One thing I try to do on a regular basis is evaluate my performance. What is working? What isn’t working? The last couple of weeks I’ve had some nice picks but I’ve also been dealing with death by a thousand cuts due to a large number of stop outs. So I’ve ended up with churn.
I’ve mentioned before that I classify my trading into three time frames. I have longer term “trend trades”, intermediate term “swing trades” and "quick scalp trades.”
I’ve noticed that my recent “trend trades” such as UDN, LQD and GLD have been working out nicely (although I’ve been in and out of UDN so this hasn’t been a true trend trade – but it is supposed to be). I’ve also been doing well with my high probability-low reward scalp trades.
For example, I shorted MO yesterday at an average price of $18.23 because it was down after earnings and a pipe top was in place.
My planned exit is only $17.80 and my stop is at $18.45 (although I may move it down). I had similar scalps with AAPL and NFLX. I did have a BLK scalp which did not work.
What is killing performance is my swing trades. For example, LCRD is down 8.56% to $8 this morning.
I did manage risk well and placed a stop at $8.6. So I missed most of the move down today. Still, it is a loss and these little losses have been adding up on the swing trades.
Look at yesterday’s trading action. A big move up and then a snap back down at the close. This can be great for day traders (scalps), but it can cause death by a thousand cuts for swing traders.
[Also note that we’re still in the overnight range on the ES today after a fakeout breach of support]
The market is currently at an action point and there is a battle going on and it remains unresolved whether the Lehman gap will become new support or at least an intermediate term top. So we’re getting whipsaw and it makes sense that the swing trades (at least for me) are not working very well. This is when you would expect death by a thousand cuts to happen.
I’m resolving this problem by shifting my trading to longer term trend trades and short term scalps (often day trades) until we get past the chop.
Today I bought COW (Livestock) and BAL (Cotton). They are both slower movers with attractive charts. This is the kind of longer term trade I’m seeking when there is so much chop. Thanks go out to Lucas for the idea.
Finally, I’ve seen some calling yesterday a top. Congratulations if you call it right, but I think you’re crazy to short this market until the dollar at least puts in a temporary bottom.
No reason to think UDN is breaking trend based on this chart.
