Trade Description: ZFGN had good news which caused it to gap up, but was sold off relatively heavily in the premarket. This can sometimes be an indicator that it may continue to fade the gap, so that's why I was looking to take the short into the premarket resistance.
However, it obviously carried on and had a pretty sizeable parabolic. When I traded this I drew-down quite a lot, and broke my rules - which in turn resulted a worse average than I should have had... And a horrible risk profile.
(1) Need to remember that it's day 1 of significant news. By the time I took the stop at 10am it was obviously VERY strong, and better to wait for the back side to add size. I then added back the 1/5th size to early (but I'm okay with that because it's part of my rules to be a bit free with the 1/5). Arguably given the demonstrative strength I could have waited for this 1/5th though.
(2) I added to 2/5s size too early. My guidelines suggest that I should have a hard stop in when I go 2/5s size. The only possible risk area was clearly the premarket high... But you need to put stop to allow for a wick through, so it was too early to define risk.
(3) Being upside down on the earlier position I added to 4/5s size before the parabolic peaked out.
Now flip all of this and consider how it should have been traded...
(1) Started in 1/5th where thought it was a reasonable spot to peak out.
(2) Gone to 2/5s either around the premarket high with a wide stop (probably not be best move given the potential volatility. Or gone to 2/5s on the first sign of fail momentum (aka first red candle on m2).
(3) Attempted to take some off into flush from the peak. Maybe get a fill here, maybe not. Ideally would because it means can be more aggressive on the lower high.
(4) Gone to 3/5s or 4/5s size on the lower high stuff move with risk defined by the high. Then added on new low.
(5) Cover down size relatively quickly, but hold about 2/5s for a reasonable period of time because it seemed broken.
(6) Trade turned into a massive trade compared to the original one which was a tiny trade with a big draw-down.
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