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Tuesday, May 22, 2012

USING YOUR NOGGEN




This current trade with the Bond System is an example of why I don't like trading systems anymore. I have drawn in just a basic regression channel here. You can see the long entry was indicated well outside of the channel on the high side. The best and worst thing about trading systems is the same, they are dumb. When we lose confidence in making good decisions it is an easy thing to want to run to something that makes the decisions for you. This takes us off the hook for being wrong. It does take off pressure, trading mechanically. However, I still maintain that the best traders trade using discretion, and I will never return to completely mechanical trading. I am trying to find ways right now to make certain things more mechanical but the final arbiter is always going to be me deciding when to click the mouse.

In this case I saw this when the trade was indicated and knew I would never take a buy at a spot like that no matter what anyone or anything told me. Had it been a sell, I would have done this trade. This does not mean it can't be a win, it is just very low odds that a buy at that level of price extension, requires a very unusual market condition to make it successful. I want to focus on low hanging fruit, this ain't it!

Since this trade appears headed for a loss, the net performance of the system is terrible so far. This is exactly why I was so cautious with this. I have seen so many systems crash, I wish I had a dollar for every one of them. Assuming this trade does turn out to be a loss, it is still within normal drawdown parameters so it is not time to write it off yet. Had I been doing this as a service, I would have filtered this trade for the above reasons anyway. Some times you have to use your head a little bit and make certain decisions. I would never allow a system trade to push me into a trade like this where I "know" that it is likely to be a loss.

One trade I mentioned yesterday that filled today, was Cocoa.




This is a crazy market so it could fly up or down a huge amount at any time. You can see the entry on the screen and the initial target. You never know if you will reach targets and most of the time you don't, but you still have to have a plan.

It appears to me now that the ES and Copper are sells tomorrow if they break down and Silver and Gold are sells in a couple of days potentially.

That is all for now.


1 comment:

Michael Tredr said...

cocoa is indeed a crazy market.

that one really huge down bar 3 weeks ago was me getting stuffed into a burlap sack and used as heavy bag practice for a muy thai fighter.