Breaking down AMZN trade today!

Today's trade on AMZN presented a smooth entry and exit. I had to trust one of my rules which is, the DOW has to be above 20 or below 20 and going in the direction of my trade. If not, I sit on the fence and wait for momentum to start running in my direction. Honestly, I did not think I was going to have a trade today, but I knew AMZN had broken through resistance at 306/307ish. If you notice, AMZN was going up, but the DOW stilI could not make up his mind. I loved what I was seeing in AMZN. It was moving up despite the undecided broad. This stock has crushed me in the past, so I waited until I had something pushing it up my way. I lost some of the position, but as I have stated in the past, I do not look at news, earnings, or events. I simply trade the charts based on momentum. Anyway, I was not comfortable going into a trade since "Old Man Dow" was slow about moving. At about 10:30ish, I noticed some positive movement in the direction of my trade, so I watched until I had a clear indication that the DOW and NAS were headed north. Other indicators were already in place. I just needed something to show me that the rise I was seeing in AMZN was real. I entered AMZN at about 11:00. I loved the ride, but I was pretty uncomfortable staying in the trade after 12, but I did because I had no reason to get out. My employees were leaving me alone. My meds were working, so I was calm and collected. At about 1:45, when I clearly saw the ADX turning south and MF was flat, I exited the trade with a good profit. I just needed a reason to get out.

This is the longest I have held a position in months. This was worth the ride. If you look at the 10 minute chart, you will see at about 1:30, the MF dropped (but not below the 80). I stayed in. MF started to creep below 80 and shortly after, the ADX started to turn down sharply. I bounced because I knew the option price was going to drop regardless if the stock was sitting or slowly dropping. When that big drop in price occurs, it seems as if everyone starts to run for the hills. I did not want to take that chance of giving any of my profit back. I was comfortable and willing to sit and watch AMZN as long as the DOW was not showing any momentum. This is very important for momentum trading. You are playing Russian Roulette if you try intraday trading when the big market sits stagnant or it is moving against you. I have been there done that, and have the battle scars to show. My 20/20 rule has helped me make a lot of money, but on the contrary, I have sat and watch a stock go up, and up, and up, but I would not pull the trigger because the DOW/NAS did not give me ultimate confidence that the stock would continue to rise. That level of discipline is tough. Imagine, you sit and watch a stock that you trade make a run $20 on a $300 stock. Whew, that was a beast. I forced myself to sit at my terminal and watch the dollars tick, tick away. I knew I had to muster through it, and one day, it would pay dividends. It did not kill me. It made me develop discipline and internal restraint. It enabled me to protect my basket. It helped me to start building that house, one brick at a time. Remember, read, study, and most of all practice.

I really hope some of you were in AMZN today. It was a great trade.

Nicely done. One big fat brick for the pile:-)

Thanks, but lately, they have come far and few between!

As fairly new drivers go through the process of developing discipline, please remember, it is very risky going into a trade during Amateur Hour (9:30-9:45). I was very tempted to try that AMZN again this morning at about 9:40. I had a lot of success with it yesterday, and the stock was looking good on and after the open this morning. If I were swing trading, I would have made a butt load of money because a hold overnight would have been nice-especially after coming off yesterday's rally. Anyway, If you look at the 10 chart, at about 9:40, it appeared to be a good entry point, but it turned by 9:50. I would have lost a dollar by 10:00. That would have been a chunk of money to lose- especially if you are trading weeklies. Just lets you know that the rule regarding sitting through AA, is HUGE! I still have all profits from yesterday, and I am watching AMZN slide down. I have elected to shut it down for the day because I am not liking anything I trade at this point. Lesson is, do not get greedy and always stick with your trading plan.

Have a great weekend!

Rookie, Considering your AMZN trade on 6/5, it had already moved quite a bit before you got in. Is there a certain percentage that a stock has already moved that may discourage you from making a trade even though the charts are still looking good? And by the way, I really appreciate all your posts and your generosity in sharing your methods and thought processes. Thanks for all your help

tplayer32,

I tend to experience this slight change each year about this time. I can distinctively remember that during this time last year, stocks were moving a bit slower. I am accustomed to entering around 10:00, but I have to be a bit more patient and wait for an additional 30 minutes to an hour. I was watching AAPL today. It moved slowly, but eventually met most of my criteria. I did not trade it because I am not familiar with how stocks respond to splits, as well as, I was not comfortable with the DOW. The one thing that I constantly remind myself is, I am a momentum trader. If the momentum is not clearly moving in my direction, I do not trade. The DOW drives it, but the NAS is also important and needs to be on the same side of the trade as well. Now, if my indicators push in the same direction, I trade it because I have so much momentum rolling in my direction until it is will be very rare to not gain at least 10% before experiencing any major reversal.

Take a look at the number of indicators I use to trade momentum...

5 MA going in direction of trade
10 MA going in direction of trade
20 MA going in direction of trade
Candles running up or down the 8 MA (not 100% necessary, but can be used)
Break of previous day's high or low
NAS going in the direction of the trade
DOW going in the direction of the trade
Money Flow going in direction of trade
HRFP/ FP on 55 (Trend)
HRFP/ FP on 21 (Decision)
HRFP on 10 or Smaller (Action)
Window of time when stocks move the most (for me)- 9:45-11:00

Tpplayer, it is very rare to miss a 10% or bigger move when having an enormous amount of momentum behind you. Trades are coming farther and fewer between, but as confidence continue to build, position size increases. I can live with one or two trades a week, if I earn 10-20% on 20K trades. I know I have shared the momentum components I focus on, but I listed them together. I also still use my candlestick knowledge by recognizing reversal and continuation patterns, support/resistance areas, trading ranges, etc. The indicators are good, but it has to all be put together to have consistent winning trades. When I question a trade before entering, I think, "where is the momentum that will push this trade in my direction". I start with the DOW and go from there. I have grown to realize that if I do not have that DOW running in my direction, I am closing up shop. Some make a ton of money despite the direction of the broad market. I am just not that kind of trader. I have to live with that.