DUB Chart and TA, page-12

Hi @Sdaji – Yes I agree, but I think we may have a different view about what a mistake in trading actually is.  So I thought I’d share with everyone my review of the DUB trade that I made, along with what I learnt and any mistakes I think I may have made.  An annotated chart is provided below.

  
DUB first came to my notice on 05/07.  The chart indicated that the SP was in a strong up-trend.  I did a bit of research using the DUB FA threads and given that the Quarterly was due on 31/07, and the 3Y of 04/07 showed that the Directors were exercising their Options, my decision to enter long was made.  The only question was when.

The SP was in a well define up-trend channel but with short term oscillators suggesting the stock was overbought.  So I thought there may be some short term downside.  When I had a look at the DUB Order Book it appeared that there was some strong support for the SP and that there may be some difficulty at getting in at a reasonable price.  I did notice that the SP was thinly traded and the Order Book was somewhat erratic.  Given that the Fib price target projection based on the previous impulse move had a target of around 60c and that I could use the trend channel lower line as a trailing stop, I decided to enter long on 09/07 at 47c.

Well that short term downside did appear but the SP stayed above my trailing stop line.  In fact a bullish flag pattern appeared and the SP broke above the flag on 30/07, one day prior to the Quarterly.  Things were looking very good from a TA perspective.  On the following day the SP did something extremely unusual as it broke below my stop but then closed on the Open after the Quarterly was released.  A doji with an extremely long tail showing a large amount of indecision appeared.  Then I was starting to get a bit confused.  The following day the SP traded lower again but still closed above my stop.  On 02/08 the SP broke and then closed below my stop.  I exit the trade at 44c.

So what mistakes were made and what did I learn:

One thing that I was aware of and did take into account was to be very wary of what I call “classical setups” with low cap spec stocks.  This lesson is reinforced by the DUB trade.

I hadn’t had much experience with what I describe as “thinly traded and erratic Order Book” stocks.  I’m not sure how I will incorporate this sort of observation into my Trade System, but it is a consideration that I will place more emphasis on in the future.

The technical setup was correct – no mistake there.
My Trade Plan reward to risk ratio was approximately equal to 2 – no mistake there.
I exited the trade as per my Trade Plan – no mistake there.

The only mistake in using TA that you can make is not to have a Trade Plan.  And the biggest mistake you can make is not to follow your Trade Plan.

As a TA Trader I’m aiming for a win % of about 60% or higher with a maximum loss of about 10% and a target profit of about 20% or more.  If you can achieve this you have a very profitable system.  Unfortunately my DUB trade fell into the 40% basket of losing trades with a loss of about -8.4%.