Tuesday, March 13, 2012

Click click click...dohhhhh!

Total gross profits:  $-262.50  -5.25 ES points
Total trades:  4
Accuracy:  25.0%
Execution score: 50.00%
Opportunity cost: $50.00

First losing day since the beginning of the month.

It seemed like everyone was waiting for the FOMC news to be released, so that "real" trading can resume.  I was being so patient, too.

And for the most part, post-FOMC-release, it was a thud.  Resumption of the choppy action, but with a bigger chop.  That is, until the financials started rippin' higher based on banks raising dividends, passing the stress test, blah blah blah.  So the bulls made a run to everything in sight, so goes the rationale. 

News is out!  Hey, where am I?  I feel like I'm at the Bellagio's all you can eat buffet!!
After all the talk about being on a diet yesterday, once the news was released this afternoon and the market started to move, it was as if I was in Las Vegas right in the middle of Bellagio's all you can eat buffet -- after eating only bread and water for a couple weeks.  Will I be able to maintain my composure, resist temptation, and maintain my diet?

Looking like a trend day UP
All day long, I thought it was "so obvious" that it's looking like a trend day -- gap up open, the R2 pivot held, higher swing highs, higher swing lows, upward sloping moving averages, etc.  The FOMC news shook things up a bit, but from the bigger picture perspective, the overall trend was still up.

Then why are all my trades today, SHORTS?!?!
I really don't know.  After getting stopped out of my first short in (I believe a record) 19 seconds and quickly made a new HOD, it was a warning sign that there is significant strength, PERIOD.  No more shorts allowed, stand back.

And what did I do next?
I tried to short again about 3 minutes later.  But I accidentally pressed the DOM after my initial entry, and added an additional contract.  OK, let me fix that.


Uh oh.  I tried to offset the position by via the market order button, but I entered it on the wrong side, so I now had 3 contracts short.  I forgot to turn off my bracket orders, so they're stacking up all over the DOM now, messing things up.  What the...


Semi-panic set in, DOHHHH!  And since I was very fortunate to have it go a few ticks in my favor, I pressed the EJECT "Exit at Mkt & Cxl" button and just flatten to start over.  This was the first time I actually felt some emotions in quite some time.  In hindsight, this impacted my future trade decisions.

Time to chill out
4 minutes later (it seemed a lot longer), thinking I regained my clarity of thought, I tried to short...again.  I'll just reenter the prior trade I messed up at a slightly better price, why not?  WRONG.  Nearly 4 minutes later, I was stopped out again.  I said, that's it, I'm done for the day.

But about 20 minutes later (I'm really back to normal by now, right?), there was "another opportunity that I couldn't pass up."  Although that opportunity went +1.25 (not quite enough to move my stop to breakeven), it didn't look good and I moved my stop down to -1.00.  It eventually went -2.25, so at least my instincts proved correct.  But unfortunately, I couldn't resist temptation to avoid the trade.

Therapy session over
OK, I've had enough of re-experiencing this, and I'm sure many of you have experienced similar situations before.  And I'm sure I'll experience something like this again in the future.  The purpose of me writing about this is to help me understand and remember what I did, so that if I see "this story" developing again in the future, then I'll be able to put a stop to it before it gets out of hand.

What did I learn?
  • Don't fight the trend, especially when news driven
  • Know your DOM well...
  • ...so that you can exit positions gracefully, under adverse conditions
  • If you get out of sync, just walk away (after a loss, this is the most difficult action for me to take)
  • Obey your account risk management rules to know when to quit for the day  (i.e. 3 stops and you're done, x% loss of account, etc.)
An airline pilot regularly trains under various adverse conditions, to the point where if they experience an emergency situation in real life, they are conditioned to react in a specific manner with a high level of confidence.  If you know exactly what you're supposed to do when things start hitting the fan, you will not experience the panic that will cripple you from taking appropriate action.

Therefore, I need to experience more adverse trading conditions...under the SIM/demo account.

Self-review of my actions
In the end, I did not do as well as I could to manage my risk, but I did handle an adverse situation well without panic (fat fingered trade); I put the brakes on my trading after 2 losses in a row (I let a 3rd slip by slightly); and ultimately, I limited the overall losses on my account (< 3%)

Therefore, my frame of mind is still sound, my account received only a mild hit, and I'm ready to face tomorrow from a position of strength and confidence.

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