Almost 20% in just a month for a trade sounds like a dream, right? Or coincidence? Read the article and see the ins and outs of one of my profitable trades. How I Made 19.36% In 36 Days
trade setup
volatility
One thing I have found working well is to be sure that the volatility of the stock price is low. See how small were the intraday fluctuations before buying:
Small blue arrows in the drawing represent the most volatile days before buying. There are not many of these, and the stock fell just a few percentage points during that time.
Also, notice that the overall price fluctuates in a relatively small range:
Blue lines in the drawing above, represent the local highs and lows of the price. The stock price fluctuates in a small range which is a good sign.
These are the main considerations I usually take into account regarding volatility. Subsequently, making further decisions becomes much easier.
How I Made 19.36% In 36 Days
decision How I Made 19.36% In 36 Days
I get interested if I see the stock with low volatility going up in price and above all of its key moving averages (or breaking out of a base).
This is why I took the position on May 7th.
Let’s see what happens next.
How I Made 1How I Made 19.36% In 36 Days9.36% In 36 Days
taking position How I Made 19.36% In 36 Days
I took the position with the price of 37.85$ on May 7th and set the stop-loss to the price level of 35.41. Why this price level?
35.41$ was slightly below the EMA 21 moving average and gave me a reasonably small risk for the trade.
How I Made 19.36% In 36 Days
price action after buying How I Made 19.36% In 36 Days
After buying the price of the stock had an up day which was followed by 3 down days and then it started to climb rapidly:
Why am I saying it climbed rapidly? Because the rise of the price was so high key moving averages such as EMA 21 (green line) and SMA 21 (red line) couldn’t keep up.
This is what traders want to see once they have bought the position.
But what to do next? How long can you keep the position open? It’s unreasonable to think that the stock will keep climbing without any hiccups.
That’s where the pre-set profit target comes in. It is set to keep us sane.
How I Made 19.36% In 36 Days
closing
After a very strong rise on June 12th, the profit target 45.42$ was reached and I closed the position with the price of 45.91. See it on the chart:
This trade gave me a profit of 19.36% in just 36 days. Cool, right?
The VECO trade is a perfect example of the trade I am always looking for when picking candidates.
- One more remark: This article is about realizing only the part of the profit. It’s always good to sell into strength. I closed the position because the price reached the planned profit target.
How I Made 19.36% In 36 Days
Trade Analysis
What went well? How I Made 19.36% In 36 Days
Although the volume at the breakout was not ideal and also the industry rank wasn’t high enough, the price of the stock performed perfectly, and it was a good trade.
Lessons Learned
- Every part of the CAN SLIM criteria doesn’t always have to match. We just need to be aware of it and plan our trades accordingly.
- I should keep my positions running until the profit reaches more than 20%.
How I Made 19.36% In 36 Days
Additional Considerations
Even though the trade itself turned out fine there are some things to consider which can affect the further trades.
#1 position size
When trading, our goal is to maximize profits and minimize losses. This means that we need to make as much money as possible from trades like this and lose as little as possible from the trades that go south.
How did this profit affect my overall portfolio?
Even though close to 20% profit for a month is a good outcome, the overall profit for the portfolio from this trade was just 1%. This isn’t that much. Why was the profit so small?
Because I bought such a small position. This trade was just 5.19% of my portfolio when I opened.
Probably I should start taking bigger initial positions but not that much bigger because when losses occur, these will increase as well.
#2 When to take a profit
Should you keep holding the stock until it’s going up or should you sell it when the profit target has been reached?
William O’Neil in his book has said that we should sell into strength and take profit when the stock price has risen 20-25% from the pivot point. Why?
Because nothing goes up as a straight line forever. Some market participants start to sell once the stock price has risen.
And it’s better to sell when the price action is strong.
#3 market
When trading, one thing that holds true is the overall market action and direction. If you have some market experience, you probably know it already. Still, the human mind is somewhat weird. What do I mean by that?
You know things logically, but still, you may not act on this logic.
For example, I have known that up to 75% of the stocks in the market move in the same direction as the market does, still, there have been many cases when I haven’t taken it into account.
s&p 500 action during the trade
Down below is the S&P500 chart from the time the VECO trade was on:
As you can see, when I took the position, the index was above key moving averages:
- Green line – EMA 21
- Red line – SMA 50
- Black line – SMA 200.
This means that the overall market was in an uptrend and it was good to buy stocks.
Read on, and see the overview of the trade and some explanations to the terms.
How I Made 19.36% In 36 Days
Details at a Glance
Explanations for the Drawing: The upward purple arrow shows where I bought the stock. The downward purple arrow shows where I sold it.
Green Line 21-day exponential moving average line (see EMA 21 below)
Red Line 50-day simple moving average line (see SMA 50 below)
Black Line 200-day simple moving average line (see SMA 200 below)
Opening
- Underlying: VECO
- Date: 7 May 2024
- Underlying Price: 37.85
- Stop Loss: 35.41
- Position risk, %: 6.39
- Position Risk to NL, %: 0.33
- Profit Target: 45.42
- Potential Profit (position), %: 19.83
- Risk to Reward Ratio: 0.32
- Market Outlook: Confirmed uptrend
- RS Rating: 92
- RS line trend (U/N/D): U
- Industry Rank (X / 197): 37
- Volume U/D Ratio: 1.2
- Institutional Ownership Trend (U/N/D): U
- Position size, %: 5.19
- Why did I open this trade at that point? (e.g., CAN SLIM, EMA 21): Stock was breaking out of a base (with not heavy volume). The price of the stock outperforms 92% of the overall market.
- Was it an ideal buy? YES
- Remarks: By the price pattern, I would consider it an ideal buy but the stock is not CAN SLIM and industry rank is not in TOP 20 or TOP 10.
Closing
- Date: 12 Jun 2024
- Price (close): 45.91
- Market Outlook: Confirmed uptrend
- RS Rating: 96
- RS Change: 4
Results
- Position ROI, %: 19.36
- Position ROI (portfolio), %: 1.00
- Position Open Time (trading days): 26
- Position Open Time (days): 36
How I Made 19.36% In 36 Days
terms and definitions
Ever felt like trading lingo was designed just to keep amateurs out of the loop? Let’s simplify a couple of terms:
EMA 21 Calculates the 21-period exponential moving average, highlighting short-term trends.
SMA 50 Averages the price over 50 periods, showing medium-term trends without overemphasizing recent data.
SMA 200 Averages the price over 200 periods, revealing long-term trends by treating all data equally.
How I Made 19.36% In 36 Days
Pivot price is the optimal buy point of a stock is defined as the moment it transitions from a stable basing area or chart pattern and begins to achieve new highs in price.
Industry Rank Investor’s Business Daily’s system ranks industries 1 to 197 based on performance. It guides us in CAN SLIM TRADING towards leading sectors.
How I Made 19.36% In 36 Days
U/D Ratio Measures stocks closing up versus down. A ratio above 1.0 indicates bullish sentiment, important in CAN SLIM TRADING.
RS Rating Ranks a stock’s performance on a 1 to 99 scale. I look for at least 85, showing strong momentum and growth potential. This basically means that the stock outperforms the minimum of 85% of the stocks in the market.
RS Line Compares stock price to the market, plotted as a ratio. We seek an uptrend, indicating outperformance and strong momentum.
How I Made 19.36% In 36 Days
Volatility Measures how much a security’s price fluctuates over time. High volatility means large price changes, indicating risk and potential reward.
Institutional Ownership Trend indicates whether the stock is under accumulation or distribution by the institutions.
EPS (Earnings Per Share): A financial metric calculated by dividing a company’s net profit by the number of its outstanding shares. It indicates the amount of profit attributed to each share of stock, serving as a key indicator of a company’s profitability.
How I Made 19.36% In 36 Days
Overhead Supply: is a stock market term for a large amount of unsold shares at a certain price level, acting as resistance that prevents the price from rising. It occurs when investors looking to sell at break-even points add to the supply, making it hard for the stock to increase in value until this excess is bought up.
How I Made 19.36% In 36 Days
CONCLUSION
As I have learned from the books and experienced myself, profitable trading is all about eliminating your trading errors one at a time. That being said, since we are creatures of habit, it is always not that easy – Even if you know some of your errors, it might happen that you still repeat it.
So, I have learned that the best thing to do is to acknowledge your errors and try not to repeat them. If it happens, we just need to try more.
ONE MORE THING
If you have any thoughts or questions about trading or investing, fill out the form here and I’ll get back to you.
