We took a loss here. This is about the worst thing that can happen to you in a trade, so we might as well get this example out of the way early so hopefully we won't run into it too much anymore.
The left-most blue boxed candle shows you our bullish entry. The next day was a small candle, then the following day we had a big bearish candle that went against our trade. The big question you should be thinking right now is "Why didn't you sell an option for protection/income?" Good question!!
The reason I didn't sell an option was because the price moved against us so quickly (within 1 large bear candle) that our stop was relatively close. There would not have been enough "room" to move down to capture a decent amount of profit from a sold option. Most likely, if it would have gone down a decent amount just 1 more day, then I would have been out of both trades. Due to the "bid/ask" spread from the market maker I most likely would have been even on the sold option.
After that big down day against us, the price just kinda floated sideways (just like most of the market at that time) and instead of bouncing up, it hit my stop - Oh, and THEN IT BOUNCED BACK UP. Murphy's Law.
You'll find that many times a stock will come down, touch your price, get you stopped out for a loss, and THEN RESUME IN THE DIRECTION YOU THOUGHT. More on this in the next post, but for now let's just concentrate on our loss.
So, on the right-most blue box I was stopped out for a loss. I sold the option back to the market for $2.80.
I initially bought the option for $3.60 and sold it back for $2.80, so my loss was $0.80, not a killer but still a loss is a loss.
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