A $5,000+ profit trade to learn from!

by Matt Pryzby
Here is a real world example, on the day this trade was put on, we felt through $200 Bidu could have a strong $5-10 move over the next few days, during this day, it was trading in a range of $198 to $200 during the opening season. We started small buying 100 shares, with a hard stop of $197.99, if it broke there we were out and would have lost about $100 after commission. (our price is $198.86 - $197.99 = $.87x 100 shares +$10 commission = $100 risk. After an hour we bought another 100, and than finally another 100 shares. Now at this point our risk in the trade is $300. For at least a 2-1 risk reward we now need to make at least $600 or have this go to at least around $202. But we feel it can go higher so as long as we dont get stopped out, were going to hold for a bigger move.
Right around lunch time, the stock finally breaks $200 (buyers in control) within 15 minutes of breaking 200 at noon it is around $202 or a +$600 trade. We are still confident (mental/ psychological) though that it will go higher since we know we are right! Now this is when real trading vs paper or fake trading takes over because when the stock is up, your the man, you know everything and its short and brief! 10 minutes like this.....

Then over the next hour, the stock pulls in from $202, to $201 (now only a $400 gain), back to $200 ($200 gain) than back to your price or a break even trade. Mentally the wind is taken out of your sales, why didn't I sell at $202 I'm soo stupid! Why didn't i just get out at $201 when i knew it was coming back here! Got dammit now i might take a loss in this trade now! These are all questions that will run through most peoples minds and that no trade on TV or in a book will talk about. But what you have to remember is the ORIGINAL game plan!

The original game plan that you made with a clear head before you put the trade on, you had your entry for a reason, you had your STOP for a reason and your trade for a reason. Trades take time, you can force it because you want it Now! What a bad trader will do, and we have done it yourself (no one is perfect) is change or alter your game plan and in most cases for the worst. But we knew the trade and stuck with our plan and by 2pm we were back in a good place with the stock cruising back up toward highs of the day!
 
By 4 o'clock the stock was at $205, our price was $199 and was up $1800 (3-1 risk reward) on this day alone, now by selling $100 shares for a $600 profit we know covered our risk of this trade. That's a term called "Paying for the Trade"
 

We had a $5,000 share gain on the trade due to the fact that we had 1,000 shares to start the day and sold most, holding 300 more but to show you a simpler example we wanted to start with 300.
Paying for the trade - selling a portion  of your stock for a gain that covers the risk (total loss) of the trade so that if the remainder of your stock comes back to your Stop price the trade will now be BREAK EVEN, instead of for a LOSS

Also if you have a specific question about this trade that you don't understand, please ask, we are here to help and want to make sure you fully understand, no questions is ever a dumb question!

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