Day-Trading SPY

by Ryan Mallory

I haven't dissected a trade of mine in quite some time for everyone. While I give out my trade setups in great detail, I could probably do a better job of giving a post game report on each of them. So, going forward, I'll try my hardest to do exactly that because, for one, it helps you understand the art of managing the trade, my successes and pitfalls, and secondly, it makes me take a greater in-depth examination of how I handled the trade, when I act like a Monday-Morning Quarterback.

In the chart below, I made a day-trade in SPY. The yellow line might find you scratching your head a bit, but let me explain: there was a trend line on the S&P e-mini futures that went back to 6am on Tuesday morning lows. The trend line was a thing of beauty on the 5min chart, marked with higher-lows and higher-highs. But at about 11:30am today, that trend line was broken and I waited for a retracement back up to the underside of that trend line to initiate my trade. I used the high of the day as my stop-loss and a fill of the gap from this morning as my target price (gaps typically are filled statistically, about 80% of the time).

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At first the stock could not break back up through the previous trendline and instead continued to ride higher without ever breaking the resistance. That was a bit frustrating, I'll admit. But finally at about 2pm the stock finally started breaking down, and the flood waters rushed in, and after that, the profits took care of itself.

Now one criticism that could be made about the trade is that I left a lot potential profits on the table that could have still been made and that I should have instead just tightened my stop-loss. I can respect that criticism, and believe me, I wish I would have been that insightful to have known that the market would tank right after I covered my trade.

But my plan going into the trade was to take profits at the gap fill and that is what I did. Most important aspect of the trade is that you plan your trade and trade your plan. But that doesn't mean that I won't have plenty of losing trades along the way. Just stay tuned and I'll be providing you with plenty of them :)