AmerisourceBergen ABC
How this flag trade is developing continues to intrigue me. Indeed, is it still to be considered as a flag?
If you recall from the previous post, it was a good looking flag from mid Dec but I was stopped out of the trade on 7 Jan because I had prematurely raised the stop to the entry point. The logic was to prevent losses but the real effect was to take me out of the trade as I was caught by the long tail of the drop on 7 Jan before it was properly developed.
As at todays chart it still looks like I should have stayed with my first decision and left the stop with the known, finite risk just below the low of 3381 on 24 Dec.
Certainly not raised it so quickly to the entry point. That way I would still be in this trade and beginning to make a profit – provided it continues to go upwards. I suppose that answers my earlier question. If it continues upwards then it was a good flag providing a good profit. If not, then it will just have deteriorated again and I close the trade while still above the entry point and with a small profit.
The next question is perhaps the resistance which may be present from the low formed back in mid July. The lesson is not yet over…
The thing that is pleasing me most with my current paper trading excercise with Flag-Trader is the number of times I don't do things – thereby avoiding mistakes, rather than the number of times that I do. Staying focussed on Guy Cohen's directions as well as putting some pretty stringent requirements into the Tradefinder software is helping me to avoid the sort of mistakes I used to make and keeping my money safe.
But this following example was a real lesson I wanted to share with you of a great looking bull flag that went wrong for me and taught me a lesson about my stop loss.
This is Amerisource Bergen recently.
Amerisourcebergen ABC
You can see the great looking flag that developed just after the strong upward bars. So I put my notional paper trade in place and was very pleased when it was triggered as the price suddently took off and things were looking good.
My stop was just below the lowest point of the flag, as per instructions. The gain was not consistently strong with a daily gain/loss/gain so I was a little worried and on the 6th when it showed a second loss on the day I moved my stop up to the entry point. My logic was that this would prevent any loss if the price turned down again.
Next day, I was stopped out as the tail of the low whipsawed me out of the trade. OK, I thought, I had done the right thing because I was still safe and had lost nothing.
Today, it is a different story as the price has recovered strongly and is back on track. So I wish I was still in the trade – but the situation has changed and I know enough to leave it alone.
The lesson I am taking away from this is that although I am being very conservative because I don't want to incur losses, in fact I moved my stop up too far and too fast. A real lesson to learn for a novice trader. I entered the trade with a known risk and it was good enough for the decision at that time. By moving my stop I was actually changing my decision despite the fact that the situation had not really changed.
This is one of the few really good looking flags that I have found in recent weeks (exactly as per Guy's Flag-Trader teachings) so it's an opportunity lost – but a lesson learned.
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Guy Cohen, author of Flag-Trader, has been recommending to his students to use the TC2000 trading software package mainly for the speed with which it allows you to flick through the candidate trades identified by Flag-Trader.
These can be easily imported into TC2000 and then, using the flag evaluation methods taught by Guy, it is very easy to flick through them to identify the stocks or other instrument that you might choose to trade.
It is always useful being able to use tools recommended by your mentor with the same setting as they use and Guy has just put a post up on the Flag-Trader site to help you set up your copy of TC2000 with the minimal settings necessary to emulate the way that he works.
You can find his post on Flag-Trader.com. Just look under the Alerts in the top Navigation bar.
After attending Guy's seminar recently I switched to using TC2000 courtesy of the free installation disk supplied to the seminar delegates.
Although I'm not a great fan of some aspects of the TC2000 software, the increase in speed for reviewing potential trades identified by the Flag Tradefinder is phenomenal and outweighs any disadvantages. I thought I had the process pretty well sorted by opening Flag-Trader, my trading diary spreadsheet and the IG Index Real time charting software.
Having got that sorted I was then taking a first look at candidates on the Yahoo chart linked from Tradefinder. If that looked interesting then copy and paste the stock name into IG Index charting for a closer look and to identify entry and stop levels. Then Paste again into my trading diary to create my own record of the trade. (Note this is paper trading. Once you are trading for real then your trades will be recorded on your online brokerage or spread-betting account).
Open Tradefinder data file using Excel
TC2000 transforms that process using the csv download icon built into Flag Tradefinder. Clicking this link allows you to Open or Save the file called Stocks.csv . Open this in Excel then Save As.. a Text (tab delimited) file to your desktop without doing anything with it. You should now have a file called Stocks.txt sitting on your desktop.
With TC2000 open and updated with the latest data then just New> Watch List and Import from file brings those stocks directly into TC2000. I call the new watch list by the date for a quick review. Anything that I decide to trade then gets transferred to my Flag-Trader watchlist. After a while I go back and just delete the old watchlists with date names as they are no longer of interest to me.
Everyone finds their own method of working but I just wanted to highlight the dramatic speed with which you can rattle through the daily candidates using this method with TC2000
I've just done todays trades. One click on the space bar moves the chart from one stock to the next. Using the 'pretty pattern' criteria taught by Guy you can dispense with the no-hopers within seconds. Only if something looks interesting do you need to quickly identify your entry and stop levels, stick in a trend line and place your trade.
As with any trading method the recommendation is always to paper trade it first before committing real money. Currently my paper trading is 30% up over 15 trades since 3 November with only spasmodic use of Flag-Trader due to other pressures. But I'm finding it easier and quicker all the time as the system beds in and my flag pattern recognition gets better.
