-2 things I did better this time: 1) I had stop loss level in my mind. 2)I cut my position instead of waiting for liquidation.
Mistake/Lesson:
-Letting premarket downtrend influence my decision making and I was too biased and stubborn.
-Pre-market action is invalid if the volume is relatively small! Due to increasing volume and the fact it made a new high after morning sideways action, it's NEVER a short!!!! Just by watching the volume you can tell this thing is over-crowded!!! Remember Nate's saying,"it's good to be 50cents late than being early!!!!
-when the stock is consolidating near the HOD, it's NEVER a short!!!!! remember LEI>?!
-Premarket action is insignificant b/c the volume is extremely low compared to regular hrs!!! I could make better decision if not letting premarket action influence my thinking and bias. The only thing that I am interested is parabolic shorting but it was not parabolic yet, so why short???!! You were just begging for squeeze. In fact when it makes new high and consolidating near it, it's a LONG setsup!!!
-Again deep down the root of the problem, I wasn't prepared well. I traded on assumption and didn't have a good double-way plan whatsoever: what to do when stop level got hit and whether should flip. Again in this case I had a plan BUT the problem is I didn't stick to my plan! Again I saw the price blew through my mental stop lvl without taking it off! I thought about the slippage but still didn't take the action and flipped my position.
-this pattern is exactly like LEI and will happen again and again. The question is are you ready to capitalize it when it comes?!
-My initial desire was to short into strength but way too early and frankly it was not para yet!!
-I thought it was parabolic and the action was stuffing but in reality it was consolidation
-A series of identical size green candles on top range is NEVER a short!!!
-why the fuck I shorted near VWAP??!!!! Wait for the candle gets bigger and faster and the price deviates far the hell above VWAP to initiate short!
-After looking over all the charts of morning players and I've figured out interesting connections between price, volume, VWAP and timeframe!!!! ONLY after taking these 4 factors into consideration, appropriate decision can be produced.
-eg: when price moves from $1 to $1.50 which is 50% jump:
scenario 1: given the volume is the same, it takes 3-minute(3 candles) to reach it.
scenario 2: given the volume is the same, it takes 10-minute(10 candles) to reach it.
Scenario 1 has higher probability of pullback. Shorter the timeframe, better chance of pullback.
Farther the price deviates from the VWAP, closer the occurance of pullback and bigger the pullback will happen.
Combining all is the key elements of shorting morning parabolic: relatively bigger the candle, faster the price movement(momentum), bigger the volume, shorter the duration of price movement, farther away from the VWAP--->high odds of good short!!!
-Be extremely cautious shorting low float runner coming out of consolidation and massive volume Price-VWAP deviation can possibly be ridiculous: eg KBIO on 11/23: After price-$46, VWAP-$31 before the momentum shifted. The deviation is $15!!!!! Another good example is AQXP. Watch out these black swans!
-It's important to distinguish consolidation from stuffing near the HOD level. I've noticed that near the HOD it's the area to short with the greatest profitability however the same area in LEI and ZFGN's case are the best spot to buy. It's sooooo easy that short-biased traders fall into the big percentage & high price perception trap!!!! By using Price-VWAP Deviation in both cases, I wouldn't incur huge losses like I did.
-As conclusion: when the volume is big, NEVER EVER think about shorting anywhere close to VWAP-above&under!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Unfortunately this is the mistake I made twice!
-One important change that I will start implementing is I will review the chart LEI, ZFGN, RWLK, AQXP every single morning before 9:30am and start retrospecting!! 20min reviewing and retrospection can save you thousands of dollars, is it worth it??!!!!!!
Starting today I will keep my blog as simple as possible by only posting bad trades in terms of monetary and operative perspectives.
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