AMSC closed due to after market trading bid triggered my trailing stop

OK, so this really pisses me off. I put a trailing stop in to protect my profits in a stock I have just bought at a good price, which is going up. My trailing stop is about the same as the largest trading range within the last five days , so in theory it is a safe and realistic amount for a trailing stop.

What happens: Even though the stock never trades in the open market session down to my trailing stop price, my trailing stop still gets triggered.

Confused? I was, so I called TDAmeritrade to find out what is going on. They said that the trailing stop is triggered by the bid price in the closed session. So the stock doesn't even need to trade at that price - just some broker needs to bid that price in the quiet after hours.

My intepretation: A TDAmeritrade market maker puts in a low-ball bid in the closed session, knowing that a bunch of realistically set trailing stops put in by amateurs like me will get conveniently triggered and taken out of the market as soon as the market opens. Lots of commission for TDAmeritrade brokers, lots of lost profits for retail investors.

Solution: I conclude the game is rigged against stop losses and trailing stops. The only way to get around this is what TDAmeritrade calls a trigger, which you can specify to only trigger if the last sale is a certain amount, rather than the  bid price, which they give you no choice about using for a trailing stop or stop loss.

Footnote: This never occured to me at Charles Schwab where I set a lot of trailing stops and never got taken out by an after-market bid. This is the third time something similar has happened at TD Ameritrade, I will have to check the exact prices to see what happened on the other occasions, but that's a downgrade for TDAmeritrade from my perspective.

Enter DARA position for speculative biotech swing trade

Successful entry into DARA short term swing trade. Entry point $0.445 on 4/12. 5% Trailing stop. Profit target $0.55.

The Daily Income for Life strategy uses risky, speculative trades like this to increase capital. The capital goes into income stocks for longer term security and dividend and royalty income streams.

The trailing stop trigger after one day is $0.456. So this trade is profitable day 1 due to the high of  $0.48 causing the trailing stop to be higher than the entry point. It doesn't seem much but on a speculative biotech penny stock that one cent between the entry and the trailing stop trigger means my money is safe. That's important when you are trading thousands of shares of your own money on a speculative sector.

Buy signals for this trade were the declining volume on the second graph, the MACD cross (blackline crossing red) on the second graph, and the uptick in RSI on the third graph. Biotechs often get lightly traded, and then explode on the next news release, amplifying a swing trend.

The profit target of $0.55 will needs some good news. If nothing happens, the trailing stop will close the trade out at some point with a small profit. I don't really care when or how much at this point.

Exited BPT due to Trailing Stop with 41% profit

Now heres a prime example of how trailing stops help you protect your profits...but annoys you at the same time.

I bought BPT (BP Prudhoe Bay) as in part of my income portfolio at $70 per share. BPT showed a nice run up, plus I'd collected and reinvested dividends. After the wild price movements back in March calmed down, as it climbed again I tightened the trailing stop to 3% in order to not lose the 40% profit I'd made within the last four months. That's like doubling your money if you annualize the return. For an income stock...

Even with a 16% p/a dividend, I'm not adverse to taking trading profits. At 16%, even with compounding, a 40% gain is still a couple of years worth of dividends.

However, I was kind of annoyed to get stopped out on a single days movement on April 8.

Lessons learned. The trailing stop has to be relevant to the daily movement of the stock. Mine was triggered at $99.04. which was pretty much right on the 13-Day EMA (Green Line on the graph). While the price crossing the 13-Day can indicate significant weakening and a downturn, given there was only 1 red candle in the last week I wasn't expecting it to happen.

And a day later it was back at $105...

Oh well. Cash in the bank. I still like BPT, and will probably buy back in when it gets it's next savaging down to the 50-day EMA (the red line).

Found a photo of BP Prudhoe Bay on the web. Its a place you go for income, not holidays.

Happy investing and happy Easter.

HXL lessons learned

How long will this rally last? Turns out I got out of my HLX trade way to early. I executed the trade exactly as I had planned. This is good - every trade should have both a planned entry and exit. But you also need to stay flexible, and change your exit if things are looking good.

My entry - red arrow, was at $10.70 Coming down from a big sell off from $14, which is not shown on the graph. My target profit exit was 25% profit, which translated to $13.50 (automated). I also had a trailing stop of 5% to protect my profit if I didn't reach the profit target.  The green arrow was my exit and profit target at $13.50.The cross in the candlestick the day before I hit the profit target (which was an automated sell) was suggesting the the rally was over. Turned out it was more of a rally-bench-rally pattern,  so I missed the second rally. A better strategy would have been to remove my profit exit and simply tighten the trailing stop up to 1 or 2 %, or wait until the candlestick line crosses the 13 day EMA (Green line), with red bars. To date this still hasn't happened.

I'm not complaining. 25% profit in just over a month is still a pretty good trade...

Using Trailing stop to profit on HXL Swing Trade

HXL Entry  - Feb 16 @ $10.70  Graph from Clearstation

On this trade, I set the trailing stop intially at 5%. This was based on an approximate calculation of 1.5 times the average daily trading range. You don't want the stop to take you out just because the daily range is large.

Once the trade showed some nice profit and I decided I would be happy to take the profit, I tightened the trailing stop to 4%.



HXL Exit  - March 11 @ $13.50

I exited the trade at $13.50 on 3/11. 20% profit in under 4 weeks. 

From the graph, you can see I should have stuck with the trailing stop rather than my preset 20% profit point, and let this run a little longer. It jumped another 5% after I exited on 3/11.

The lesson is, if you are in a good trade, let it run with the trading stop, rather than tagging profit. That decision was fear based and greed based. Greed:  making a nice trade with a healthy return in under a month. Fear: Didn't want to lose the gain I already had, so closed out too early.