Navigating the stock market is akin to trying to predict the weather in my hometown—just when you think it’s safe to leave your umbrella at home, you’re caught in a downpour. Let’s dive deeper into my journey with FROG, a story of optimism, tactical errors, and newfound wisdom.
The Leap into FROG
On a day marked by ambition, January 19, 2024, I set my sights on FROG. Its numbers whispered promises of growth, and its position relative to EMA 21 was like a siren’s call.
The Setup
- Underlying: FROG
- Underlying Price at Open: $33.41
- Stop Loss: $31.58
- Profit Target: $40.09
- Position Size, %: 4.55%
I convinced myself I was making a calculated move. The market outlook was as bright as a confirmed uptrend could be, and my rationale was solid—or so I thought.
The Plot Twist: Selling FROG
Fast forward to January 31, and my dreams were slightly dampened, much like my spirits, as I parted ways with FROG at $32.38. The market still favored the bold, but my stop-loss strategy was timid at best.
Hindsight’s Clarity
- Closing Price: $32.38
- Market Outlook: Still an uptrend
- My Error: A stop-loss too tight, fear of loss outweighing the potential for gain.
A Comedy of (Tactical) Errors
This section deserves its own spotlight because, let’s face it, you don’t learn to ride a bike without a few falls. Sometimes you make the same errors several times, and that’s normal.
What I Did Right
- I chose a stock with strong indicators and a solid base.
- I understood the importance of buying near EMA 21.
What Went Wrong
- My stop-loss was set with the precision of a nervous cat walking past sleeping dogs—too cautious, leading to a premature exit.
- I underestimated the importance of allowing some room for the stock to breathe.
The Art of the Stop-Loss
This deserves a drumroll. Setting a stop-loss is an art form, akin to seasoning food—it needs just the right touch.
The touch includes two main things:
- We can’t place it too far below the purchasing price.
- We should place it below the recent lows of the price action so as not to get stopped out too easily.
Expanding the Safety Net
- Lesson Learned: The stop-loss should have been set beyond the normal lows to avoid being ousted by market noise.
The Bounce-Back Strategy
- Pro Tip: Use price alerts for a second chance. It’s like missing the bus but catching a faster one right after.
I have found it useful to immediately put the price alert to the price level I would buy the stock back (e.g. slightly above the EMA 21 line).
The Lessons Carved in Stone
Every trader has their tablet of commandments, and here are mine, freshly inscribed.
Commandments for Future Trades
- Solid bases are your best friends. Cherish them.
- A tight stop-loss is a scared stop-loss. Give it some room.
- Price alerts are the comeback kid’s secret weapon.
Reflecting on Returns
While my wallet was lighter, my arsenal of knowledge was significantly heavier.
The Numbers Speak
- Position ROI, %: -4.99%—a small price for invaluable lessons.
- Time in the Market: 12 days of highs and lows, much like a condensed soap opera.
details at a glance
Opening
- Underlying: FROG
- Date Opened: 19 Jan 2024
- Underlying Price at Open: $33.41
- Stop Loss: $31.58
- Profit Target: $40.09
- Market Outlook at Open: Confirmed uptrend
- RS Rating at Open: 95
- Position Risk, %: 5.42%
- Position Risk to NL, %: 0.25%
- Potential Profit (Position), %: 19.80%
- Risk to Reward Ratio: 0.27
- Position Size, %: 4.55%
- Reason for Opening the Trade: Price near and above EMA 21. CAN SLIM stock.
- Was it an Ideal Buy?: No. The price was not in the base.
Closing
- Date Closed: 31 Jan 2024
- Closing Price: $32.38
- Market Outlook at Close: Confirmed uptrend
- RS Rating at Close: 93
- RS Change: -2
- Reason for Selling: Sold because the price was below EMA 21 for the second day, and the RS line seemed to have turned downward.
Results
- What Went Well:
- Bought a good stock near EMA 21, ensuring the stock wasn’t extended.
- The stock was in a solid base, and volatility was fairly low, with volatility contracting before buying.
- The uptrend was not old and obvious at the time of purchase.
- Cause of Error/Improvement:
- Sold it too soon; it was a normal shakeout.
- Should have kept the stock longer or bought it back.
- Need to use price alerts immediately after being stopped out when placing tight stop-losses.
- Lessons Learned:
- A solid base is foundational to a preceding strong movement.
- When shaken out after a solid base, using a price alert is crucial to re-enter at the right time.
- Position ROI, %: -4.99%
- Position ROI (Portfolio), %: -0.23%
- Position Open Time (Trading Days): 8 days
- Position Open Time (Days): 12 days
Epilogue: A Trader’s Growth
In retrospect, my FROG venture was less about financial gain and more about the evolution of my trading strategy.
Growing Pains
- The journey was short, but the growth was monumental. I learned to marry patience with strategy.
Looking Ahead
- With these lessons in hand, I’m better equipped for the next opportunity. The market will see me again, umbrella in hand, ready for whatever weather it throws my way.
In the realm of trading, every loss is a lesson, and every missed opportunity is a stepping stone to success. The good thing about trading stocks is that we can practically choose how much our lessons cost, meaning that when we keep our positions small and stop-losses reasonable, we’ll get the same lessons as we would if we used larger positions. Armed with a more strategic approach to stop losses and an unwavering resolve to use price alerts effectively, I’m stepping back into the arena, ready to make my next move my best move.
