The Monsanto Snipe!

Results of the snipe are visible by clicking the thumbnail below.

Monsanto-annotated-03-23-15 at 04.01 AMThe assessment of this stock as a good snipe opportunity undertaken about a week earlier. I do not go into the whole process here. There were particular features of the personality of the Monsanto stock price chart, that led me to think it was a good hit.

Not all the features are on the chart. The large chart is as it was on 23/03/2015. The expanded region is what happened next on 1st April 2015.

Monsanto was assessed to be strong stock i.e. price was generally heading up, for well over a year – and it disliked the 400MA and had not done so in a very long time. When that happened on 23rd Mar, that was my queue to take serious interest.

I entered before it hit the 400MA. No one could know whether it would suddenly go lower or higher. It fell That dragged me into negative equity. But then I unloaded a few more shots as it fell much further below.

At one stage negative equity on the trade fell to around £700. That’s when your nerves are tested properly. Do you stay in or fall out and cut your losses. Emotions begin to rage riot on logic. In this one I stuck with the logic of my assessment – and you see the results.  Of £1249.50 in profits taken.

Yes – price may have gone higher. I could have got more profit out of this by waiting days or weeks more. But the name of the game is to take the money and run – without looking back. And yes – price could have fallen lower – and one has to be prepared to lose.  But it’s about using stop-losses to limit losses. Remember this is more a losers game than a winners game as about 60% of the time you lose!!

Quite a lot of people come to a subconscious impression that all this is really more technical than I make it out to be – after all, those wavy lines seem to boggle the mind (don’t they). The actual reality is that most successful traders do not rely a bunch of technical stuff. Price-action – which is basically a common sense evaluation of the directions of price – is your best indicator. I distract myself here to note that I’ve often seen trainee doctors discharge terribly ill patients. Then comes along a consultant who takes one look at the patient and says, “No – the patient is obviously ill! S/he can’t be discharged!” What do consultants do in those circumstances? They discard all the ‘technical knowledge’ – the science – and look at the whole picture of the patient. So – on occasions trainees adhere too much on ‘technical knowledge’ and less on common sense. Similarly, new traders – and I was one – tend to make a similar kind of mistake.

MONSANTO 04-03-15 at 10.01 AM

This chart/graph of price at left show the general trend and a rejection of price falling on or near the 400MA (whatever that is). [Understanding what the 400MA is truly adds nothing to the assessment. Understanding how an engine of a car works or how a plane engine keeps aircraft afloat is not necessary to using these means of transport. Understanding may give comfort but nothing of practical value].

As I mentioned elsewhere, these ‘markers’ or indicators only give a way of assessing the patterns and ‘personality’ of the stock. It’s like someone who doesn’t like loud noises or to socialise – understanding why doesn’t really help a great deal – you’ve still got to interact with them at their levels of tolerance or preference. So you may know from experience that such a person doesn’t like your music above setting 4 or 10 (or whatever) on your Hi-Fi – or that they don’t like meeting more than 3 people at any one time. If you want to remain friends with them you cater for them – it’s their personality.

If you were working as a sniper for a military agency, you may stalk your victim for days, weeks or months, evaluating their patterns of movement and preferences – in order to chose your moment for a clean hit. That is  the sniper concept. Just to be clear I’m not suggesting you take up such a job to kill people or that killing people in that way is a good thing. I’m only borrowing the concept – spoken about by Francis Hunt – and applied in trading. And like a military sniper, you would need to know your exit strategy if it went wrong and you were discovered. Similarly in trading you’ve got to know your exit strategy in your stop-losses, if it goes wrong.

There may be a sniper school somewhere for military snipers. But sure enough, the main learning comes from actually going out on the field. Oops – this is not an encouragement to start trading by way of analogy. Thankfully, in trading one can actually acquire all the skill by practicing in a safe environment for no loss – it’s called a demo account.

Why do I write all this?

1. To benefit myself – I need to reinforce my new discoveries and winning strategies. I sharpen my thinking by reflecting on my successes.

2. To benefit others who – may want to explore some of this. [No charge or obligation].

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