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Wednesday, September 29, 2010

YOU JUST NEVER KNOW



One of the beautiful yet frustrating aspects of trading and for life in general is that we never know what will happen in the future. We spend our whole lives trying to figure it out in advance, and just when we think we "know" a few things, they are proven to be no better than any other predictive theory. The above is a trade in Coffee I got into recently, that turned into a ONE DAY WONDER. These are trades I have written about often in here, they have these monster one day moves, and that is it. You can see via the arrow where I entered this trade and after yesterday appeared to be gangbusters. I had my profit target orders in above and stops below. I had the plan, then unfortunately the market had to open. It virtually fully reversed the huge one day gain today, and I have to admit that I bailed out of this for basically a scratch.

We have not taken out yesterday's low yet so this could still turn back around again and go back up. However, my experience with these types of trades is that when they reverse this much the very next day, I just want to be out and move on to something else. Some of them will turn back around and go back up, but the majority of them do not. If this does that I don't care. I don't mind sitting through choppy periods right when I get in, but I am not willing to do it once a trade has taken off, then fully retraces the gains. This is a personal preference, there really is no right or wrong answer to whether or not you sit through this type of thing or not. I don't like the emotional effect it has on me, so I just like to move on. Sometimes that is the correct move and sometimes it is not.

I did get short some things this morning knowing I was front running again a little and it appears at this point they were traps. This just dovetails on what I stated the other day about doing this. I have valid sells now so I take then trades, if they don't work so be it.

Below is a trade I have been sitting in for awhile along with some of my fellow LW students, COCOA.



This is a market I do not trade that often due to the wild spikes that show up out of the blue sometimes. This market is just creeping higher very slowly, but today "appears" to be gaining some steam. Of course Coffee appeared to be doing that also until today. I have one possible target displayed above. I have not decided exactly what target to go for here yet, so I am just trailing a stop up below as you can see with the red arrow. It was under Mondays low coming into today. We did have alot of divergence in the momentum oscillators at the low, but I waited for it to rally and come back a little before going in. Sometimes you miss trades waiting like that but there was a reversal bar at the very low and I don't like just buying above the highs of those bars when trading against a trend that was as strong as this was at that time.

I am also still long treasuries, and if we do happen to get any type of decline here in the SP 500 I think that will pop those prices up a little. I am surprised treasuries have been this strong in the face of the incredible stock rally we have had in the last few weeks.


4 comments:

John said...

Chris,

Larry Williams has been bullish HO for some time now (Due to commercials,etc). Look what happened today! Like you say, it is improtant to position ones self to take advantage of these moves. There is no money to make on the sidelines....

Do you ever post recommendation on this site???

Thanks

John

Chris Johnston said...

I often post the trades I am doing a day in advance of doing them, but they are never recommendations. I talk about the trades I do and why. There are too many legalities to deal with in making recommendations, and in a forum where no money is generated I am not going to subject myself to potential lawsuits etc.. The purpose of my blog is really to talk about the markets, what I see and what I am doing. What readers choose to do with the information is up to them.

If you read back in the archives you will find numerous examples of me showing exactly where my orders will be placed the next day in something, and then me showing the trade once it is executed and where I got out, etc.. This is not to be construed as a recommendation of any kind, just a description of what I have actually done.

Loev Joy said...

Chris- I am new to futures but have been trading stocks and options for the past 5 years.

What software are you using to generate your charts and what are the indicators you are showing?

Thank you and I look forward to reading your views as I work more with futures trading.

Chris Johnston said...

I use both genesis and trade station, most of the charts are genesis charts. The indicators are proprietary indicators that are not available for the public. They were developed by someone else and I have signed a non-disclosure agreement on them.