BOT 1498 CLOSE 13:26:24 When 12:37 rolled around, I realized that there was no way that I would want to go long at that point. I decided that I would put a stop at 1504.5 which has been the high of the day at that point. So instead of just exiting at 1504.5 with a 6 point loss, I had a stop of 1504.5. That way, the most I could lose would be more time. I am actually feeling pretty good about myself since instead of panicking, I was able to formulate a sensible contingency plan. It seemed too risky to go for anything more than 1498, so that was my preferred exit point. I'm happy that this idea worked, and I'm also happy that I didn't compromise myself in the process.
I'm going to take a short break. I would like to be completely done trading by 2:30 to avoid anymore incidents like the past several days.
I thought it might be a good idea to clarify what I meant by this statement. In order to close a short position, one must buy contracts long. I was able to get enough objectivity to realize that if I wasn't currently short there would be no way that I would buy at that point. Therefore, I decided to wait for a better exit. This is similiar in strategy to not using any exit signals at all. In order to exit a short position, you would wait for a long entry signal, and vice versa.
Since the selloff following the FOMC decision, the NDX has closed above 1490 5 times, but has been unable to close above 1500. I think that today is probably the day. Therefore, I am going to be wary about going short into the final hour, especially below the current high.
SLD 1496.5 CLOSE 14:43:53 My entry on this was off. The market was definitely stabilizing, but I couldn't afford to take anymore chances.
I'm happy about this too. While at the time the market did appear to be stabilizing, it ended up closing at 1494.5. This trade was initiated at 2:20, which probably wasn't a good idea. Unless I am extremely confident about a trade, I think that it would be wise not to initiate trades after 2:15, and to close existing trades by 2:45.
Step back for a moment and realize what u just did.... a 6 point stop loss for 1/2 point bail-out gain. Hmm.. maybe u got lucky today and the market didnt take out its high.. but its a dangerous game and in the long run it will catch up with u. U averaged 1/2 point gains today but at one point of the day u had 12x your gains on the line. Just reflect on this for a moment and decide if u actually think its a sound way to trade. There is nothing wrong with being completely discretionary and following gut and instinct.. but there is a big problem when u are allowing your losses to have the possibility to seriously outweigh your gains. -- I am not attacking.. just food for thought. --MIKE
Your very last sentence contains the words "completely, discretionary, instinct, possibility, seriously, and outweigh," but the word "you" is too long to type out? I hope that you don't take it personally; I was just wondering if there was a reason for this? On paper I risked 6 points to make .5 points. If that was my standard risk/reward ratio, I doubt that would be trading for very long. The fact is that I wasn't risking 6 points. I already lost 6 points. Just because the loss was on open equity doesn't mean that it wasn't there. It might help to look at it from the perspective of Trade 1a and Trade 1b. Trade 1a was the 6 point loss from 1498.5 to 1504.5 that encompassed two hours. Trade 1b was after my realization that the market had essentially topped and there was no point to entering a long trade, even if it was to close a position. Trade 1b was the 6.5 point gain from 1504.5 to 1498 that lasted approximately one hour. Trade 1a was a mess. My entry was late and consequently was 2.5 points below my signal. The other thing that hurt me was that my entry was below the zero line for the day. The markets don't like to be at zero change, so there is a tendency for the market to hover above or below this point. Add to the fact that 1500 was acting like another zero line. None of this really matters except for the fact that about 2 points of that loss was due to this fact. Anyway, the point is that in two hours I lost 6 points. Not to mention the opportunity cost of holding the position. I figure opportunity cost at 1 point per hour, so really I lost 8 points. The only thing that I was risking on Trade 1b was time. I had already lost the 6 points. I was only risking time at that point (which I've already assigned a value of 1 point per hour). Since Trade 1 took 3 hours, I really ended up losing 2.5 points on the trade. At least I had valid reasons to be in this trade, unlike some of the others I've been in lately. It almost sounds like you would have been happier if I had kept my original profit target instead of getting out when I did. I don't know what a "bail out gain" is, but it doesn't sound too good. From experience, I know that the best I can hope for out of an intraday trade is approximately 7-8 points. Therefore, if I get in and the trade doesn't go against me at all, I can get maybe 7 points. However, I'll usually shoot for 4-6 points assuming that the trade will initially go against me 1.5 points and that I need to leave a little room for error. So assuming the trade goes against me 5 points and I still feel that conditions are favorable but that I've missed my entry, then the most I can really hope for is a 1 point gain. It would be foolish of me to still go for a 5 point gain when my entry was off by 2.5 points. Obviously there are other factors that enter into a trade after entry such as market action, time, etc. Let's say that you are using a 3:1 ratio and you enter at 1500. Your target is 1515 and your stop is 1495. If it manages to go down to 1496, do you keep your target at 1515? If that happended to me, I would do one of two things. I would either treat the trade as if I had entered at 1496 and move my stop, or more than likely I would be looking to get out at breakeven depending on how the market was acting around 1500. Or what if the trade had managed to get up to 1512 then come back down to 1509. It then came back up to 1512.5, but it looked like it was stalling out. Would you still go for 1515, or would you take what you could get? The point is that you can't just blindly assign risk and reward. You need to listen to the market and make your decisions based on that. Something that I used to use which I may begin to start implementing again is soft stop hard stop. Using Trade 1 as an example, the soft stop would have been triggered when 1500.5 was hit. Then I wait for the pullback. If it pulled back immediately, I would still go for a 1 point gain at 1497.5. Today however, it kept going to 1503. The target would then change to 1500. The hard stop is either a max loss (5 points) or a time constraint (30 min.) or both. The max loss would typically be triggered before the pullback. What that means is if there was no pullback before the max loss, the trade would immediately be stopped out. After the pullback the max loss would be at or right above the pullback point.