July 24th - Morning Trade

FAS landed the big blow to me yesterday but I got in my own lick this morning. Picked up a $204 winner after getting stopped out just prior. Also called that big move down on FAS after the open but hesitated on pulling the trigger. One thing of note and which leaves me feeling sour is that big drop in FAS earlier, my trade from yesterday would have been "in the money" if I had held! Big moves always give a nice reverse eventually, the question is what is your appetite for pain in the interim? Am I disappointed at selling last night and thinking I SHOULD have held it overnight? Hell no! It was the prudent decision based on my account size. I SHOULDN'T have been in the trade to begin with. Lesson learned. One important detail that I don't remember posting about chasing yesterdays run up in FAS is that I had more $ in my account to chase it... I couldn't do it because FAS no longer had shares available to short on IB. No matter. It was right to get out. The markets could very easily have been up this morning and I could possibly be getting margin calls and forced selling (depending on how high it was hypothetically up)... I'll say again, a reversal can sometimes take a while to come to you.

UPDATE: I did continue trading but in my paper-trade account after this activity in my live account. The results were for a loss because of early difficulty with higher stop-losses than I wanted. I had to acclimate to the speed of FAS as it jumped through my stops. I finished the day paper-trading with a long string of winners trading in the PROPER way.

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1 for 2 winners, a 50% win rate. Gain of $114 in .75 hours of trading

July 23rd

I guess yesterday was a premonition of things to come. I took a really tough loss today trying to average in/ add to losers while playing for a reversal on FAS. Got cocky and thought I was going to beat it this time and I didn't. Like I've posted many times over the past months since I started, the problem with adding to losers is that it only takes one big day in a single direction and you'll get dropped on your head... reversals just don't come on days like today, only small pullbacks. That happened to me today when the reversal I was playing for did not come.

I'm not even for a second considering quitting the markets. But I have given my word to Mrs. Bluecollar that I will never trade that way again. And if one thing is true, I am a man who keeps his word to others. No more adding to losers. My pledge to her is that if I do it again, I WILL stop trading. I'm going to have to sharpen my skills and be prepared for taking stop losses and poorer win rates. But, I simply can't afford to do this again. It's tougher on my psyche than my account. This is not a killer loss financially in the big picture. But, it does sting my ego and my confidence, which is good for me in the long run, I think.

After all the carping about not adding to losers, doing the "trading bootcamp" last month, posting stories of how other traders blew out their accounts by trading this way, and all the times I've read Scott Farnham say how stupid it is, I feel like a fool for having to learn the hard way. Sometimes wisdom is hard to come by.

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8 for 22, a 36 % win rate. Loss of $3789 in 6 hours of live trading.

July 22nd

When pro football players get back to the NFL after time away and are asked what the biggest challenge was when coming back, they often remark that it is adapting to the speed of the game. That is how I felt today as I got a full day to trade for the first time in a while. I made some early gains in my old buddy, SKF, going 9 for 9 winners and up $144 from the open until about 11:20 am. At that point, I noticed from my watch list that FAS was giving a much better day-range over the same time frames as SKF. So, I switched to FAS. That's where the "Speed of the Game" hit me. Back in March, when I was early into paper-trading, I would inevitably try to play reversals without any feel for how SKF moved, especially in that ultra-volatile trade environment (You all remember March, right?). I would get punished averaging in much too soon, given the amount of day-range SKF had at that time. Today, without really thinking about it, I got long FAS and found myself in the same environment as SKF in March. Why? As I and everyone knows, it is a 3x trading vehicle and therefore, moves 33% faster than the 2x that is SKF. I was not prepared for the extra speed, however. I found myself down, nearly bumping up against my margin limit. All the while, I knew this thing was really going to crack eventually. So I held, and held some more. Most of the afternoon I held, then I decided that I would lighten up some. I took four losses and held the remainder of my position. A bit after 3:00 pm, FAS did come down and I scaled out of the rest of my position but not enough to offset the four losses from earlier. I was in the hole by roughly -$70. The bummer is that I exited too early on those remaining shares... I could have taken a very nice gain even after those four scale-out losses, had I held a bit longer.

I continued to experiment and try to get a feel for FAS by getting long on four more trades in it; collecting winners in each and adding $113 to my account, putting me back in the "black" for the day. I then went back to SKF to close out the day, adding $25 with two more winners.

It was an exciting and nerve-wracking day, that's for sure. And, as is often the case, lack of patience hurt my results.

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24 for 28, an 86% success rate. Gain of $67 in 6.5 hours of live trading.