Monday, December 19, 2011
Total gross profits: -($175.00) -3.50 ES points
Total trades: 10 [0 scratch]
Execution score: 65.5%
Opportunity cost: $ -5.75
(yes, my rogue trades actually benefited me)
Today felt like Friday, right when the markets started to tank in the late morning before the lunch hour. And once again, I started to buy at various levels on the way down. But this time, I was better prepared. I kept telling myself how this feels just like Friday's action, and used a little more caution.
But in the end, I still ended up having 5 full stop losses out of 10 total trades (1 of them was a rogue setup). The markets the past few days seem to have been very tricky, and so this must be the whole "thin volume holiday trading" condition everyone talks about.
Bad execution score / favorable opportunity cost?
My execution score was 65.5% (3.5 non-compliant trades out of 10), so I didn't do very well from that perspective. But what's more surprising is that the related opportunity cost was a favorable -287.50 or -5.75 points. This means that had I not taken the rogue trades, I would have had a bigger loss today.
But to be more clear, it was a single rogue trade I took at the end of the day that ended up making +5.75. If you were to add up the opportunity costs from the other 2.5 trades, they washed out. So I'm not sure how to take this. On the one hand, I had a smaller loss than I should have. But on the other, isn't this one step closer towards consistently undisciplined behavior?
And what if?
And this brings up an interesting question. What if my opportunity costs start to become consistently negative? Essentially, this means that my rogue trades or "mistakes" are actually net positive for the bottom line.
More tracking to do
I've struggled with avoiding trades that I know have a decent chance of working, since it's not part of my trading plan. But this "opportunity cost" metric might be another way of tracking to see if there are certain setups that I "mistakenly" take, but have a good probability of working well over time.
Why fight it?
Because if the setups that I struggle with avoiding are truly valid, why fight something that screams at you from within your soul and works in the long run? If that's the case, then I'll modify my trading plan so that I can take the trades and be at peace with myself.