Monday, March 13, 2006
Friday March 10 was a treat. So much so that I haven't even opened the charts since. I wanted a full three days off. So I'm disciplining myself and not even going near Monday's action. I often feel that when a 'windfall' trend gifts a trader with excellent, no effort profits, it's best to stay away for a bit. Chances are despite the weekend, the next trading day after a mover like Friday will be a sleeper anyway. It's possible I might be missing something, but the personal strength I gain from not trading is worth it. The markets will be there tomorrow. And so will I.

Friday's trend was right out of the gate and just pounded in the equity for me. I won't dwell on this because you already know if you're active, trading skill and self understanding come more from the losses and not the wins. It's how we manage ourselves and study from our errors and mistakes that teaches better trading. When the trend takes off for you and all you've got to manage is the trailing stop, there's nothing to learn except how to control the greed.

Lack of discipline in that mode means you'll leave profits on the table. I've taught myself to let the market dictate how much I earn. That's not to say I don't frequently get knocked out in a retracing move only to miss the rest of the trend. But that's fairly easy to hitch up for the next leg by just trading the break out from the support or resistance range.

Having said that, there was an error I made and I need to acknowledge it. For your sake as well as mine. I had a real sense the market was going to sell off around noon. I gauged that not only would there be some profit taking but we might see a serious correction. I did something with which I've never been entirely comfortable. I raised my stop up so tight it pinched and I changed the platform to double the contracts. It's called stop and reverse. I'm just telling you that personally I have some difficulty committing one way and then having what it takes to quickly go the other. What it usually means is I'm admitting I'm wrong. That's probably why it doesn't sit well with my makeup. I'm just being honest here. Nobody likes to admit they're wrong but in trading, recognizing you're wrong early is better! There's an understatement if there ever was one!

Now in Friday's play, I was banking profit and willing to risk reversing for the sell off. There's a big psychological difference. I changed the platform when I pulled up the stop around 11:45 to 11155. I got clipped out of my longs on the next bar and let me tell you, I left lots on the table because the high of the noon bar was 11174. The low was 48 with the close at 11149. That's a range of 26 points to save you the math! I made my notes and promptly forgot that I'd doubled the contracts. In my feeble little mind I was flat the market. Of course in reality I was now short.

I don't like to sell tops usually because I like a confirmation the turn is done. That's why this behavior was out of character. In all honesty I'm sure I was rubbing my hands together, congratulating myself on how smart I was and thinking about grinding some espresso beans. It wasn't until I pulled the trading platform up on the screen quite a bit later to get it ready for another possible trade I realized what I'd done. I double checked the confirmed trade window and blanched.

I was short! I felt my blood pressure rise as I realized the potential damage I'd done to myself. I pulled up my charts and holy bar chart Batman, the profit taking sell off was well underway and I was in the clear. As it turned out the double top of 11158 at 12:30 to 12:45 held and the sell off carried on. I was onboard and didn't even know it.

Now that's just STUPID behavior on my part. I'd caught the reversal and not even known it. When you look at Friday's second dramatic reversal later at 15:00, you can see the potential wipe out of earlier profits I could have sustained. They rallied it up for the close so fast it made my head spin. I was long gone of course because I fixed the problem, set my stop loss to cover the shorts and changed the number of contracts back to normal. I chided myself for being so dumb but thanked my lucky stars I'd escaped and actually made more than I'd counted on. It's a lesson learned to check all the little details, especially I think now, when operating outside my own personal comfort zone. As I reflect on this, that might be what happened to me. I'd lulled myself into being comfortable as Friday's test of recent highs lulled me with it's siren song of profits. I'll be more on my guard next time and so should you.

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