Thursday, October 27, 2011

How to save your emotional capital

How can you help save your emotional capital while trading?

Simple...Do NOT fight the trend!

And so what did I do today?...I fought the trend! 

My natural preference is to trade with the trend, usually on a breakout or on a pullback in the direction of the trend.  But for some reason, I kept trying to short this big uptrending market today.  The trades I took were NOT a part of the Diamond Setups chatroom, just me trying to be "smart", and I ended up wasting a lot of emotional capital.  Didn't I just say yesterday that I was going to listen better? 

@RenaTrader said around lunch time that this will likely be a trend day up, so he was only looking for long trades (unlike me).  Then near the final half hour, he made this call to short, but only for aggressive traders (I was already selling on the way up, so hey, what's another short attempt!):

     [Oct 27, 2011 3:25:05 PM EDT] RenaTrader 1289-91 is key

But I didn't listen...again. 

I thought the market couldn't get up there, so I entered my short at a much more aggressive level at 1286.50.  Once again, not a great decision.  If I had listed to Renato, my entry would have been 1288.75, which would have entered me 2 ticks below the high of the day.  That would have only been a couple ticks of heat instead of the -2.75 points I had to endure.

My exit was based on a decent confluence of vwap and other levels at 1274.50, which was the exact swing low before it rebounded sharply.  There was also some SIM related fantasy fills on this final trade that may not have been so lenient in a live account.  Luck was on my side, and total profits on my final trade was +13.50 points. 
ESZ11 5min 2011-10-27
Because of that final trade, I ended the day $-20.10 net after commissions, vs. having quite an ugly day.  After the markets closed, instead of feeling a sigh of relief that I scratched after being down so much, I was quite disappointed with my performance.  And knowing that it was a single unusually good trade (ironically against the trend) that recovered all my losses also gave me a clear message that this kind of miraculous recovery can not and will not be repeated very often.

On the plus side, I was able to stay focused and continue to execute without getting rattled, and my emotional state was definitely in the heightened end of the normal range, but far from the tilt zone.  However, I would much rather have preferred saving my emotional and mental capital so that I'm not so exhausted at the end of the trading day. 

But that's the past, the deal is done, lessons learned...Don't Fight The Trend!

See this trade on Tradervue:

* * * * *
Thursday, October 27
Total gross profits:  $37.50
Total trades:  11
Accuracy:  55%
Contracts per trade: 2

NOTES:  I fought the trend, and gave myself a few extra gray hairs.  And if it were not for the final trade, the day would have been quite ugly.


Greg said...

The Tradervue link is - the one you had in the post is a private link.

Grove Under said...

Hi Greg,
Thank you! I've corrected the link in the main post.