July 6 2010 Overlay and Trades

Price did not come off 1026.00 this AM and test potential inside support at 1018.25 that I was premising for.

I identified the major probe of 1006.00 that happened during the Globex session in the prep commentary.

These often lead to major short term reactionary reversals which is what we had pre-market and just after the open.

There was not any opportunity for me to get long. I was looking for an area to fade as a play on the stretched price action. I made a move at the 1032.75 resistance area.

I exited today at the first area of potential inside support with the intent to re enter. This is how I am going to handle my exits for now.

Once a 3 or 4 point excursion is achieved, I will lock up the equity and force a re entry if I want to continue to participate in a premised move.

This is a basic premise that it is more probable to catch two 5 point winners then one 10 point winner in normal market volatility.

I did not re enter today because I was looking for a contraction after the Globex low probe and resistance high probe had occurred. That is what we got today but that contraction included a 10 point sell off to mid range that was trade-able.


EXITS

The theme of my review and commentary in the upcoming weeks is going to be exits.

It has become more and more apparent to me recently that profitability is determined almost in it's entirety by how a trade is exited.

I always knew this as it was one of the first things I learned once I committed to robust training. However, I am living now as I have had one stellar entry after another over the past couple months and it led to sub par results.

It does not matter how good you can read the market or how well you execute your entry if the exit is not consistent and repeatable.

I have been through many phases in my trading journey. When I started this blog over a year ago, the goal was to hold for larger intra day moves greater than 8+ points.

My style has shifted to one that takes profits more frequently thus forcing multiple re entries in a trending market.

This has resulted in me frequently taking 2 or 3 point profits on trades that hit my overall volatility target and then holding trades that obtain a 2 - 4 point excursion followed by taking a BE or loss on the entry retest.

Overall, my trades tend to hit the area premised for. However, price does not move to point A to point B in a straight line.

Management is what drives profit and it is time for me to join one camp or another and stick with it for a major sample size.

I am even considering drilling by taking somewhat random entries and working on managing the outcome. I am confident the where I enter has little to do with my profitability. I will explore this more as we move along.

It is more important intra day how you play the game. As in how you interact with the other players who are actively playing against you and trying to take your money.

Most intermediate and beyond losing traders are forced to give up their money. They often do not lose from being wrong.

I am working on a strategy and protocol that will allow me to be wrong when I am wrong and consistently take profits on my winners as opposed to being driven out of the trade or driving myself out of the trade.

This is a major crossroads in my evolution as a profitable trader and all my effort needs to be put into mastering my exits.