Want to know about my active trade list? Here’s how we traded Shopify ($SHOP) (February 11, 2021)
Want to know about my Active Trade List? Let me explain to you what we did with Shopify ( NYSE: SHOP ). I actually bought it here on the first day where it looked like this decline was over. This is what the trade looked like, this was the day that I decided to buy this stock. And because of where the stock was I really felt like I needed to keep a looser stop on it because it did tend to be pretty volatile. I felt really good about this so I put the stop down below the 50, right?
Then the stock runs up, we got a pullback here now. I put the stop right below the 50. So you say, should have been stopped out here. No, because I put the stop below the 50 based on where it had been here. So this stop actually was well below, and I didn’t raise it, we didn’t have enough of a gain to warrant raising the stop, so this stop was well below where this stock pulled back.
Should I have taken the trade out, should I have closed this trade out when it broke the 50? No, because a lot of stocks fall back to the 50-day moving average, trade even lower, sometimes substantially lower, and then just slingshot higher. I wouldn’t put this in that category, but I would say that we got the stock at the low end of the range. It ran up then it fell back. It did not get the stop hit, did not panic, just stayed in the trade, did not add here, that wasn’t my choice. I just chose not to, could have, maybe should have but I didn’t, that’s trading.
I don’t like to add to a losing position. I don’t like to add on the way down, I am obviously wrong on this stock, just not wrong enough to be out so the last thing I need to do is putting good money into a trade that is not profitable, and so I hung onto the trade. The stock comes up here and we actually played kind of like good stock bad stock with this; where I had a bunch of lines drawn up here. This was where the good stock zone is and down here, this was where the bad stock zone is, something like that.
Once the stock got up to here, then it was just a matter of riding this stock up as long as the trend persisted; because the thing is, you have got to remember something, we are in stocks looking for this kind of move. This is what we want, and so if you see the stock running in your direction don’t be quick to take a profit and say, oh, the last trade I had was a loser. Or the last two trades I had were losers. I better book this profit because I will feel better about myself. No, wait for the stock to either get ridiculously expensive or for the stock to give you some sense that the trade is over, and it’s time to take profits.
So what I was doing today was, I was considering just taking half off the table. We were up like 27 percent on this trade, I think 28 percent, actually. But we were up a lot relative to what my typical gain is, again, it’s 16.5 percent over the last 30-days. I always like to look at the current market and see what’s happening with my trading relative to the market. So we were up nicely on this, basically twice what the average profit typically is so it’s time to book those gains.
I was thinking about booking just 50 percent and then setting the stop at break-even for the remaining. And then I have at least locked in, think about this, if the current gain is twice what my average gain is, if I take half off the table, set the stop to break even on whatever the entry was, then the worst-case scenario is, I have a gain that is equal to my average gain on my winners. That’s a pretty good deal. I just chose not to because the stock came right up against 1500.00 and then failed. It is still doing okay and for all we know the stock could just continue up here. Their earnings are reported in 7-days and what I didn’t want to do, frankly, is risk the stock not doing anything, and then risk the stock pulling back.
Now, as each day goes by I’m closer and closer to earnings. And I am in a situation where I am saying, I wished I had sold when the stock was up here. Now the stock is pulling back and it is kind of eating into my profits and I’ve got earnings right around the corner so I don’t have staying power. It does this sometimes, it just made more sense to close the entire trade out. Just take it, if you have got almost a 30 percent gain on a trade that you haven’t really had on for very long, take the money and run. Even Steve Miller tells us to do that and I don’t think that guy was a trader, though he is a heck of a guitar player.
I just wanted to explain this trade to you and why I got in, how I stayed in, and why I am getting out. Now I am really happy with this trade. If this stock continues to move up I am okay with that because I had a good trade, a good reason for entering, a good plan for staying in, and a good reason for exiting. As I look at this chart it seems to me like the stock has got plenty of upside room. I just didn’t want to go through this ride anymore. I will wait for a better entry or just move on with that money to something else.
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