I hope this post isn’t too depressing. I am using it almost like my trading journal as I think you may get something out of my lessons the market is teaching me this week (even if all you get is some schadenfreude). As I’ve said in the past many times, I don’t know for certain what will happen in the markets. In fact, I am often wrong. So instead of being monodirectional, I lay out potential paths which I may see probable and play accordingly. (Side note: In this way, my approach to markets actually is my approach to poker. I was going to write up a post about poker itself and its translational lessons to trading, but didn’t think anyone would be interested enough or know enough about poker to get much out of it.)
The intent is so I make good money when I am right and don’t lose my shirt when I am wrong. Well, this past week was one where I was very, very wrong. It happens often enough, but it hurts when the words that come out of my mouth (or in this case that I type in my notes) are not followed by my actions. I reviewed my notes from this past week and it was almost funny in a very cynical kind of way.
Things I did right:
1- Perceived that we were very extended to the downside at the end of last week.
2- Closed the majority of my short positions in SPX on Friday, all very profitable.
3- Closed the rest of my short on Monday morning, still very profitable.
4- Noted the basing pattern on the daily chart forming Monday/Tuesday.
5- Noted the correct way to play it would be to get long and play the breakout.
Things I did wrong:
1- Ignoring my own notes completely, I shorted near the breakout of the basing pattern, exited at the breakout stop loss.
2- Shorted at the next perceived resistance level without any signs of actual topping, exited at stop loss.
3- Ignored prior lessons learned and shorted at the following resistance level up (and told myself “The market must be wrong!!), exited at stop loss.
4- Tried shorting again Friday as “this surely must be done now”, no real technical level or indicator or even topping pattern, exited at stop loss.
So, this week sucked. But it did not suck simply because the market went up. It sucked because I saw that the market was ready to bounce and I not only didn’t take advantage of it, but I straight up flew in the face of my own notes on that probable scenario and played it the other way!
These are the demons I need to battle now. What I will say is there was at least SOME discipline in that I set stops and abided by them. My sizing was off, however, causing me to lose much more than I should have had on the line in the first place.
Would I have caught this entire move up even if I listened to my own notes? Unlikely. While I noted the basing pattern, I did not expect a 250 point rally in 4 days on the S&P 500. I still would have likely exited at the next resistance levels up. But for sure I’d be standing much taller this weekend than I am now. Regardless, the last positive I will say is that I am still positive in my account and I can start again next week with a fresh mind. I’ll be playing it real light this coming week.
I say this not because there isn’t potential for big moves, but rather because my mind simply isn’t right. I need to get my head back on straight before I can trade profitably again. I’ll be doing another post with charts shortly as for what I do see (I may need to zoom way out).
Everyone enjoy your weekends and start prepping for Thanksgiving (my second favorite holiday of the year)!!
