January 8th

I was in a great hurry yesterday as I finished the upload of these two trades to the blog and didn't have time to write a caption or comment to the chart & trade-log. So, I'm doing it on Saturday morning.

It was good to get back into the markets for practice trading after an absence. It took me about 30 minutes to get the feel of what was going on after being away for so long... I took these two trades in GENZ after getting the sense that momentum had stalled and a reversal was coming. In both cases, my instincts were correct but on both, my exit was quite hasty. I left a lot on the table as GENZ continued to sink each time. I still have no idea what happenned after I printed this chart because I haven't logged into IB since then. Who knows where GENZ ended up afterward... I'll check the chart later, for curiosity sake.

saw it, liked it.

I saw this on Dr. Brett's blog post from yesterday, January 7th, http://traderfeed.blogspot.com/ and liked it. If you are a trader in training, I continue to recommend his site to you. It is one I visit daily...

Trading Risk: Time is Size
The recent post addressed the issue of adding to trades following adverse movement. Here is a trading faux pas that has cost me in the past: I don't add size to a trade that's in the red, but I have added *time*.

In other words, a trade will move a bit my way, then a bit against me, then back to scratch: back and forth for a while. Often this occurs in slow markets.

Normally, my trade ideas include an estimate of time: I should see the market move my way within a matter of minutes from my entry. If that doesn't happen and I stay in the trade, it's been a pretty good predictor of a losing trade.

One reason for that is that adding time is like adding size: it increases the variability of returns. If I turn a short-term trade into an intraday swing trade or an intraday swing into an overnight hold, I've effectively added to the size of the trade. Instead of adding risk on a promising trade, I'm adding it to one that has fallen short of promise.

Equally important, every trade idea with a target and time frame is assuming a particular level of market volatility. If the trade has not moved much in the allotted time frame, it means that the estimate of volatility may be off, which in turn suggests that market participation has declined. Again, this is hardly a good reason to add risk.

Some of my worst trades occurred when short-term trades turned into miniature investments. You don't have to add size to a losing trade to add risk; in the market time *is* risk.