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Tuesday, June 22, 2010
YOU JUST NEVER KNOW
Here is an example of a typical trade in any market. This is the Live Cattle trade I mentioned a couple of days ago, a trade I assumed was going to get stopped out for a scratch yesterday. Low and behold even though we had closed right on the low Friday, and it seemingly was a lock that low would get taken out where my stop was resting, we had a huge up day yesterday right from the get go. My stop was never threatened and it "was" looking good. Alas as you can see now we have a reversal bar down working now for today. I have moved up my stop now to where indicated and once again have the expectation that this will get hit. Again, you just never now what will happen. Here we had something that seemed destined to be a scratch, then to be a big win, now destined to be a marginal profit it appears.
This is what makes trading so challenging, yet so exciting at the same time. The future is for the most part unpredictable, so we just try and capture moves that we can predict. I am not watching intraday price action much nowadays just because it adds so much stress to trading. Watching thousands come and go is not an easy thing to do day in day out. Also my change in my trading style that I have explained opens me up to alot more of this type of thing so I have to accept the good with the bad and deal with it. However, that does not mean I have to ride the roller coaster up and down with every 5 minute bar. One of the things I always tell myself is to "get out of my own way." By this I mean that I need to let my trading techniques determine my fate, not my emotions.
Why spend weeks, months, or years researching and developing things just to override them on an emotional whim in the heat of the moment? I have done that at times, but not too often, and wish I had never done it. At times it has served me quite well, others times not so well. It is correct to use discretion to make decisions, but that discretion should not be emotional. This is especially true when you find yourself in the middle of a lousy month like I am having right now. It is even more likely that your emotions will override good thinking in a situation like this. I have to accept that I am going to have a loss this month at this point, so why get hung up in it? It is time to be ultra disciplined and set the stage for the next big up leg in my account balance. That begins with good discipline and not "poor me I lost money this month" etc..
At one point yesterday when the Copper trade was moving big in my direction, I was actually almost back to even this month, but that benchmark means nothing. It is arbitrary and in my mind only. The market does not know or care where my profits or losses are. I could have arbitrarily taken profits in both trades and made myself almost whole. However, I had embarked on a plan to go for longer trades and larger wins, so I could not just take the money on the table emotionally just because it "got me back to even." That might be a way to avoid losing, but it is not a way to win big. There is a big difference between those two things.
In the stock indexes yesterday we had that big reversal after the gap up opening in the pit session. This was certainly no surprise. However, I don't think we are at a point that we are going to reverse back down other than for a day or two. I think a dip here is a buy at the moment. I think if we get sell signals for a hold it will be from a higher price level. Just my two cents, which is more than I have made this month!