Today $AMD had earnings after hours and I decided that I would watch it and see if there would be a good opportunity on it based on the ER. They beat earnings and revenue estimates but they said they expect sales to decrease by 15% in Q4. So basically it was a mixed bag and was not an obvious buy or short.
I watched the price action unfold and saw a huge spike from $14 to $15 then it dropped significantly. A small bounce then another huge drop. Clearly I should be more short biased after many big red candles. So, I ended up shorting at $13 thinking it’d drop another 50c/share at least since it had already tanked. And that’s exactly what happened, however, my timing was off and I got in too early causing me to bail on the position.
There was barely any time to get out since as soon as I shorted I was down 10c then 20c and then 30c within seconds. I had to get out and cut the loss since it was clearly the bottom.
What went wrong:
- Not able to define a risk level
- Having a set stop level (10c) does not help when you do not have a resistance level to base off of
- Not shorting into a bounce (chasing it down)
- Shorting into a whole dollar (possible support)
I marked my entry, exit, and where I should have shorted instead. If I had waited for the bounce and the reject off $13.47, I could have defined my risk level (get out if it breaks through $13.47). Instead, I caught the exact bottom and got squeezed out since I had no idea how far it’d go back up. I could have waited and it would have been fine eventually, but doing that invites disaster and you can only get lucky so many times.
The only way to become a successful trader is to make stupid mistakes like this so you don’t repeat them.