Time to learn some lessons!

Anytime that I have a losing trade, I ALWAYS go back to see what happened. Most times I somehow screwed something up, once in awhile trades just go against me and there's really not much I can do. But, in any case, going back and analyzing your trades is probably one of the most productive things you can do in order to become a better trader.

So, let's go back and look over our MEE and AGU trades to see where my mistakes were. We'll first look at MEE:

There were 2 problems with our entry. We should NEVER have gotten into this trade in the first place. Yes, it did meet our rules, but you also must look at the entire picture and develop your "trader's sense" before entering any trade.

Trading is definitely like an art. You first must have the foundation and basics, but after that you will find that there are just TOO MANY nuances to build into your "rules". I'll try my best from this point to list what I generally see before getting into a trade and hopefully you'll understand it after time. We are going to still follow our rules, but we'll let the artistic/subjective part of the trading help dictate our entries/management/exits of trading from here on out.

Okay, back to the 2 problems. FIRST, look at that stochastics indicator, particularly the black line. Notice how, on our entry day, that the black stochastics line was going down. When you follow the candle chart that corresponds with that line, you'll notice that during the time period of the most recent high to our entry that the line was going down. This means that the stock was getting weaker, but we thought it was getting stronger - so strong in fact that we thought it was going to break up through that purple resistance line.

Which brings us to problem number 2 - the resistance line. We should have waited for the stock to first break that resistance line and then find an entry. Most times, after a stock breaks a resistance line (or support line) that it will go a little further in the direction of the breakout, then it will come back to that same line it just broke and bounce back off it. This is called the "re-test" of that resistance/support line. That is by far the better entry.

So, those were the problems with MEE - we should have never even gotten into that trade.

Onto the next stock - AGU:

We still entered this at a resistance line, BUT the difference in this one is that at the time of the entry - the stochastics black line had already gone down and was then turning back UP. So, we were good.

The problem with AGU is that when we got up to the highest high on the chart (the end of that blue line) you'll notice that the stochastics line (also marked by a blue line) was basically the same relative height as it was before we even entered - even though we made a new high. When you make a new high, that stochastics should make a new high on it's chart. However, ours did not. That's the first issue - our stock wasn't getting stronger as it went up - it was losing it's momentum.

The second issue with AGU was that when we did make that new high it wasn't done with much gusto. It was done with a "doji" candle. You can look up candle formations online, but a doji candle is one where the buyers and sellers were in equal power. However, up until that time you'll see we had nice, decent size, white bullish candles. This means that the buyers were stronger than the sellers. Once we hit that high, the sellers came in and were equally as strong with the buyers.

With those two issues above, we should have closed out the trade for a nice profit on that high day and just waited to get back into the trade at a later date. But, I did not. Nope, I just stuck to my "rules" and waited. Rules are good, but you gotta let that subjectivity/artistic side come into play.

Finally, while this was all happening, let's look at what the market itself was doing:

I give most of my trades the priority over the market, but you also need to look at the market so you have some idea of what's going on.

I entered BOTH the AGU and MEE trades toward the end of the phase of the market marked by that blue box. Now, applying your new found knowledge from above via the stochastics indicator, what was happening with the strength of the market??

Answer: the market went up and then sideways, BUT at the same time the stochastics was dropping. The market was getting weaker even though it was still trying to stay up there at those prices. Finally, the weakness took over and the market came back down.

If I would have looked at what was happening in the market AND looked at my trades closely, then instead of having 2 losses, we would have had:

1. No trade whatsoever in MEE

2. Profit on AGU

Lessons learned. Keep these in your mind each and every time you look at a possible new trade or a trade that you are already in.

Now, a new week is coming, let's get 'em.