Home > Chart Talk, Lessons from the trading floor, Trade Replays > $RIMM: Trading Around an Idea

$RIMM: Trading Around an Idea

Everyday the market offers us an array of ideas.  It is up to us as traders to organize these ideas, make them our own, and turn them into trades we can understand.  Now just because you have an idea doesn’t mean you automatically get paid.  You must trade around this idea, find scenarios where you can manage risk, and take profits when you think the trade is finished.  As I mentioned on twitter this morning (follow us here) my best idea this morning was shorting RIMM below 53. 

In the pre-market this morning RIMM was trading below the 53 level.  We were going to gap down so I quickly formulated a few scenarios.  We could trade up on the open where I would look to get involved if I noticed some selling below the 53 level.  We could trade flat on the open where I would look for volume and selling on the tape so I could find a level to manage risk.  Or we could immediately trade down to the next support level of 52.  Because we had support levels so close to where the stock was going to open I told myself the only trades I would put size on were the first 2 scenarios.  If the third scenario happened I would get involved with smaller share sizes because I was chasing the move a bit. 

On the open we basically traded to the support level of 52 then popped up to the 52.50 level and paused for a bit.  I noticed selling being done at 52.60 so I put the trade on there, knowing I would be getting out above the high of the day which was 52.80.  I got stopped out of this trade as we broke the .60 level and traded up very quickly.  Obviously looking back on it I should have let the stock breathe as we quickly traded down to my original entry but I formulated a plan so it is my job to follow it.  I should have scaled out of my trade immediately above .60 and held the rest to the figure, which I knew was a strong level.  Oh well now it was time to plan my reentry. 

RIMM traded down to the support level of 52 very quickly so my next plan was to look for selling below this level.  We traded below 52 but kept popping above it.  Finally a little after 10 I got involved when we held the offer at 52.  RIMM traded quickly down below 51.68 and I took some profits around .50.  I was given the opportunity to add back in when we consolidated around this level and I took the entire position off when we traded through 51 then popped back above it. 

I think overall I did a good job planning this trade and sticking to what I had planned.  Going over this trade I should have been more patient with my original entry and I should have put more size on when we consolidated around the 51.70 level.  But I think I did a job reentering after being stopped out and of holding this trade for the bigger move.  After closing weak today I will be looking for more follow through as the next level of support is 47.50.  Best of luck tomorrow. 

Kyle

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