NOT ALL ARE CREATED EQUAL

I mentioned yesterday that I bailed out of my Swiss Franc short due to it's relative strength against the EURO. You can see today that at least from a very short term perspective it was a good move. This is what I was looking at when making that decision. Going into the trade it was quite obvious the Swiss was the weaker chart pattern of the two, so I will not go into that explanation.

What is clear is that when the big break in the EURO occurred matched of course by a rally in the Dollar, the Swiss barely moved down. This was also accompanied by a big break in the stock index futures. All else being equal, the Swiss should have been down big, it was not. This was the first alarm bell. I was not planning on babysitting this trade intra-day until my first check spotted this condition. I then watched it for awhile live and as the Euro continued to decline, it did not budge. I think it was down about 45 ticks for the day, when the EURO was down 260 or so. It appeared to be there might be a buy the Swiss sell the EURO trade going on. This did not mean that it would not continue to go down, and also that is just complete conjecture on my part, so it was not something I could act on.

Next I went to my trading log and noticed in my notes that I had been really torn about shorting the currencies in general due to already being short the SP 500 and it basically being the same trade in terms of chart patterns. I had picked the Swiss also because it was in my mind the least correlated to the stock market in terms of chart pattern, hence it was a better non-correlated trade. Well I did get that part right, since everything else tumbled but this one. However, it also enabled it to defy gravity which was no good.

Also, you can look at the PROGO indicator in red and see how much more it was going down in the EURO than it was in the Swiss. When I weighed all of this together and also considered that we were still in a very big uptrend, I decided that I did not want to wait around and find out after a loss, that I had made a mistake. Net, I bailed out with a profit where indicated on the chart, and am not looking back. Today prices are much higher than where I got out, but it does not really matter, I am done with this market for a couple of days. Now it appears the other currencies are much better candidates for shorting if we get a bounce.

I always have subscribed to selling the weak and buying the strong. Before I found out that it was the right thing to do, it always made logical sense to me. It works "most" of the time, but in this case it did not. Nothing that I know of works every time in anything in life, this is no different. In trading so many well reasoned decisions turn out to be wrong, it is the ultimate self confidence game. It is often hard to have that constant confidence when a series of decisions turn out to be lousy. This is one of the reasons why so many people do not succeed in this business.

At times I question decisions I make also, especially during losing streaks, but I know that if I keep grinding it out eventually I will make some good ones. I have always managed to do in the past.