introduction
In the world of investing, embarking on a new trade often feels like setting sail on an uncharted sea. On December 13, 2023, I decided to navigate these waters with Amazon (AMZN) as my vessel, purchasing shares at $148.13 with a profit target of $177.00 and a stop loss of $137.36. The market outlook was positive, signaling a confirmed uptrend, and Amazon appeared as a beacon of strength in this bullish climate.
The Strategy: Crafting a Path to Success
With a market showing clear signs of an uptrend, I formulated a strategy that seemed foolproof:
- Stop Loss: I set it at $137.36, acknowledging that even the mightiest ships can face turbulent waters.
- Profit Target: I aimed for $177.00, aspiring to reach ambitious heights in my trading journey.
- Position Size: Allocating 6.70% of my portfolio to this trade, I embraced the principle of diversification to mitigate risk.
I identified Amazon as a strong stock breaking out from its base in an uptrend, reminiscent of a powerful launch. However, I overlooked the fact that the trading volume was not as high as desired, a minor oversight in my pursuit of success.
trade details at a glance
opening
- Underlying: AMZN
- Date (Open): 13 Dec 2023
- Underlying Price (Open): 148.13 USD
- Stop Loss: 137.36 USD
- Profit Target: 177.00 USD
- Market Outlook (Open): Confirmed uptrend
- RS Rating: 92
- Position Risk, %: 7.22%
- Position Risk to NL, %: 0.48%
- Potential Profit (Position), %: 19.36%
- Risk to Reward Ratio: 0.37
- Position Size, %: 6.70%
- Why did I open this trade at that point?: Strong stock breaking out of a base in an uptrend.
- Was it an ideal buy?: No. Volume wasn’t high enough.
- Remarks (Open): “Profit target: at least 20%, Stop loss: maximum 7%”
closing
- Date (Close): 4 Jan 2024
- Price (Close): 146.84 USD
- Market Outlook (Close): Confirmed uptrend
- RS Rating (Close): 91
- RS Change: -1
- Remarks (Close): The stock was sold because the price fell below the EMA 21 line.
- What went well?: “The stock was bought at the right place. The stock was sold almost at the right time.”
- Cause of Error / IMPROVE: “Since most of the stocks that I have been shaken out of later have advanced in price, probably the error is in my habits not my stock picking. I need to create a new atomic habit to get back in when the time is right. I should have put the price alert or STP LMT orders slightly above the EMA 21 line to buy the stock back. Should I get rid of the stocks that haven’t advanced in a week or so? There is no point to hold the stock that doesn’t do anything. Maybe just put their alerts to the key stocks?”
- Lessons Learned: “Again wrong timing and I wasn’t in when the timing became right. What is the lesson here? I still have a systemic mistake but what is it?”
- Position ROI, %: -2.21%
- Position ROI (Portfolio), %: -0.15%
- Position Open Time (Trading Days): 14 days
- Position Open Time (Days): 22 days
The Result: Adjusting the Sails
By January 4, 2024, the trade had not unfolded as anticipated. Amazon’s shares closed at $146.84, not reaching the lofty goal of $177.00. Despite the market maintaining its uptrend, Amazon’s RS Rating slightly decreased to 91.
I decided to sell the shares when the price fell below the EMA 21 line, adhering to my predefined trading rules. This decision, albeit timely, prompted me to reflect on the nuances of timing and strategy in trading.
Insights: Unearthing Valuable Lessons
This trading experience, while not yielding the desired financial return, offered invaluable insights:
- Insight #1: Timing is crucial in trading. I realized the importance of re-entering the market at the opportune moment, potentially through setting price alerts or STP LMT orders just above the EMA 21 line.
- Insight #2: It’s essential to reassess holdings that do not perform as expected. Letting go of underperforming stocks can free up resources and attention for more promising opportunities.
- Insight #3: The primary challenge I faced was not in selecting the right stock but in mastering the timing of trades. Identifying and correcting systemic mistakes remains a key area for improvement.
Conclusion: A Step Forward in the Investing Journey
The trade resulted in a -2.21% ROI, affecting my portfolio by a marginal -0.15%, over 14 trading days (22 calendar days). While not the triumph I had hoped for, this experience provided a rich learning opportunity.
In my opinion, learning experiences like this are the best because they often come at a high cost. When you break even on a trade and maximize the learning gained, it’s akin to receiving an education for free. Since in trading, we can not avoid losses, this is the best we can do.
Final Thoughts: Embracing Continuous Learning
This journey with Amazon underscores the dynamic nature of the stock market and the continuous learning curve it presents to investors. Each trade teaches a new lesson, contributing to our growth and development as investors. Here’s to navigating the markets with wisdom, adaptability, and an unwavering commitment to improvement. May our future trades reflect the lessons learned and lead us to greater success.
