Thursday, April 29, 2010

Discipline issues continue...

SSRX is a Chinese stock that I have been very bearish on because of the long term head and shoulders pattern it has formed over the past few months. However, it has not triggered any of my usual entry signals. Yet this morning I entered this stock short after it gapped up with all my remaining buying power. I did not plan the trade. This meant that I did not know where my stop loss was going to be and since that was the case I was tempted to hold on to the position even if it moved far against me.

This was a potentially dangerous situation for me. This is the second time I can remember shorting a stock that was in a clear short term uptrend that did not trigger a short entry and without a clear stop loss point. Fortunately for me, however, reason kicked in. I decided to put my stop loss above the day's high and was eventually stopped out for a sizeable ($135.00) but still in retrospect reasonable loss.

Being patitent is extremely difficult. It is very hard to fight greed and the feeling that your going to miss out on money if you stick to your trading plan and wait for a proper entry trigger. Your always tempted to try to pick a top or bottom with dollar signs in your eyes until reality kicks in and you have the position on and losses pilling up and you get mad at your self for doing what the amateurs are doing instead of sticking to your plan.

Ironically, it has been the "greed driven" trades that have cost me the most. If I had been discipined and stuck to my plan consistently the dollars that I was chasing would have been in my account now instead of in red in my performance spreadsheet.

Sticking to simple rules is most certainly a challenge but I am working on ways to force my self to do so. I guess I could just look back my trading performance over the past two months everytime I get a rush of blood to my head and want to take a poor trade.

Lesson: I am going to try really, really, really hard to stick to my trading plan.

Update: I am still long SVN with an unrealised profit of $40.00 and will continue to hold until I am either stopped out or have a profit that exceeds 3R's.

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