On Losing

Of late, I just keep driving in neutral with my trading.  My account balance just keeps trading water…I’ll appear to make some headway only to find myself (stupidly) holding through an earnings miss or an analyst downgrade.  I’m hitting a lot of singles and doubles, but a handful of trades-gone-wrong have kept me from making any sort of headway.

I have no doubt that trading is the most rewarding AND frustrating profession on Earth.

I am a firm believer in streaks.  Sometimes, every order I place turns to gold, other times, like now, I’m just churning…I’m not losing much money, but I’m not getting ahead either.  I have gone through periods like this before, and as long as I continue to trade, I will go through them again.

In order to keep myself in check, I need to scale back and trade smaller.  If I’m going to continue to pick duds, I’d rather do so with less risk on the line.  I’m doing what I have done in the past to be successful…in fact, I’d say that when I’m on a roll, I tend to do less work than when I’m cold.

Maybe I’m pressing instead of letting trades come to me?

In looking at my biggest losers over the past month, there is no doubt that I made some stupid and hasty decisions that could have been averted with a little more foresight.  The other night I spoke of how I think my trading improves when I’m writing.  Through writing out my ideas, I’m certainly able to view them more objectively.  Sometimes taking that step back can provide a different perspective and allow me to make better decisions.

Now for a review of the trades that I made today.

$CVS

CVS 2012-03-28

I wouldn’t put this into the “bad trade” category.  The setup looked promising, price was advancing to my liking, and then fell right back into the range it has sat in for over a month.  On the weakness today I decided to lighten up on my position in order to lessen my risk.  No doubt, $CVS is now officially on liquidation watch…there are better places for my money if the price of this stock continues to crater.

$SWY

SWY 2012-03-28

I get what I deserve with this.  One of my rules for long trades is: only buy stocks that are above their 3 month EMA.  There have been many instances over the years where I have broken this rule and usually end up muttering 4-letter words about my ignorance and stupidity afterward.  Well, look at that…I get to do it once again.  Unfortunately, the pattern that formed last week looked just too good to pass up so I decided to break my rule and get long.  A quaint analyst downgrade on Monday morning sent shares of $SWY plummeting and along with it, my June 20 Call options.  I took off half on that news and thought it would be prudent to hold the other half to “see what happens”.  Great idea…all I was doing was letting price AND time decrease the value of the option.  I put this position out of it’s misery this afternoon through liquidating my remaining contracts.  All I had to do was adhere to my rules and I would have avoided this land mine…lesson learned?  Fuck me.

$MCD

MCD 2012-03-28

I really like this pattern to initiate a short position here.  $MCD struggled around 100 for almost 3 months before gapping lower on March 8.  It has made two attempts to push higher but quickly ran out of steam both times.  Now price weakness has been confirmed with a second failed attempt to move higher, so I feel pretty comfortable going short.  My ‘stop’ is pretty wide, so I’ll be liquidating this on a break of the 63 EMA with minimal damage.  I don’t make decisions to go short for a long duration.  Therefore if price slides back to the lows of last week, I’ll probably take my money and get the hell out of here.

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