Feb 13, 2008

Dangers of trading

If anyone wanted a good example of the inherit risks of trading... look no further than today's CEPH chart. It was in my watchlist as it gapped up and there were a couple of areas I looked to enter but never did. However, at 1pm the bottom dropped out of the stock. Even if you had a stop in place... you would've been burnt by major slippage. If you didn't have a stop... you were toast. I'm still wondering how this could happen on a stock that gapped up and had a fairly orderly rise to the ORH and then BAM!

Maybe some of you guys can offer theories as to how and why this could happen?

18 comments:

MP said...

the only thing i see is really really low volume?

;/

OONR7 said...

mp: there was plenty of volume on this stock.

Glenn said...

13-Feb-08 13:04 Cephalon to be accused by U.S of illegal deals

OONR7 said...

and there you go. Wow.

OONR7 said...

forgot to mention... thanks Glenn!

wolverine said...

Whoo yeah, that was scary. I was in that trade, entry over the 11:00 15' bar. Thought at first that it was a bad tick. I had taken a partial at the ORH, luckily. And for the other half, I'm very glad that I placed a stop order in the market, and didn't just use a mental stop. Anything can happen...

OONR7 said...

wolverine: thanks for sharing... your entry was the first area I was thinking of entering. Just thought is was a bit too low in the OR, but a perfect candle on a nice pullback. Now I looked at the 30 sec chart and saw price just tank. Do you mind sharing if you were stopped out at your intended stop or did you suffer major slippage?

MP said...

ah, still learning but after the OR it just looks like volume died i.e. lack of any follow-through? I know mid-day volume is always lower...

wolverine said...

I had the same concern too, but with such a nice candle I thought I'd pull out some profit even if it stalled.

My original stop was below that 1100 bar, but I pulled it up to around 62.20 as it came back in to retest the ORH from above (I also thought volume looked weak as it broke out). Got out with about $2 in slippage on those shares! And that was enough to turn a 2.5R winner (if i had taken full profits at ORH) into a 1.6R loser.

PRD trader said...

I was in a scary situation today,i was thinking to enter in JAKK after the low of the second bar, but the brokers' chart server crashed at 9.57 so I coulnd't get in. If the server would've crashed after 10 I would probably be in the trade and been in trouble!

wolverine said...
This comment has been removed by the author.
wolverine said...

PRD: Sorry, I don't get it...were you looking to go short or long? Its a really nice short setup...

OONR7 said...

wolverine: thanks for sharing and I really wasn't trying to 'reveal' a loss. I was just curious to hear from someone in the trade how far the slippage went on a stop order. BTW... partialing at the ORH was a great idea.

QQQBall said...

wolverine, ni8ce entry. when i first saw that chart, i thought, "i'd take that long. good discipline to have a stop in place. i use stop-limits - in more volatile markets, have had sell stops get jumped completely and come back to the office to find id gotten reamed. amazing how "X's" $1 profit rule would have probably gotten most out with a profit?

ESLR PB'ed to the OR support area. DF on a Trader X B&B to the 38.2% retrace area.

QQQBall

Jamie said...

As Glenn noted at 1:00 EST U.S. antitrust officials accused CEPH of illegals deals. Bad news can come out at any time during the trading day on any stock. Protective stops are a must. I was watching this one too but, thankfully, did not get involved.

Anonymous said...

Happened to me yesterday on GS, the bottom just fell out.

bl said...

Alot of nice 30" charts: jaso yge eslr3/30 ener4/30 lnn 4/30. Coals on fire with opening reversal: pcx 5/30 +7 h-l. wow!

bl said...

AMAT- a solar play 3/30