Shaken Out

In attempt to self analyze my trading, I will attempt to highlight trades and emotions in this blog.  Today I was shaken out of a trade I was confident in, but grew impatient.  The chart below shows a percent r buy signal given from a TF chart.  There were a couple of reasons I was hesitant to pull the trigger here:

1.  Risk Amount – Having traded for awhile now, I have had my fair share of experiences where the market likes to prod nice round numbers.  With a buy signal 1003, this is only 3 pts above 1000.  The market would love to do nothing more than prod to 999 to knock out some stops.

2.  As you can see below, the market appeared over extended.  The TF gave a percent r buy signal but the ES had yet to do so (leaves it still overbought technically).

3.  The 15 min was setup but not confirmed.

So, this is still a valid buy signal.  So in order to reduce risk there are still a couple of things one can do.  Put a half position at 1003 and add half at 1000.  This way if it does resume the uptrend without the prod, you are still benefiting.  Also, if it does prod, you will have an avg cost of 1001.50 and you can have your stop at 998.50 to maintain your normal risk.  The other option is to just wait and try to put the entire position on closer to 1000.  However, if the market does not prod, you may be left behind.

I took option 1.  I bought 1 ct at 1003.  The mkt made an immediate push and hit 1005.  This is not my 2.5 pt target but I could tell the mkt appeared out of gas so I exit for +1 tick.  The mkt then pulls back a little more.  Not prodding 1000 yet, but prodding 1002.  I take a long position with 1 ct at 1002 which is also the IB high.  The market bounces for the next hours between 1001 and 1003.  This is torture for me psychologically.  But I recognize this and know the mkt is just teasing the longs here.  When I pose the question to myself, who is getting screwed here the most, my response is the longs, not the shorts.  The market is telling me it wants to go higher.  After another 30 minutes of chop I exit at +1 tick again just before the mkt launches into a 3.5pt rally.  The morale of the story here is when I have a legit signal + a legit gut feeling for something, buckle up and hang tight.

After all this, if I had traded this exactly to my current plan, I would have ended up exactly as I did.  After buying 1003, the mkt hits 1005.50 exactly (2.5 pt target) and then falls back down to knock me out for BE.  For some reason I like to think I would have been smart enough to pull some off up there, but that’s for another day.