I have decided to make a change to what I am doing and I do not know how it will effect the content of this blog going forward.
Here is an intraday chart of the SP 500 yesterday, and of course another save by the PPT at the very end of the day. This is getting so old that it is basically just the market now. It is not even worth commenting on other than to say that if you are a short term trader and are short the indexes or individual stocks going into the last hour of any down day, you should exit by noon. There is no point in continually letting all those profits go because of what is going on. It is hard to say when and if this will change, but it has been going on for so long now, get the hint and save the money. Shorting and holding overnight is not a viable strategy at this point almost no matter what your time frame.
As readers know a couple of months ago I mentioned that I was undertaking a change in my trading, and that I thought it would be painful, but was going to try and stay the course. It has been painful, in fact it has been the worst 2 months of trading I have had in several years in all honesty. If I had known it would have been this difficult, I would not have undertaken this task. At this point my goals for the year are now out of the question, they will not be reached. Trying to do so would be putting levels of risk too high, and I never do that. I thought I would highlight something I have done completely wrong trying to make the changes, so that maybe others might benefit from my mistakes.
I have been "babysitting" intraday price action way too much. I used to be able to watch the swings during the day and have no problem with it. For some reason now that I am trading larger, it is way to stressful to watch 25 to 50k come and go during the day. I have made some very bad decisions due to watching these swings. I have the chart above to illustrate how much things can move during a day.
Lets just say someone was long and trying to ride through this daily chop of the last 2 weeks or so. There have been some sell signals, all have failed, but they have been there. If you are watching intraday, and yesterday was a good example especially in the Russell 2000. That index formed an outside day when it took out the prior days lows. It you were long and were watching that, it had to be in the back of your mind that this market is extremely extended upward and maybe this is finally "the break" that is going to turn things down. It might not be a major turn, but big enough just to pick off your stops on your long position. You might have been tempted to exit your longs when those lows went. I was watching this at that time, and although I did think the PPT would show up which they did, it certainly occurred to me that this one could roll over. It is these types of thoughts that are dangerous. Of course we got the false break and reversal and we went up considerably in the last 30 minutes.
I have been looking for sell signals, so I was even thinking along the lines of whether or not it might be an entry when that outside bar formed. What a stupid thought. If you look at a daily chart, it was obviously just another decline into the clear support level, and nothing to even consider shorting. I arrived at that final decision by focusing on the daily chart and forcing myself to assess that versus the chart above. The point is this, match up what you watch with the time frame you trade. If you make decisions based on daily price bars, watch daily price bars, do not watch intraday price bars, and vice versa. If you trade off weekly charts, do not get hung up on daily bars. I have often thought to myself, well I am an experienced trader, so maybe I can get in a little better watching intraday swings, than what my daily plans are. This is a terrible mistake to make and it has cost me dearly this year. This one thing alone has taken over 100k of profits back from me.
I made this mistake for the last time of my life yesterday, and it is what has led to this post topic. I came in yesterday with sell orders in Soybeans. I had looked at the grains and determined for a variety of reasons, that I wanted to be a seller on a break, and that is the market that I determined looking at the markets "Daily" bars, that I wanted to play in. During the day I noticed that Soybean Meal was trading weaker, and also had a legitimate sell pattern on it's daily chart. When it broke down ahead of Beans, I switched my strategy and shorted the Meal. Well the rest is history, the Meal was a fakeout, and I was stopped out last night for a 5k loss. The Soybean orders never filled. Had I not been watching prices intraday, this would have never happened because I would not have known about this intraday BS. As much as I look at the Meal chart after the fact and still see a valid sell signal that failed, it was clear that my overnight study of the two markets yielded the correct strategy, and I overrode that plan on an impulse.
DON'T DO THIS EVER
Probably my biggest blunder of the whole year involving this was during the flash crash week. I was short the farm going into that week, and had I not watched intraday would have made at least another 50k if not 100k. I have not bothered to calculate it because it would just infuriate me. I exited all the shorts too soon based on emotion watching intraday. I will grant you that was extraordinary action, but just watching it after the fact I would have thought, wow that was a big day, glad I did well and moved on.
I will be turning off my live data feeds during the day now going forward. I will not be watching intraday trading anymore. I cannot say forever, because who knows what the future will bring. I can say for sure that for the rest of the year at the very least, I will not take a single peak at prices intraday, not ONE! I suggest you do the same unless you are a day trader. If you email me during trading hours I will not respond until after the markets are closed, because I will not know what is taking place. I will have my stops in and that is that.