Saturday, March 19, 2011

My trading so far...

Yesterday marked the end of my third week of trading since starting back on the 28th of February and my account is now down to $1,279.45 from $1,450 or roughly 11.8%. I got spanked on Friday by the illiquid put option I bought to hedge my long $FTK position. The spreads in these illiquid options are nasty but I really had no choice. It was either I hedge or face the very real possibility of the stock tanking hard into the close of trading. Never the less, this loss serves me right as I should have never put the trade on with out a day trade. In fact, I should not have even had my trading platform open!

Now, as much as the draw down in my account can be attributed to my lack of discipline; the market conditions have not helped either. Looking back, I can see that the markets clearly entered a correction since the 22nd of February and I started trading on the 28th of February. Since then I have been trying to force long trades with very little success except in the low float oil $LEI (whose sector was in play big time). I simply did not want to face the reality that market conditions were and still are not in favor of long swings!

The excitement of trading overcame the need to be very selective with long swings. So I just put on trades willy nilly. Now that I have come to terms with this; I will not be trading unless a set up jumps out at me and I believe that the markets are ripe for a short term bounce. No more spontaneously buying intra-day break outs like the $FTK trade...looking for an over night gap...this is not a bull market! Had I started in September or even October, I's sure the bull market would have bailed me out and therefore my account would have been up and not down! But such is life, you just have to accept that certain market conditions are not conducive to your strategy and adjust accordingly! That is what I will do. Wait patiently for only the best well thought out long set ups and then get swiftly in and out like a sniper.

On another note, it shouldn't be much longer than 2 weeks before I add to my account again and get it above $2,000.00. This will allow me to trade on margin. This should make my life a lot easier since I would then be able to trade on the short side. I should do better then as shorting should be easier than buying in the environment we currently have.

Finally, it seems unlikely that I will get to my goal of a 20% gain on the month and thats fine. Whats more important to me is not drawing down my account significantly. Even though I'm down 11.8%, it will only take a couple good trades next week or the week after to get me back to break even and then a good month or two to get me back on track with my plan! Trading returns do not come evenly spread out. Some months will be good some not as good. So my focus is on process; sticking with my plan and trying to let my edge play out. This is sure to get me to my goal by the end of the year.

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