So today I took only one trade (my per trade risk at the moment is only $50) yet ended up hitting my max daily loss limit ($100)!
How did this happen...
As you can see above, the single trade I took was in $ALNY. After seeing the stock try to rally; get stuffed hard on volume and then coil up forming a text-book pennant; my thought was this stock's heading lower!
So as the stock looked like it was about to break down from the formation; I hit it short 100 shares @ $75.10 with a mental stop just above the pennant @ $75.60 and target of the pre-market low around $73.19ish.
This trade never really moved in my favor and I was prepared to take the loss once the price violated my stop area as mentioned above. I actually had a limit order prepared at $75.75 (giving it some room above the stock level as I know these stocks move fast especially at the open); however I was wayyyyyy too slow to react when the stock started spiking.
By the time I clicked to enter the limit order the bid had already jumped to the $75.90's. So I had to cancel this limit order and try to market out (which is what I should have done in the first case!) By the time I was able to enter the order to cover my position I got filled @ $76.30 for over 2x my max risk per trade and just over my daily stop; taking me out of the game for the rest of the day...OUCH!!! If I'd have just hit the market instead of trying to use the limit order; worst case I would have been out high $75.80's max...leaving me with maximum a $70-$75 loss but more importantly I would have still been able to trade and have the opportunity to take a 2nd and possibly profitable trade as was the case only yesterday!
LESSON LEARNED: My default route is "MARKET" and not "LIMIT" for a reason....it gets me in and out much fucking faster which is especially critical in the first 30 mins or so after the open and even more so in stocks gapping on fresh news like I usually play. Quibbling over a few cents of slippage makes no sense when speed is way way more important! From now on; I'll continue to focus on the "tape" for refining my entries and exits but going forward I'll consistently use "MARKET" to both enter and exit my trades!
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