11/12/2009

The Life of a Trade

I liked DT233's Why Trading Will Kill You post the other day so much I thought I would offer another selection along those lines.

Maybe this is just because I finally had a trade that lasted long enough to actually tell a story about it, 45 minutes and 24 seconds. That may be a record for me.

Why so long in the trade?

I am no longer moving to break even at a certain point, instead I am trailing the stop at +8 from the hard stop of -13. I have found, albeit with a statistically insignificant number of trades, that I am staying in the trades longer.

I have moved my target up to 55 ticks as well, so this now means that I can have a -13, a +55, or any number in between -13 and +33 as my final result.

Now the real story on this trade was all those yellow bars after my blue bar entry. Ten of them, yuck. Did I want to check out with one of the many passes through my entry point?

Yes.

Would that have been an ok thing to do after 20 plus minutes in a trade that's going nowhere?

Probably.

Why didn't I?

I talked to myself.

I talked through the trade, yes my short ema was flat and getting breached, however my trailing stop had moved down 2 ticks to -11 so risk had been reduced a little.

That stop was still sitting above the middle ema, so I asked myself why do you have that middle ema on your chart?

Well it's supposed to tell me where trend is at on a longer time frame basis.

Right, so that trend is still what?

Short.

Right, so why not let it ride and see if momentum comes back your way?

Why not, I'll tell you why not a -$115.50 dollar result is why not.

Why not bail out at +-1 or 2 and wait for the next signal?

Hmmm.

Well, the move is slow...

Slow, it's non existent! (I'm now interrupting myself in this conversation)

Ok it's non existent but you had a valid signal, you have set your risk management parameters for a reason, why not let those parameters play out?

Fine.

But if this doesn't work I'm holding you responsible.

Fine.

Ok I'm done talking to myself now.

As you can see it finally went. Now the next emotion racking event was the MFE, 55 you say? Not quite, 52. LOL

Trade stats were, short entry 10:32:01 MST at $77.08, MAE -0.08, MFE +0.52, exit 11:17:26 MST at $76.77.

Yes 3 ticks away from target and it turned back to the trailing stop. A +31 result. Still very good.

So if there is a moral to the story it is this, we all have emotional responses in this business, no not just DT233, we all second guess, micromanage, and if it works in our favour we are genius, and if it doesn't, well you know.

Message to us all.

Let the probabilities work.

If you have a statistical data base don't corrupt it with your emotional in flight responses.

Trade like Captain Sullenberger; we're going into the Hudson, brace for impact, we've arrived, I hope you all enjoyed your flight.

5 comments:

daytrader233 said...

I'm glad that I'm not the only nut out there! LOL

I had a similar experience on my 2nd trade today. I could actually see the support holding at +8-9 ticks. "They" kept pounding it over and over. If it had broke it would have been a big winner. But it didn't and I'd exhausted my mental energy. Out at b/e when it turned back up from support.

The quick runners are the best. I love the quick runners. :-)

ANON said...

I loved the story!

Can't wait until you get published by the WSJ or National Geographic: "I am Solfest's day trade," a la Fight Club. =)

Solfest said...

Here’s another way to look at the life of this trade.

Once upon a time.

Our trade starts out as an infant and grows rapidly (initial blue bars) with its proud Father looking on.

Then our young trade moves into its awkward teen age years (yellow bars) where it becomes moody and direction less.

But soon our trade finds its stride and as it moves into its
20s, then 30s, and 40s (MFE) until it finally hits its 50s where it promptly has a mid life crisis and reverts back to its 20's in a hurry.

Our trade then buys a convertible, marries a trophy wife, (I've now decided the trade is male) and spends $12,000 trying to grow hair on its shiny head.

The End.

Market Monkey said...

Interesting post :) very apt for the situation I found myself in this week.

What gets me the most is when you do the right thing and get the wrong result or, when you do the wrong thing and get the right result.

The latter is, IMO, far more dangerous...

Solfest said...

I agree, the latter is far more dangerous.

A couple of revenge trades that turn around a losing day and wham I'm trading everything that moves trying to make the market give me money.

Of course in the long run those revenge trades wind up costing me more money.

I think I have a "mantra" :) around this.

I cannot make the market give me more money, I can only limit the losses.