September 22 2009 Overlay, Trades, and Commentary

There have been some new readers join over the past couple days. I welcome you. Please feel free to e-mail me with questions.

I would encourage you to check out the explanation of the Morning Prep and Prep Overlays in the archive.

Also, there are actual live trade videos here. I think it is important to observe real betting.

The morning preps are done in advance and posted usually by 9:25 AM EST USA and the prep overlays are my way of grading my projections. Black bars = original morning prep and green on black bars = overlay of price action that occurred after projections.

My reviews of my personal trading are honest and often harsh. This is my real trading log and I do not hold much back.

Today's Review:

I had a virtual break even today. The 1.75 point gain is not worthy of a green digital sticker. I gave it a green (no fill) break even sticker. Trade commentary below. Also, video link way below.

Our prep was decent today. The read was fairly accurate. There was a semi-blind inside support zone at 1063.00 which I projected and bet on just after the open.

Natural inside support ended up being about 1.5 points below my line and tested my long and my resolve (twice).

I have made it my goal in the past few weeks to bet on my premise early because it tends to be the most probable outcome if I am right.

In the past I have waited for confirmation that my premise is right and then taken a more difficult (often lower positive outcome expectancy) trade and lost.

If I know I am right then it is too late. This is speculation.

The long this morning was a nail biter. It looked good initially (which is a bad sign) and then made a run for my stop. I initially had a 2.5 point stop but opened it up to 3. It needed a bit more room.

It would have stopped me out at the low tick. I like when my trades look ugly and take heat because after that, most retailers are out and the trade opens up. Not today.

It looked like it would race to the highs so I put my feet on the desk. This is a mistake. I was talking to another trader during this period (around 10:22 AM EST USA) about how I did not think the market had properly tested the 1070.00 highs overnight.

I left the office to use the restroom and when I got back, the trade was in the red after a positive excursion. This was OK. I liked my premise. It did not look so hot when it came within 2 ticks of my stop again but I stuck with it even after some yelling at the screen.

I was surprised when it reversed. Then I felt really confident.

Somehow, over the next hour I convinced myself that the initial simple upward premise was failing and an exotic form a contraction was forming. This was a mistake.

I took 2 points profit on 1/2 of a position which is a waste of time based on my trading style (inverts my ratios and cuts winners short) and then moved the remaining stop to break even.

No Break Evens:

I have repeatedly said over and over again the for me, break evens cost way more than they save over a sample. It is amazing how I can be so disciplined but still break down like this occasionally.

Note:

A break even is to manage risk. I had my break even right in the spot where a higher low (inside pullback) would form prior to this market moving up (if it where to move up). A good trader needs to think like this, in advance...making projections....no hindsight...stop starring at the bars and visualize the structure.

The positioning on my break even does nothing but pull me out of the trade. Period. It was me giving up on the trade and I pretty much understood that. If you put it there, it will usually get hit.

It ended up stopping me out on the extreme low tick. That is not bad luck, it is stupid break even placement.

I went to lunch after that. I left a bit on the table today but it is not that big of a deal. First couple days of this week have been slow for me but this is a marathon and not a sprint.

I likely would not have exited at the highs and would have closed somewhere in the median.

The other thing that contributed to my giving up early/capitulation was the ridiculous manipulation of the bids and offers all day.

This market was being pushed and pulled and propped up all day. I saw it yesterday to. I guess they got the best of me today.

This can not override the natural structure but can make trading difficult at times.

We should have a good AM set up tomorrow. I will be ready.

Observations Today:

Re-enforcement that you will always regret cutting trades early or using a break even mechanism. Always.

Do not do it. A loss is far better than missing a 6-15 point run.

Good blind bet on your inside support. That is aggression. Keep it up.

Video:

I have a link to the full trade below. It is 2 hours long. You can advance the video to watch the key areas.

There is also a screenshot demonstrating how to enlarge the video to full size. Fittingly, the "full size" labeled button does not actually increase the video to full screen real estate.

I think it might be helpful to newer traders to see someone taking heat and managing it. Anybody who says you can trade without taking heat or with a few ticks stop has not had a career over 6 months I assure you.

However, do not just let your trades move against you if you do not understand structure.

CLICK HERE SEPTEMBER 22 TRADE 1 NEAR STOP OUT TWICE AND MIS-MANGEMENT OF EXIT HD VIDEO