RING THE REGISTER
Last year I was repeatedly burned by holding on to trades for a day too long trying to get to price targets. I vowed this year not to make that same mistake. This morning as I arose to the largest 2 day gain I have ever had, I decided to do the Cash Register Exit and stick to my plan when last night I was thinking about holding another day across the board. This basically means exit everything at once and take the money. I am going to hold the VXX long which bets on a volatility increase and just carry a stop below on that and see what happens.
The main reason I have done this is that alot of my trades although just gangbusters on the charts, are against the big trend which is decidely up. I do have some short term indications of a pullback, but nothing bigger picture indicating a top. As a result I am being a bit more nimble exiting here. The Gap down in the Russell 2000 which is the futures index I was short was ripe for a reversal back up. Gaps down in uptrends are generally buys. At some point one comes along that is not and that is typically a trend change. On those days we just gap down and keep going. There is no way I have been able to find to determine when a gap will reverse and when it will not.
The PPT factor also has to be considered. There is no way the government wants a big down day in the aftermath of the hickjacking they just committed. They want to be able to continue that insulting arguement that this "reform" will actually save us money. A stock market wipeout does not fit into that logic, so I would expect them to be aggressive futures buyers if need be today. Some of what I just mentioned is really noise and quite subjective. The main reason I took the money was what I stated at the beginning above. One thing to stress though, in spite of all this logic just layed out, the one rule on exits I never violate is this. I never exit at the market taking profits on anything unless I have greater than a 1 to 1 ratio of profit vs risk. If I risk $1k I never take profits at less than $1k etc. There are trades that might get stopped out for a different ratio than that and that happens often. However when taking profits I keep this ratio so that way I know I do not have to have a 70% win ratio to make money. All of these trades moved enough to exceed this ratio and many exceeded a 2 to 1 ratio.
Too many people just randomnly take money and determine position size, without any money management thoughts. That is why so many people do not ever get anywhere doing this. I was talking with someone recently who said they don't like trading Corn anymore because it never goes anywhere! He was just taking the same number of contracts in that as he was in Soybeans. Well obviously you take more contracts in something where your risk is $500 per than you do in something that it is a $1000 per contract. That logic just blows me away when I run into it. When I trade the grains the risk is the same on every trade, 2% of my account. I just take more contracts for markets that move less. This is so obvious that I cannot believe anyone would not know to do this.
Here I exited my short on the gap down opening, and we have already reversed it intraday. The price is already $500 per contract higher than where I got out. I do expect to see some more selling later in the day so I do not think this will hold here, but I am out and don't care. I am hoping for a day or two up and a high failure for another short entry.
Here is the Oil ETF short I did, that matched up with my short in Heating Oil. Of course this is a long trade because it is an inverse ETF. Again, the big gap up open in a downtrend. The Oil market is setup for a fall I think but again the Cash Register exit. The other thing that is a bit tricky with matching up ETF trades with futures is that the futures markets are open more hours so you can get burned giving back profit or taking a bigger loss vs a futures trade in the same market. This has happened to me before where I got stopped out of a futures trade at 4 am, then had to wait to exit the ETF trade and lost a bit more by the time it opened. Oh well, it is not a perfect world. These vehicles are just terriffic overall.
Here is the Silver trade, again a very short term trade just being in for two days and then an overnight session. The metals are drifting into a support zone so I was overly careful on this one. I probably should have held this, but Gold is right in a weekly support area so I just was not sure how much room I should give this one.
I have just highlighted a few of the trades I did, in all I was short 3 futures markets and 8 stocks/ETF's, all 11 trades were winners, and all very significant winners due to having some size on them.
Good Trading to everyone