Yesterday, AIG was a day trader’s dream. It rocketed up 9 points, and gave multiple entry signals all the way up. And did I make any money on it? No. Not one cent. Why? One thought kept me out of this trade.
It Can’t Keep Going Up
You’re damned right it can. And I know this. I’ve seen this, while day trading, a thousand times. A stock just shoots up out of nowhere. You feel the slight hum of the masses as they start to talk so you decide to take a look at the chart. There it is. The stock is making gains that no one was expecting. I don’t tend to chase others’ picks once the trading day begins. My watch list is locked in, and I’m concentrating on my chosen victims. But the buzz on Stocktwits was undeniable. Something was happening with AIG. So I took a look as it broke 14 and took off. And I thought ‘Well, I missed the entry. How high can it go?’ Turns out, a lot. As I continued about my trading of other stocks, unphased by the missed entry on AIG, the buzz on Stocktwits became a roar. Everyone was chirping about AIG. I kept looking at the chart every time someone called a new high and every time I thought ‘It can’t keep going up.’ Wrong. Absolutely wrong.
I allowed myself to think instead of trade. You may be thinking ‘Doesn’t trading require one to think? Like, a lot?’ And you’re right. It does. In the beginning. But eventually, trading becomes very instinctual. You gain the ability to process massive amounts of information and enter & exit trades all in the periphery of your mind, like a Japanese dude catching an arrow. And I should have recognized the pattern here. It was nothing new. As a matter of fact, it was absolutely textbook. It was such a perfect example of how to play the bull flag pattern that you should expect to see the chart in a future post regarding the subject. For an example of how this should have been traded, just look at Chart Addict over at iBankCoin.com. He’s a great technical analyst and he nailed it. In the end, I’ve learned from this experience; don’t let thinking get in the way of trading. This could have been a monster trade. It’s a trade that I was made aware of right at the start, and several times thereafter. And the shark in me wanted to take a bite, but I let that “It can’t go any higher” mentality get to me. Luckily, this didn’t really affect my trading day. It was just another missed opportunity on the stock market. I used to get very frustrated by these misses, but now I just kind of laugh and enjoy others’ good fortune for catching it. After a while, you realize that these things happen rather frequently, and chances are, you’ll get to be a part of one of these trades some day, and it will make your month or your year.