and headed higher, breaking out of the handle by the time the close came around. It wasn't a clean breakout though because it had already had a false breakout earlier so I didn't buy the position back. Over the next few days, my original thesis for the stock proved to be correct as TRE headed higher. My mistake now was not buying back the stock after it proved me correct. I've made that mistake many times, so I'm going to work hard on correcting this "scared" behavior.

1 Comments:

At 8:12 AM, Blogger hortons768im said...

Jon:

if you get a chance, please post your thoughts on INCX. thanks.

 

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