November 19 2009 Overlay, Trades, and Commentary

CLICK HERE FOR HD VIDEO OF THIS MORNING'S SHORT TRADE

Today is a little difficult to grade. The result was positive but I feel neutral on the play. I spent most of the day not pleased with how things were going.

Having said that, the short entry just after the open was excellent. It was in an area where I usually look for a failed extension and move back above support but I could clearly tell that the extension was not behaving correctly.

The short was came very natural to me and there was absolutely no hesitation. I knew exactly what to do even though it was opposite my usual play in an area like this.

The exit:

I was irritated when the market hit the 1089.00 area and spiked off it because it was apparent that the price action was going to get tough. I knew I would have to risk most of my open equity to hold for the remaining 5 points.

This started a great exit debate instead of me just allowing the trade to work.

My target was 1083.00. I know when to let my trades run and when not to. This was a situation that required me to let the trade run. It is still difficult to hold a short 25% off the next support zone with 10 points open equity though.

As the market started grinding up it was putting in a series of higher lows and a slight chance of a major move back to the breakout origination point. If you zoom out on a higher time frame this was just a pullback.

I started having flashbacks of the 2 occasions in the past 6 months where I have had 8-10 points open equity on a short exactly like this and given it all back.

Sometimes the market will put in what I simply call a "giant smiley face" and rally back to the breakout point. This was on my mind and I made a mediocre exit.

It was still decent trade but I faded myself and went against my gut on the exit. My rules would have had me out at 10 points which would have been almost the low.

My take:

My trading style requires that I hold my big trades until they hit there target or give me clear opposite direction entry structure and pattern.

I can not let a couple big equity give backs taint every subsequent trade I take. If I give back 10 points every once in a while it is OK.

If I bail on a trade I know is good and cheat myself out of 5- 7 points repeatedly it is more costly that occasionally giving back 8-10.

To sum it up I need to hold my big winners. Period.

The second long I took in the afternoon had the right idea and was not off in premise. I just got clipped out in the tough action. I am not going to be afraid to hit trades in this type of action.