Year to Date Portfolio Performance – September 2015

Compared to a brutal August, I managed to stem the flow of blood in September by reducing my market exposure and overall participation. Better late than never. Confirmation of that decision was reaffirmed during September as I watched stocks on my shopping list continue to be punished to a degree far greater than the indices reflect.

September Net P/L:  -3.6%

Year to Date P/L:  -27.27%

Notable Wins


Notable Losses

  • AxoGen (AXGN) -15.8%, 6-day trade. A small position size of a highly rated stock bought at the wrong time and place. My exit should have been quicker at the fail of the previous consolidation, but I choose to hold to gauge support at the 50 DMA. I sold on that failure.

I’ve mentioned a few times in previous blog posts that a problem I’ve attributed to my losses has been due to being slow to adapt my strategy to changing market conditions, however I’ve come to think that my perspective on that has been wrong. The market always changes, so to continually change a working strategy to adapt to the market means that my strategy will always be a lagging strategy, and therefore more prone to being an underperforming strategy. Some of the best traders I learn from have long since reduced their exposure to the market, or otherwise entirely moved to the sidelines, rather than force implementing trades of their working strategies under less than ideal market conditions. They seem to trade working strategies until they don’t work, then they’re out. They’re not constantly chasing their tails. There is wisdom in the advice of not having to be actively trading in the market at all times.

Current Positions


Short – None

Take the Signal You’re Given, Not the One You’re Waiting For

signals-99Did you take a beating in August? I did, as my recent portfolio update indicates. I’ve gone from +10% to -24.5% during 2015. Although lagging in both recognition of the changing market environment and sluggish flexibility, I finally did catch on and took my losses which would be worse now if I had held my positions. I now have the advantage of being virtually all in cash while enjoying the pleasure of seeing quality stocks I want to own again being discounted by the market. This is the perfect time to get shopping lists ready to buy when the time is right.

I’m not going to beat myself up for being in the loss column since some lessons I’m learning now are those which I’ve never really encountered before. The first trades I put on were in October 2011, so I’ve been trading for four years. I’ve accumulated a great deal of knowledge and hands on trading experience during that time, but all of that time has transpired in bull market conditions. I’ve never known a bear market while trading. Now that appears to be changing.

The most useful experience I can take away from August is best explained using Skyworks Solutions (SWKS) as an example. I had a profitable position going into their July earnings. It was a long-trending, highly rated market leader. Earnings are then reported with both top and bottom line beats and raised guidance. Perfect! Result? It’s sold off. That seemed counterintuitive and was frustrating to the point that I refused to believe there wouldn’t be a rebound, so not only did I hold, I added to my position when price hit the 200 DMA. Only after failing at the 200 DMA did I concede and take the loss. I tried to justify the success story of Skyworks to curve fit it to my beliefs while all along price was telling me what the real story was. It doesn’t matter how good a company is fundamentally or how bright the future looks once shareholders decide it’s time to sell. I was looking at technicals to determine what my sell signal would be. The fact that Skyworks sold off after it had confirmed everything was going in its favor was the sell signal I should have been paying attention to. I tip my hat to the smarter money that recognized this ahead of me.

Skyworks is not an isolated case by any means. It isn’t difficult to find comments on social media from similarly frustrated traders struggling to comprehend why their stocks are sinking after earnings beats leading to declarations of everything from “this is bullshit” to “markets are rigged” in response. I understand it because I’ve done the same thing before myself. I’d have rescued a lot of my lost capital over the past four years by following price instead of my own biases.

Markets are cyclical, and that becomes especially apparent when macro foundations begin to crack and crumble. Consider the market first, then sectors, then finally stocks within sectors when putting together your own shopping list and acting on it. Recognizing and regarding buy and sell signals from a bottom up approach will improve chances of success.

Year to Date Portfolio Performance – August 2015

logo-ingnWhat a mess August was for me. I ignored the underlying market breadth divergence and held onto market leader positions which, for the most part, were still performing well going into the month. Some of the losses I took in August were profitable trades that sold off after positive earnings, turning profits into losses. Some were leaders held too long into the late month market plunge. One was just plain a disastrous mistake. Searching for positives here reveals few this month. I had a few good trades, and I managed to end the month mostly in cash and a few favorable trades that are working.

August Net P/L:  -24.9%

Year to Date P/L:  -24.5%

Notable Wins

  • Inogen (INGN) +16.9%, 6-day trade. Top rated IBD stock in a secular uptrend. Position was taken ahead of positive earnings. Fearing a post-earnings sell off similar to others that hurt me, I took the profits and ran which proved wise as the stock later dropped below my position buy point. Looking for another entry here.
  • Mattel (MAT) +8.2%, 24-day trade. Swing short position.
  • Apple (AAPL) +7.7%, 21-day trade. Swing short position.

Notable Losses

  • Infosonics (IFON) -33%, 3-day trade. Stung by a lazy trade in a penny stock. Lazy because I failed to do the research where I would have learned that IFON’s earnings were due to be reported two days after I took the trade. That was just a dumb thing to do. Technically, the chart was a nice setup when I initiated it. Fundamentals decided otherwise. The only saving grace here was that my position was sized smaller for a wider stop, however the high percentage loss still did far more damage than was acceptable.
  • ZIOPHARM Oncology (ZIOP) -20%, 11-day trade. Late to the party here, and late on the exit. Another smaller position, but the loss exceeded 1% of my capital nonetheless.
  • Horizon Pharma (HZNP) -17.7%, 37-day trade. Winner turned into a loser, and I let it run too far.
  • Tableau Software (DATA) -15.2%, 29-day trade. A winner with positive earnings that sold off. Did not anticipate that, then held too long.
  • Facebook (FB) -12.6%, 24-day trade. Stopped out on August 24.
  • Mobileye (MBLY) -12.4%, 28-day trade. Stopped out on August 24.
  • Financial Engines (FNGN) -12.3%, 20-day trade. Stopped out on August 6 after disappointing earnings.
  • Palo Alto Networks (PANW) -11.5%, 39-day trade. Another winner turned loser.
  • Skyworks Solutions (SWKS) -11%, 29-day trade. Top and bottom line beats, increased guidance, yet sold off. This, above all other trades, demonstrated to me that when the macro environment changes and traders decide to lock in profits no amount of good news is going to plug the exits. A very valuable lesson learned here with Skyworks in particular.

I was very frustrated that my trading seemed to be going along nicely, then very suddenly the wheels came off and I ended up in a ditch. The fact that many of these failed trades were in leading stocks added to my conviction to hold them which lead to late exits and increased losses in some of them. I just didn’t want to believe I was going to chalk up losses in these types of stocks. While it cost me losses, finally cutting them prevented further losses later. I’m grateful for avoiding the trap of relegating myself to holding onto these losses in search of the magical break even point sometime in the future. I took a big hit, but it could be much worse.

Another factor in why my August losses were so large was due to the fact that I was trading on margin with large positions on most of the losing trades in quality stocks. Margin losses do indeed add up. I need to be aware of that in the future and more disciplined in taking exits when they flash. Revenge trading is not an option as I work to refine my process to move forward from here.

It’s very difficult to post this update, and embarassing. It seems like I should be having more success after four years of trading, but that’s not the case in the here and now. Then again, I’ve never experienced the type of market conditions we’ve had in August so, despite having experience under my belt, I had none which applied to truly understanding what I was dealing with in the volatile present we’re in. I’ve never known the degree of how quickly and viciously conditions can change and turn against you. The experience I do have kept me from being hurt worse than I was, and that’s perhaps the biggest positive I have going for me this month.

Current Positions

Long – CVX   EOG   JUNO   NEM

Short – SPY

Complacency Kills


It has certainly been an interesting week. Reviewing my trade log for this year, my early entries were largely profitable while more recent trades have been decidedly unprofitable, so much so that my once 10.6% year-to-date gain has now slipped well into red ink. I decided to take a look at that log since I’m now way underperforming my expectations and trying to grasp how it could unwind so quickly for me.

Some recent shots across the bow took me by surprise, particularly positions in best of breed companies which reported earnings and revenue beats, and in some cases increased guidance, yet sold off. I’m talking about stocks such as Skyworks Solutions (SWKS), Tableau Software (DATA) and Horizon Pharma (HZNP). I suppose I was late to the party, and I suppose shareholders who arrived ahead of me took advantage of the situations to sell the news, and sell they have. It’s disheartening to be in outperforming, market leading stocks that deliver, yet they sell off. These are winning leaders after all, not penny stocks. I just wasn’t mentally prepared for that possibility until it was too late for me to act to prevent those types of winners from becoming losers.

In the past I’d have held those losers until they reversed, or until that sick pit of the stomach feeling that comes when hope pinned on a deep loss finally fades into capitulation. While I was caught off guard and slower to react than I would have liked, I did cut my losses to go largely to cash before they became much worse. Only then was I able to marvel at the market’s action this week; good, bad or ugly, I enjoy studying every aspect of it, and being in cash affords the opportunity to pounce on the bargains developing during this correction.

Complacency of success was the underlying factor in undermining my recent performance. Tunnel vision toward favorable outcomes led to unpreparedness and sloppy trade management. I should know better, and I do, yet here I am now in a hole I have to work my way out of.

My thanks go to all the veteran traders out there who spend time sharing their knowledge and experience through tweets, blogs, podcasts, etc., for the benefit of less experienced traders such as myself. A lot of advice and guidance provided recently about signs of cracks forming in the market has proved true. For example, I can’t estimate how many mentions of deteriorating market breadth I’ve read about over the past months, but I can say I didn’t give it nearly enough regard. Rich valuations, China and a host of other catalysts can be included as well. If I had treated these signals with the proper precaution I wouldn’t be nearly as deep in the hole I’m in now. I just wasn’t listening enough at the time, but I hear that advice loud and clear now.

One last thought to leave you with, a quote from Niccolo Machiavelli:

“Whosoever desires constant success must change his conduct with the times.”

Year to Date Portfolio Performance – July 2015

logo-rcpt2It was the best of times, it was the worst of times. Well, thankfully not the absolute worst. It only seems that way because I made mistakes that I know better not to do.

I’m not happy with the fact that one of my best ever trades culminating in the perfect outcome occurred during the same month as some terrible stock selections with piss poor timing and loose trade management. That one star winning trade was not enough to carry the load of my series of bad closed trades. July has been a psychological drag on me as individual high and low points have resulted in bringing me back close to where I began the year, but I guess that’s trading. For as far as I’ve come in my trading journey I still manage to find ways to reintroduce myself to the fact that I have much further to go.

July Net P/L:  -3.09%

Year to Date P/L:  +0.53%

Notable Wins

  • Receptos (RCPT) +25%, 56-day trade.  This was the bright spot of my July. Receptos proved to be a worthwhile application of Occam’s Razor in that the simplest outcome hypothesis is usually the right one. I have no idea how often I heard, “where there’s smoke, there’s fire, and there’s a LOT of smoke around Receptos”. If I piled assumptions and skepticism on top of the facts I likely would not have made this into what it is – my most profitable trade of the year. I employed conviction in adding twice to my original position which became quite large ahead of Celgene’s buyout offer. This was easily the most obvious buyout scenario I’ve ever seen, and I was fortunate enough to benefit from it.
  • Apple (AAPL) +9.7%, 209-day trade.  I spent the bulk of this trade sideways from February through July where I finally stopped out on July 9’s break under 121.12 on increased volume. The following day’s reversal leading back up to 132.97 sucked after that, but this was ultimately a case of following my rules for this trade to take what I believed to be a logical stop and book a win. I now have a profitable short position going in AAPL which I’m ultimately looking to flip to the long side again.
  • GenMark Diagnostics (GNMK) +8.9%, 41-day trade.  If you look at the weekly chart of GNMK you’ll see the obvious range trade setup I took in mid-June as I bought near the 2-year support area. I passed on taking the soon to follow move up to 10.84 looking to hold for more further up the range, but that led to red ink as price dropped to within pennies from hitting my cushioned stop just below April ’14’s 8.48 low before reversing up. At that point the trade was beginning to look weaker, so I tightened up my stop to close out with a gain.

Notable Losses

  • Laredo Petroleum (LPI) -27.7%, 68-day trade.  I bought this when LPI was consolidating and pushing on the 40 WMA with increasing accumulation. My saving grace here was that my position size was small to allow for a stop near the 50 DMA which is where price headed soon after I bought it. Had I used a drawn support trendline I would have been out of this five trading days after my entry, but I established a new stop under 12.94 as I extended my rules. From there I had one chance to get out green as LPI advanced above the 200 DMA, but then it broke down from there. I failed to honor my stop before finally selling in early July to take the loss. One of my worst trades of the year. LPI is still falling, fortunately without me.
  • C&J Energy Services (CJES) -19.6%, 57-day trade.  As I review this trade I see my poor entry point was already after CJES was faltering from the 40 WMA, and it was all downhill after that with another failure to honor my stop. Like LPI, I’m thankful to have taken the loss as CJES continued to break down significantly.
  • Nuverra Environmental Solutions (NES) -17.2%, 6-day trade.  Another case of a steady uptrend buy at the break of the 200 DMA followed by an immediate collapse and not taking a stop where I logically should have. Being more speculative, my position size was smaller than normal. Outside of that, everything about this trade blew. All I can say is I’m glad I’m not still holding what would be more than a 50% loss currently.
  • Bonanza Creek Energy (BCEI) -14.5%, 6-day trade.  Having the December ’14 low of 16.36 in mind, I bought this on July 1 anticipating a possible double bottom play (there’s that word “anticipating”). It held for one more day, then it took me five days past that to get my head out of my ass and sell.
  • Hi-Crush Partners (HCLP) -12%, 32-day trade.  Unlike BCEI, this was a double bottom play that worked. I bought this on June 5 at 27.70, and it was a mostly smooth ride up to 31.98 – that’s +15%. I’ve traded HCLP before which I know to be a volatile quick mover so I had no inclination to tighten up my stop with my sights set on this being a longer-term hold. I was fine with everything that happened until the July 2 into July 6 sudden dive that just froze me in my steps. There’s no excuse for not at least having a break even stop after a substantial gain has been made, much less taking a loss. Due to my lousy trade management here, this one hurt the most.
  • Qunar Cayman Islands (QUNR) -12%, 24-day trade.  Poor entry, added to my position at a perceived support level, then stopped on the break of that level ahead of a huge nosedive.
  • Qorvo (QRVO) -12%, 2-day trade.  IBD’s #1 semi stock finding support at the 200 DMA just ahead of earnings? Seemed like running with the strongest horse in the race was a good bet on a chance of an upside earnings play. Weak guidance intervened, down she went, and I bailed.

Oil. Five related positions are not exactly the model of diversification, and that became starkly evident when they were all going against me at once. I was way too overweight in that sector and way too loose with my stops and exits. Receptos patched up the damage that was done, but not enough to help end the month on a positive P/L note. A brilliant trade wasted. Beyond that, I also responded to these losses by booking small gains on other trades out of fear of risking losses in them instead of allowing them adequate time to develop. I worked through that period and have some decent trades going now as I aim to get back on track for a positive August.

The main positive I can take away from this month’s losses is that in the past I would often doggedly hold on in the hope of getting back to break even in situations like those, turning trades into “buy and holds” in order to prove my rationale correct for taking the trade. Now I take the losses (better late than never). Had I held on in these cases, every oil position I sold would have me substantially deeper in the hole right now.

Current Positions


Long Speculative – GST   REN   SGYP   TEU   ZIOP

Short – AAPL   MAT

Fumbling With My Fat Fingers

“If you make a mistake and do not correct it, this is called a mistake.” – Confucius

I had an interesting experience last Wednesday when I decided to sell my last 25 shares of Receptos at 230. Instead of hitting the “Close” button to close my position, I hit the “Sell” button. While that sounds like it might be the same thing, the close order closes whatever position I’m holding while the sell order is intended for initiating short positions. Sell creates an order with a default amount of 100 shares which I can then adjust to my desire. When 230 hit my limit order, I figured I was out of the position.

I’m glad I didn’t set that order and leave it. It took me a moment to recognize from the activity on my trading screen that somehow I was still in Receptos, then it occurred to me what happened – I fat fingered my trade and was now into margin short 75 shares at 230 with price creeping up. This, of course, elicited a measure of anxiety as the worst case scenario flashed through my head, that being a competing higher bid for the company, or even the rumor of one, jolting price higher in an instant. In a flash the potential risk of transitioning from booking an impressive gain to receiving a margin call and crippling or blowing out my account was now sitting in my lap.

Thanks to learning from another trader’s similar past experience the solution came to mind right away, that being when you’ve made a mistake, correct the mistake as soon as you recognize it. There was no stopping to evaluate price action to see if I might get my money back. I didn’t hesitate to act immediately and covered at 230.18 as price was on its way to 230.87 for the day.  That mistake cost me $13.50 + commissions which seems like a bargain in light of even the most remote chance of ruin being open to possibility.

Advice passed on to me, now passed on to you: correct a mistake the moment you recognize you’ve made it.

Year to Date Portfolio Performance – June 2015

Whether Greece or any other event was a reason behind underlying market performance, the bottom line for me this month was absorbing a dent to my profits due to changing up my trade strategy midstream. By that I mean initiating swing trades with targeted exits, then adopting a trend following approach to manage them once they’re working. Switching gears cost me earned profits on swings as well as keeping me in failing trades too long. Trend trading isn’t always the best fit for a choppy market, so swing trading with targets and/or tight stops had been working better for me. I switched because I would prefer to do the former, however the market dictated the latter would have been preferable. I should have listened to the market more carefully.

June Net P/L:   -4.91%

Year to Date P/L:   +3.74%

Notable Wins

  • Cytori Therapeutics (CYTX) +28.1%, 194-day trade. After several profitable trades, I finally gave up on my last piece of CYTX. I scaled out of CYTX several times with my highest booked gain being +125%, however I’ve given up on my moon shot aspirations at this time. I find that it simply is not worth giving up signficant gains in the hopes of hanging on over time to achieve a potential multi-bagger, many charts of which often start out with large percentage gains and losses along the way similar to CYTX. Hindsight always pays best though, doesn’t it?
  • Juno Therapeutics (JUNO) +21.8%, 48-day trade. This was a targeted trade from the start, then I switched it up when JUNO’s momentum looked strong. That decision clipped my profit from 35% down to 21.8%. JUNO’s upper trendline proved to be valid resistance near 69, however I stayed with it until the momentum fizzled where I stopped at 62.41 once the short-term trendline as well as the June 5 LOD were broken. Despite switching my tactics, this was a disciplined trade in taking the exit as soon as I recognized it failed. From there, JUNO dropped to 44.50.
  • Blucora (BCOR) +17.7%, 55-day trade. I first noticed BCOR’s chart pattern at the end of April seeming to be rounding up, so I put on a trade with a stop under 12.61 in mind. I benefitted from the earnings surprise, then stayed in while it ranged sideways through April into June. I booked the trade to free up stalled money for another setup.
  • Qorvo (QRVO) +11.7%, 81-day trade. I should have jotted down what I referenced to measure a price target here, but I know the projection was 88.45, so I planned all along to sell if it hit 88. Price peaked at 88.35, however this was another switch in mid-trade that proved to drain earned profits. I chose to hold it anticipating continued momentum and higher gains before I finally took the exit on June 26’s big down day. By not taking my target I swapped a 22.6% gain for 11.7%. Frustrating, and to add insult to injury the overall trend is still up. I’m looking for a re-entry here.

Notable Losses

  • Alibaba (BABA) -10.5%, 38-day trade. I took a full position in two halves on the pullback from the May surge to 95.06, averaging 91.95. It looked promising until June 8, then I held on too long with too large of a position.

Current Positions


Short – None

Year to Date Portfolio Performance – May 2015

logo-rlgtMay was a month of redemption as I managed to earn back the majority of my April losses. Stock selection and better utilization of strategy type for individual positions are what I credit as making differences in a choppy month for the overall market. I continue to find better success by choosing the best stocks available which have superior fundamentals coming into line with a technical setup that offers a favorable reward-to-risk trade. I’ve tried a few trades of lesser quality companies which have a good technical setup, however I’m finding these are more often than not panning out. Because of that, when those types of trades look as though they may fail I’m more likely to bail out on them due to lacking confidence in the fundamentals. Trading best of breed stocks is simple, sensible advice and worth remembering.

May Net P/L:  +7.63%

Year to Date P/L:  +9.1%

Notable Wins

  • Radiant Logistics (RLGT) 186-day trade for +51.1%. Definitely one of my longer-term trades, I love this company but I chose to book my profit for three reasons. First, while continuing to stick with the overall uptrend, I did not enjoy enduring the -20.2% drop from the April 6.09 high to May’s 4.86 low despite having more of an investor mentality with this trade than that of a trader. Second, priced dipped twice below the March low of 4.91 which had me considering whether or not the trend was changing. Third, RLGT filed a shelf at the beginning of the month, and I did not want to be holding if they utilized it. While pondering my next move, RLGT jumped 15% on May 18, and that’s when I took the money and ran.
  • Xenon Pharmaceuticals (XENE) 20-day trade for +7.6%. My second profitable trade in XENE, I sold ahead of earnings and avoided a -20% loss.
  • Planar Systems (PLNR) 77-day trade for +5.9%. Sideways action through the duration of this trade had me a little frustrated, and I did not have confidence ahead of their earnings report. Sold just before the close that day at 6.25, that decision steered this away from the loss column. Price sunk -36.5% from my sell point.
  • Hennessey Advisors (HNNA) 28-day trade for 5.7%. Another sell ahead of earnings which avoided a loss.

While XENE, PLNR and HNNA are not exceptional percentage gains, I still consider them notable examples of risk management for booking profits ahead of known catalysts which otherwise would have resulted in significant losses.

Notable Losses

  • Bloomin’ Brands (BLMN) 16-day trade for a -5.2% loss. On May 6, BLMN looked like a fabulous short, closing under the 200 DMA after the previous day’s -6.4% dive on more than triple volume – it did not continue. Shorts that aren’t working wear on me more than longs that aren’t working. My buy stop covered (perhaps prematurely) for the loss.

Although I’m increasing my focus on best of breed stocks, I always have some cash on hand for the occasional speculative flyer with a catalyst or showing a good technical setup. Regardless, I always know my risk and my exit before taking any trade.

Current Positions


Short – RJET

Year to Date Portfolio Performance – April 2015

logo-rtixThe last five days of April damaged my gains in several positions, some I’m still holding within trends and others I sold or stopped out of. Application of short-term swing trading would have preserved some profits, however my desire to utilize longer-term trend following timeframes for select trades ruled out in the end. I opted to take heat on some positions in order to hold them for hopefully larger moves down the road. I’m finding that in this market environment, choosing the correct strategy for any particular trade is as increasingly important as choosing the correct stock to employ it on.

April Net P/L:  -6.0%

Year to Date Net P/L:  1.5%

Notable Wins

  • RTI Surgical (RTIX) 16-day trade for +20.5%. A very good entry was made on a late March 61.8% retracement level preceding a straight line up swing trade.
  • Cheetah Mobile (CMCM) 8-day trade for +19.1%. I snatched this gain way too early on the first day of a four-day surge higher and regrettably left a lot behind.
  • C&J Energy Services (CJES) +12.8% on a 62-day trade. I had been through enough ups and downs to decide to take the profit after April 14’s doji candle printed.
  • Advanced Semiconductor (ASX) +8.4% on a 13-day trade. This was a Fibonacci calculated swing trade with two 1/2 position buys made near 50% and 61.8% retracements of the 2015 uptrend, then all sold on April 27 at the 61.8% retracement of the March-April downtrend. While it proved I could have waited for the 61.8% level to buy a full position, this was still my best utilization of fib levels in that my 7.00 basis was sold at 7.59 before price returned to 7.01.

Notable Losses

  • Array Biopharma (ARRY) -12.5%, 54-day trade. I bought what looked to be a range break higher which failed, and then I held far too long until it broke down at the end of April. That is why I prefer to buy support rather than resistance.
  • PMC-Sierra (PMCS) -7.6%, 69-day trade. Dead money going sideways before breaking down and stopping out in late April.

Despite the down month, I avoided changing up strategies in mid-trade on current positions I’m holding in response to negative market action, something I’ve been successfully working on. My biggest mistakes were taking profits too early in CMCM and CJES, however it’s often difficult to let some positions run without snatching gains, particularly in volatile stocks like those, when buy and sell points were determined with a high degree of accuracy in other positions such as RTIX and ASX.

Points to ponder.

Current Positions


Short – None

All 61.8% or Nothing

I think I gravitate to Fibonacci levels because it satisfies the dip buyer in me while at the same time defining technical levels to evaluate the risk and reward boundaries of putting on trades. Who wouldn’t want to be able to determine the perfect buy point on a deep pull back before the next leg higher?

In some instances of finding chart setups of stocks I wanted to be in I’ve seen reversals from 50% retracements that never make it to 61.8%. Because of that, I adopted a practice of buying a half position in a stock when it seemed to me to have found support at 50%, then buying the second half if it did continue to retrace to 61.8%. If that happened, I’d be left with a compromise price between the two levels with an exit typically being a failure for price to hold the 61.8% level. If 50% is where price reverses higher, then the worst case scenario there is that I earn a profit on the smaller half position I’m holding.

That pre-planned strategy has been the one and only exception I use to add to a losing position. Knowing the price points in advance and sizing my position accordingly manages the risk.

I’ve since changed my philosophy on the strategy of buying half at 50% and half lower at 61.8%. I’m finding too many occurrences of the 50% level failing to hold and putting the 61.8% level in play. It really boils down to there simply being too many setups available to trade anything less than my optimal target of a 61.8% retracement. If a stock I’m watching for an entry fails to hit the 61.8% level then I simply forget about it and move on to others. That keeps me out of the adding to a losing position scenario as well as more sharply defining risk and reward when putting on trades.