Trading is like professional sports... and is highly competitive. Only the best traders win consistently. Just Like pro athletes- successful traders need to be disciplined and must maintain a Game Plan & a set of strategies.
Good Traders and Athletes review their performance after the buzzer or trading bell has called the end of the game.
It makes sense to review winning and losing trades, to see where your trading might be enhanced, and where mistakes might be avoided in the future.
Given the events of the past couple of weeks with the crowdsourced stock play GameStop (GME) (whether one traded the stock or not), a post-game review of the chart can prove to be a constructive exercise. Going into late November 2020 GME had been a heavily shorted stock (69.7 million shares short) and had formed a top and traded down for a half a month, then began to attract interest once again taking out the late November high, with another consolidation following. On the 13th of January, the stock broke out to a new high on a large bar on a massive volume increase, trading 144 million shares. In the next 5 trading sessions, the stock consolidated but volume continued to be heavier than prior to the breakout. Then on January 22nd the stock once again broke out on massive volume trading 197 million shares. The next two days had similar volumes. The following four sessions had a great deal of volatility in the shares. On January 28 GME surged and posted an intraday high of $483 before melting down and closed -44% on the day! Technically called an outside day down (bearish to say the least). Note how volume dropped precipitously during the most volatile GME sessions. Given the cumulative volume between the 13th and the 28th came in at 1.56 billion shares traded, which was more than 16 times the short interest needed to cover, the wise trader would have seen the shorts had covered (or been bought in) and the game was over.
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