Setting Too Tight A Stop On A QQQQ Trade

Rules are meant to be broken, I guess.  I had set my game plan the other night.  I swore to myself that I would wait until the setups got hit before I placed my trades.  This (Thursday) morning, early the market sold off and the QQQQs (QQQQ) retested the lows that they made on Friday 10/10.  I bought some call options on the QQQQs and set a contingent stop.  When QQQQs got below the Friday low, I’d get out.  I set the stop and the QQQQs went down and hit my stop.

Friday’s low was 29.38.  I set my stop at 29.30;  My stop got taken out as the QQQs hit a low of 29.26.  The QQQQs then made a strong move throughout the day to 32.25.

As I evaluate the trade to try to learn from it, I realized it was a good setup. It was a retest of a 5 year low on the QQQs.  My game plan earlier in the week was to wait for the short setups and not to play the countertrend rallies.  This setup was too good.  I feel that my mistake here was to set a stop that was too close.  I also set the stop on a round number.  I thought that my risk reward was OK.  It was probably too good, considering where I planned to set the stop - I should’ve given it more room.

In retrospect, I should have bought the equity, instead of playing the call options.  It would have given me more flexibility into the close.  I could have sold it if I chose, after 4pm.

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