Trader Talk: Getting Stopped Out
Sep 08, 2023
The following is a chat between Rob and one of the many traders he helps coach. The chat took place the morning of September 2, 2023 and takes a look at IF-THEN statements, getting faked out with entries, stopping out with exits, gap fills, breakouts and more.
Trader:
Rob, in regards to if-then statements:
I will create an if-then similar to the ones you illustrated on Monday’s show with Josh.
IF this stock breaks past s2, THEN i will be stopped out.
IF the stock reaches up to the previous close, THEN I will go short.
The problem for me often is that the market can be tricky in its price action. For example, the stock may go under the s2 level, but then undercut and rally. So my if-then statement was fulfilled, my stop was ran, and now the market is rallying without me.
Or, the stock may get NEAR the previous close, but never reach it, and then starts selling off. My if-then statement to go short had the right sentiment behind it, but it was never fulfilled because the level was never reached.
So there are a lot of nuances and discretion when trying to read the price action and not having a perfectionist mindset in the fulfilling of your if-then statements. There’s the science of formulating if-then statements, but then there’s the art of executing them. And the art part is where I struggle.
Did you have the same struggles as a new trader, and how did you and other traders overcome these struggles?
Rob:
Yes, it is common for those learning this business to get stopped out, shaken out and feel generally unsure of their actions.
The best place to start to build some confidence is practice your IF-THEN based on the potential for gap fills off of the early morning high or low, which can often be the actual high or low of the day.
August was a strange month in how long it took for a gap to fill (lack of players, lack of conviction as contributing factors)
so you look for a lower high to engage...setting your out at the original high or look for a higher low, setting your out at the original low
examine these charts
starting with yesterday (good premium on a probability of down day (seasonality)
same thing for Last day of August seasonality was down expectation
and i could keep going
if we say there is an average of 21 trading days per month and 75% of gaps are filled then 15-16 of the days experience gap fills.
So your strongest plumb line is relative to the Previous Close. Fill or no Fill Previous Close X-over or deflection off of it.
once you master the Opening Range breakout, and capture the Higher Lows or Lower Highs and work on Gap Fills, then start to work on Previous Close X-Over moves
after you master that.. start to add other key levels like Pivots
all of those are in my Single Stock Trading course in the Learning Academy
IF at a minimum, a trader that is wanting to trade intraday, is not using Seasonality context and Gap Fill and X-Over probabilities, then they are not utilizing the most obvious frameworks at their disposal (for ETF or single stock trading)
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