"Hope Springs Eternal - Except In Day Trading"

All trades in this article should be considered hypothetical
April 28, 2000

Hi Day Traders,

Last week I talked about how disastrous it can be to hang onto hope when it is not appropriate. The opposite of that is not displaying enough hope while it is warranted. Yesterday I had a trade that demonstrates the importance of allowing a trade enough room to work.

About 3:00 EST I recommended buying 1467.60. The market continued to decline and we were filled at 3:15 with a low of 1467.50. It promptly rallied to 71.50 and I placed a stop at 67.20, just under the low even though my criteria for doing so had not quite been filled. It came back down and got our stops and made a low of 67.10 before rallying to 80.50. A dumb mistake because it is not uncommon for a swing to be taken out by .50 to get the stops and then reversing. And I knew that of course.

The lesson is you have to give a trade room to work.

I don't believe in giving them much, but you have to give them some. If you pick your entries wisely, it is not necessary to give them much.

Of course, one of the reasons I was so quick was that not long before at 1:57 EST I had recommended buying 1465.60. We got in at 2:02 with a 65.50 low. It never went against us and we exited at 76.40. So we had just gotten 10.80 points and I didn't want to risk giving much of it back even though I was fairly sure we would have one more rally.

So remember, pick your entries wisely and give them enough room to work. At least .70 beyond the last swing point. On Tuesday we had a pattern that is one of my favorite ones to trade. But I will leave that lesson for another time.

Yours for success,

Ellery Coleman

The trades referred to in this article are trades that were sent to our Choice Day Trades subscribers as they happened. We have no way to verify whether or not all or any of these trades were taken in real time since we did not take them in our account. Therefore they should all be considered hypothetical.

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