As always, I seem to learn a lesson by losing money. In this case, I was prepared for a trend to break downward. What I wasn’t looking for was a trend to break upward. My new rule, once a trend is broken, UP or DOWN, sell.
JOEZ was set nicely for a good upward trend. I was excited about the chart and the upward movement it was making. I bought it at just the right time (at the bottom of it’s trending cycle). It did everything I expected. Then one day, bang, it jumped 15%. 15%! Yes, what I should have done was sell it. The trend was broken. Unfortunately, I was only tracking a trend that broke it’s trend downward. The next day, bang, 15% loss. I went from a $200 profit to a $6 loss. Of course, my trailing stop loss kicked in and sold.
Moral of the story:
When a trend is broken (up or down), it’s time to sell.
Here is my full confession to my horrible mistake. I did it again! After careful consideration and research, I bought 200 shares of a nice pharmaceutical company. I followed my rules:
Added it to my trading journal
Calculated my Profit Limit
Calculated my Loss Limit
Set my alerts for both profit and loss
The stock did just as I expected. It hit my profit limit. As always, when my iPhone dings it’s ding of profit, I cheer and do the “the profit dance”. But! I didn’t sell. The whispers of greed said, wait it could go higher. I missed the word “could”. Yes, dear reader, the spirits of trading punished me for not following my own rules. The stock dropped. My iPhone mournfully sang the tune of loss and I frowned and did the “loss shuffle” to my computer. It touched the loss limit, but didn’t go below. I was safe. I now promise the trading spirits that I WILL follow my rules and sell when my limits are met. Again, I have learned my lesson the wrong way.
Thanks for reading, check back later for a more light hearted and happy post. I promise!
