Friday, January 27, 2012

Final second kick in the gut

Total gross profits:  $-412.50 -8.25 ES points
Total trades:  9  [2 scratch]
Accuracy:  14.3%
Execution score: ?%
Opportunity cost: $?  ? ES points

It was one of those days -- just when you think your bad luck streak for the day is ending, you get kicked in the gut.

Today, I had a relatively good read on the markets, but like an painter that has a clear vision in his head but just can't get it onto the canvas, I wasn't able to execute properly.  Sure, I had more-than-usual-of-the-usual: missed trades, sloppy executions, and bad overall luck -- that's just something I'm working on and will absolutely improve with time (i.e. my mental game).

The kick in the gut
On my final trade, I was short the ES into the cash close, only a tick away from my +2 target....finally, something that seems to be working as planned!  But in my mind, I knew holding into the close was a gamble, especially on a Friday.  I watched the time and sales and my DOM, and only a second after the cash market closed, a huge buy order came in, spiking up the price several points in seconds. 

ES 377 tick chart - 5 points up & down...< 1 minute
Although my stop was at breakeven, it had about a 2 point slippage.  And in less than a minute after the buy order was quickly absorbed, the price returned to where it originally was and then hit my target.  Murphy's Law!

Just when you think you'll be getting a break, it's taken away in a flash.  It's like the other basketball team shot an impossible 3 pointer to win the game at the buzzer.  On the bright side, at least my I didn't get filled on the top tick of the spike, yeah!!

Coulda shoulda woulda...
I ended the day down -8, although if you factor in the opportunity costs and slippage of just that final trade, I would have been down -4.  And opportunities costs from other trades would have taken it down to -2.50.  And of course, there were a few missed profitable trades that I don't even count.  But in the end, it's not the P&L that really matters for me during this stage of my development, it's all about whether I did my best to execute the plan and remain disciplined. 

Why was today more psychologically difficult?
Today was probably more psychologically difficult due in part to the relaxation of some of the trade management rules I started yesterday (in other words, letting Rogue Grove take the keys to drive).  I was also "fixated" on the bottom of the upward channel in the chart below (will it break or hold?!?).  Therefore, instead of being mechanical about my trade management and simply following the rules, there was much more discretion and uncertainty involved -- and that consumes a greater amount of emotional capital.

ES 120min char
An easy solution?
I'll need to give much more consideration to how much discretion I'll use in the future.  Or perhaps it won't require much thought, since the critical issue at stake is simply my desire to let a contract run for greater than a +2 target.  This can be accommodated by trading multiple contracts and scaling out.  My only concern is the increased risk that trading multiple contracts might entail, so I'll need to consider the best scaling out strategy for 2 contracts.

I'm getting there
My account is now back to where I started at the beginning of the December, so at least I can still consider myself a "net-breakeven trader."  It was a tough ending, to a tough week.  But I'm taking this as more experience and education under my belt, so that I will be better prepared to handle greater adversity in the future.

So many pieces of the puzzle are finally starting to come together, and it's time to keep with the program of being disciplined and focused on my plan.

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