All the trading rules broken!!
I haven’t been trading enough this week so I was eager to get stuck in today.
My first trade was a short at 12922… the market had already come off a 50% Fib level and I was thinking that it had further to go. I had missed the move as it fell (as I had only got in at 6.30pm GMT).. I quickly opened the short but didn’t check to see that the stochastics had almost reached the oversold level. This was frustrating as I sold right at the bottom. The market went up and hit my stop for -18!!
Anyway, second trade, I was a bit more cautious. The stochastics were picking up momentum towards the upside in both the 1 and 5 minute charts. I went long at 12943. It went up, then down below my entry price but the 5 min stochastics were still looking good.. it was a few points to my stoploss but it turned and shot up. I took profit at 12969 as the stochastics looked overbought. This was the perfect intraday close as the market then went south again hitting a low of 12958! I got 26 points.
The third trade I was in two minds. I felt that I saw a top when the price action fell below 12980. I watched it go lower for confirmation and then I entered a short… with spreadbets you can get a bad price and I got my short at a crappy 12968. I was wrong here and the market shot up taking me out at 12985 for -17! Arrgh!
Then as the market edged higher and lower, I felt there was a top here again, the stochastics in the 5 mins were looking to make their turn below the 80 line… I felt this was a good opportunity and shorted at 12973 with a stop at 12995.
This last trade is still going as I write and so far it’s not looking so good… the price action is at 12985 currently. The problem with picking tops and bottoms is that most of the time in doing so, you lose big time. Price will do what it wants to do and not what you think it will do. I think I wrote just the other day that indicators are formed from the price action and are secondary to what is actually happening.
If you do manage to pick a top or bottom, the rewards can be fantastic. That feeling that you outwitted the market and entered the perfect short at a top or the perfect long at a bottom is exhilarating but in truth, that trade was probably more luck.
Unfortunately, I thought I saw a top here and shorted… not just once but twice and got stung. I know all the trading sayings and they are all true but in the heat of the moment, one seems to forget them all.
The trading axioms which come to mind are:
“Trade what you see, not what you think!”
“Trade with the trend”
“Cut your losers, ride your winners”
“Don’t try and pick tops and bottoms”
I think I failed all of these today with the last two trades. Ho hum!! Back to the drawing board!
Hi there
considering the out of hours nature and spread I think your stops are too tight on the Dow. I’d maybe go for 40 points or so and aim for around 60, or 30 and 45. Just my thoughts.