I would like to call myself a price action trader. It is hard to tell how far the market will move up or down. If I put on a position, I'll stay with it as long as my it is going my way. If it reverses the same day I'll get out, if not I'll add to it. Hope this answers your questions. Everybody, if you have something to add, please do so. I have been right more often than wrong due to my trading style but I haven't been able to make more than 5-10% on a good month. I must be doing something wrong.
Thursday's Recap: This is a sick market especially if you're short. I was short two positions and there was a midnight rally that extended for few more hours after the market was open. Finally, it was down but the last hours it gained back all of the day's losses. I closed my positions during the rally, so I'm right at break-even. This sucks big time because my timing was right, I was short before the market broke down but at the end of the day I do not have anything to show. If you add all the comissions I'm actually down a little bit. The reason I closed my position was because I could not figure out what the market wanted in the last few days. I needed some time to think and go over my stuff. When oil goes up a dollar the market goes down but when it retraces 20 cents, there is a huge rally. This looks like a bubble to me. After some thinking and looking at the market ie. bonds, oil, sentiment indicators and as such I'm still bearish. So the right thing to do is go short here. I'm short at 1238 with a stop at 1251. If I do get stopped out I'll reach my monthly loss point and sit out the rest of the month.
The reason for still being short. In the last few days I have wandered if being short here is the right thing to do. I think so. Here is my reason: I was reading Michael Steindart's interview in the Market Wizards. He said that in 1987 he was bearish but he ended up being long because the market was rallying everyday. Since the market was going up he went long but after he was long, the bulls lost their stamina and the market crashed. It is somewhat similar to what is happening right now. The last three down days gave the people that wanted to go long another opportunity, but this rally doesn't have legs. There are intraday reversals and so forth, so I'm short. Steindart ended up closing his fund after that. For me to be long here I need to see one of the patterns that I mentioned in my first post to take place. We'll see what tomorrow brings.
try looking at the last 1 to 2 hours of trading. Most of the time this is when 'smart money' gets in. Buy/Sell programs, institutions, money managers. Look at the buy and sell volume as well as price action. Note the difference between the buys and sells. This can give you a clue in to the supply demand picture. It may help you get a better entry or dodge bad ones. What you are aiming for is to get in after the institutions but before the retail investor or mutual fund. A good example might be tommorrow. We close up on heavy buy volume. Now in theory the retail/mutual funds should follow tommorrow in the AM. So it may be reasonable for this market to climb. Can you get 1 point profit off of this? Probably... 2, 3, 5 10, 40 points... the lower you aim the more likely you will make money... kinda like hit and run. Remember you want to make 10% a month... To do this break the returns down to 2.5% a week... depending on your leverage... that could be 2 to 3 points of profit. I have found it much 'easier' to make money when it is broken down. Apologies for the ramblings... but hope it helps
Firday's Recap As you know I closed my short positions on Thursday. I was still bearish but the mini rallys kinda got to me. The reason I closed my positions was to reevaluate with an open mind. I went through my analysis and still figured that I wanted to be short. I shorted 1 contacat at 1238 on Thursday night eventhough I was worried about the midnight rally. There was no midnight rally so I entered another sell stop at 1235. When I checked my positions during the day, I was short 2 contracts and the market was down. I was happy, I was short everything was perfect---- then during the day around 1.00-2.00 the market started to rally. I did not want to go to the weekend with a loss so I covered both positions at 1235 but in 5 minutes after that the market was down again. This is it. Looking back at all the trades my problem is when I add new positions. I have let huge profits turn into losses or at best minimal profit. I WILL NOT MAKE THE MISTAKE EVER AGAIN. This is what I'm going to do: If I add to a position which is going my way, I will take profit on the position that I have added. It will be at the next pivot or support and I'll ride the original position. Still bearish....... We'll see what tomorrow brings.
How many times this year have you reached your montly loss point and was forced to sit out the remaining trading days in that month. ??? Further, while your sitting out a month of trading... Do you switch to simulator trading, do you continue watching the markets as if you were trading eventhough you aren't opening new position or do you completely shut down (no reviewing, no adapting your trading plan...complete shut down) ??? NihabaAshi
Sorry, could not reply sooner. To answer your first question I haven't had to sit out any months this year. This does not mean that I made money every month but my losses were never more than 15% a month. While I'm sitting out a month of trading, I do watch the market, test indicators and basically try to get in sync with the market. I re-read the books that I have already read hundred times.
Monday & Tuesday's Recap: On Friday I was mad at myself for covering my positions at 1235 when the market went down to 1230 in few minutes after that. On Monday, the S&P was up about 6 pts from Friday's close. After that I did not feel too bad about closing those positions. Today was a different story. My plan was to initiate a short position at the EOD Tuesday. I was hoping today to be an up day so that I can sell at a good price. Alas, my stupidity and not following the plan in the last 2 weeks made me miss this huge down day and a bagload of money. Today was a true selling day. Every index was down more than 1%. So we had 4 -1% true selling days in the past 2 weeks. This is powerful. I can't expect for a rally to get short here, so I initiated a short position today at 1222.25 with a stop at 1238.75. Next stop is 1200. We'll see what tomorrow brings.
Wednesday's Recap It looked like the bulls are running out of gas here. S&P tried to move up but ended up closing where it opened. I see another inverted V bottom pattern. This gives us another opportunity to short the market here. I'm just holding tight and sitting on my short position. We'll see what tomorrow brings.
Thursday and Friday's Recap: Nothing really happened. S&P was up and down but closed pretty much where it opened. Monday's plan: If Monday is an up day, I will look to short at the close with the initial stop at 1239. If it is a down day, I will just stay with my current position. I might put a sell stop at 1219, but I will close the new position at the end of the day.