ATD/B - deconstructing the trade

Well, my ATD/B long trade did not go well and I compounded the problem by dinking around with the stop rather than really double checking the chart properly. The stock price hit my price and sold yesterday so this is not really hindsight as it is very recent and this stuff was already in place for me to see before yesterday. I thought that the price was going to rally any time now and I lowered my stop setting to try to stay in below the possible bottom, not in the plan so I got emotional, always a bad move.

This link to HF deconstruction is a post where I deconstructed my failed HF long trade. It outlines what I would have done for the short sell stop progression leading up to the long trade. Notice on that chart that I left the stop above the upper trend line longer than I have been based on the previous history as I noted "it bounced last time so I might expect it to bounce this time." So I might have expected ATD to do something similar based on the last twoTWT up. The HF study waas a hindsight one but again all the indicators were there.

The difference with ATD/B is that the price dropped below the last low point this time ...which still puts it above the lower trend line and indicates that the TWT is still heading down.
This is where the MACD could comes into play. The high momentum from this last TWT peak is lower than the peak from May 12th, the previous TWT high. Trading based on the MACD at this point would have me selling to get out of the trade if I was long and holding if I was short.
It is worth noting that the TWT downtrend that we just came off of has something else to say.

I plotted the initial TWT line (green) from May 12th to May 31st while I held a short position, then on June the 9th I ammended it steeper and adjusted my stops to follow the new line. Today I extended the original line and the current rally in price hit the old line...I should know that the first plotting is significant and kept an eye on it.

I keep saying how significant these lines are but I don't follow my own words and adjust to reduce losses or increase gains too soon and I do not get the results I aim for. So not only should I have expected the bounce and rally, I should have expected the peak of the rally and realized that the TWT down may not be completed yet. So when the price bounced off of the lower trend boundary on June 11th the plan could have been: (considering I had the same short position)

Short then Long trades

1) cover the short as I did

2) enter long as I did but perhaps earlier...I waited an extra day but I would likley still do the same again, that fits the plan

3) expect a possible peak at the original TWT down line and tighten the stop, not loosen it as I did once the price started down

4) stop out could have broke even or close

5) a) perhaps re-short on Friday's open, given the price activity I thought of it, I try not to trade on Fridays though so no go

b) hold and wait for the TWT resolution...next low bounce watching for the original TWT line to act as resistance this course of action will likely produce more trades and more opportunity for small gains...not really a great plan.

c) hold and wait for the TWT resolution...next time the price crosses above the old TWT line convincingly, buy. Best plan

My CTP strategy involves letting long positions run once a downtrend reverses. This is an example of letting the short position run being the better choice rather than looking for the target trade and had the HF example for stop setting been followed the result would have been:

The more ideal Short Trade, "the one that got away"?

1) Leave the stop above the upper trend boundary until it settles into a down trend (May 14th to June 1st)

2) Once the price crosses the 50 SMA it is pretty committed so the stop can track steeply until it hits the 50SMA line (June 5th)

3) A good built in stop line can be the 50 SMA line so I would track along that next, gives the price room to move (June 6th to date)

4) Once the price hits the lower boundary it is time to start tightening the stop closer to the price to maximize profits should the price bounce. (lower the stop to near the TWT line but not past) So according to my own plan, which I didn't really follow, I would not have been stopped out on the latest bounce from a short position and my original short would not have been stopped on the previous little bounce in late May. So not only would I be farther ahead in gains I would not have entered the long position that I did and would not have lost anything. Depending on how steep I followed the stop after the bounce would determine if I were still in the trade or stopped out for a profit.

The point is that either way, had I used my plan I would be much farther ahead in either circumstance. My plan is now to wait until the green TWT line is broken before considering re-entering a long position. I should note that it is worthwhile extending TWT trend lines until they intersect the boundary line that they are approaching as they can act as resistance...ATD/B a case in point.

Something to keep in mind is that a trend is more likely to continue than to reverse...this is definitely true of the larger trend but can also be applied to the Trend Within a Trend to a lesser degree in so far as it applies to setting the stops. Time to start paying more attention to my own ramblings. So, if you extend the lower trend boundary line and the green TWT line they go for some time before they intersect...the price very well could bounce along between the two for a while yet creating a good short position but not a high probability one. I am going to wait it out.

U did the same thing on the way up and I waited for the price to break down past the upward red TWT line before shorting it on the 11th.

I didn't have to but it beat watching the price perhaps bounce of the line one more time, and it is working well. My stop is still near the 50sma and will follow the 30 sma once it crosses the 50 on the way down. I think that following the moving averages and using the various intersections on the way down as targets for the stop may be the way to go...more research needed though.

JD