Trading Education: Question regarding AAA trade – Dec. 21, 2011

sorry for the late reply….good question.

i failed to elaborate further on this. i forgot to point out regarding gap open which i was anticipating.

apparently i gave the first resistance at 3.57. i was thinking that if AAA opens higher and first resistance breaks,there is a chance that 3.68 will be tested. of course, there will are traders who will try to buy at the at the gap open.

the line that states “to cut if 3.68 don’t break” are addressed to those who are aggressive in buying and might have bought higher at the open. to be specific, these are buyers who bought at the break above 3.57. remember yun mga bumili ang iniisip eh ma-break ang 3.68 resistance. yun ang expectation nila nun bumili sila.

what happened was that this expectation didn’t materialize and therefore because the plan did not go as intended…the right thing to do is to get out of the position. lets not forget, when we trade…we always have to have a plan. the plan are your basis whether ang ginagawa mo ay tama or mali. kapag ang plano di natutupad alinsunod sa inaasahan then masasabi natin na mali na ang trade.

it doesn’t mean that once you exited trade eh wag ng balikan. pwedeng bumalik but we have to re-evaluate and come up with a new plan again. that plan will again serve as your basis if tama or mali again ang ginagawa.

how do we know that the plan didn’t materialize?

1) very obvious price didn’t go above 3.68

2) remember resistance becomes support and vice versa. after breaking resistance at 3.57, it automatically became a support. ang expectation was for 3.57 to hold after breaking kase it now became a support. if 3.57 holds then meron pang chance that 3.68 may be retested again and probably be broken. ang kaso, it didn’t. when the price pulled back, it went straight below it and therefore became a resistance. ngayon instead of one, naging dalawa na resistance…3.57 and 3.68. mas mahirap na sila ma-break.

*always remember that aggressive buying will always require aggressive cut loss mechanism. that is the only way we can insure that we don’t get burn on our trades.

on the other line which states sell if “3.32-3.30 breaks”…they are meant for those who will buy at the bounce from the support which are from 3.35-3.37.

why cut at 3.32-3.30 not immediately below 3.35 (the support)? the logic behind it is that…we want to give some room for the price to maneuver. kung baga, we are giving our trade the chance to prove its worthiness. like a parent, mahirap masyadong stricto sa anak natin. dapat bigyan din natin sila ng room to grow but at the same time we can’t also be too lenient at baka tayo sawayin naman.

*conservative buying must be given some room to wiggle in order to let it grow and develop but never get to lenient that it will hurt our capital.

there are smc backdoor rumors that are circulating around on this stock but i don’t want to go into that zone. once we start to dip our hands and trade on rumors, am afraid we can never go back to a safer way of trading which is following a method that works.

we can get lucky once or twice but when you get hit….it really hits hard that it tends to wipe out all the hardship and effort one have put into trading. there are those who can’t get back anymore because they loss a lot of capital. if you don’t believe me, ask those who traded BHI and IP at the top based on rumors and are now stuck. you will know what i mean. 

REMEMBER A TRADER CAN BE WRONG 80% OF THE TIME BUT CAN STILL MANAGE TO HAVE 50% OVERALL GAIN.
HOW? by minimizing the losses on 80% losing trade and maximizing profit on the 20% winning trades.
THIS IS THE HOLY GRAIL OF TRADING…its all about money management and the system/method that one employs.