Friday, January 21, 2011

Today’s mistake


Most of the traders and bloggers out there will show you how they make 100 or 1000 points every day, just to boost their ego. Completely opposite to that I will post my day’s trade in order to explain my mistakes: In 600 point day with clear trend I managed to finish some 80 points in red. Yes, it amazes me as well!

I missed first hour or so, as I had to go to municipality to do some work, so I was in front of screen from around 10:00.

First trade was short at 28772 around 10:20 (entries are marked with big arrows, exits with small arrows). Exit was 3 bars later at 28719 and the reason for close was red bar on high volume (stopping bar), which usually marks end of the trend. Profit 53 points

Second trade was at 28820 around 11:40 with very tight stop loss. ALSI tested previous high (from 9:50) and volume was not supporting move upwards, so it was ideal place to short. Unfortunately, I could not get full size and I had to go with my son to swimming lesson, so I had to close at 28780 for 40 points profit, but effectively it was only about 13 points, because it was only one third of the size. Ideally, this short trade should have been closed much later in the day. Easy close would be 14:00 at 28700 when we closed above 10 and 20 exponential moving average.

Later in the day I tried to go long, trying to find a bottom at 15:55 and later at 16:45 and both trades closed as losses. Loss for those two together was around 140 points, so day was closed with 80 points loss.

As I’ve analyzed chart tonight I realized that instead of trying to find bottom around 15:55, much easier and better trade was to go short at exactly the same time with very tight stop loss of around 30 points. That short could have easily gone all the way till the end of the day and it would have pocketed anything between 200 and 300 points.

So, today’s two good trades were short 28820 around 11:40 with 30 points stop loss and with close at 28700 for 120 points profit and second one was short 28700 around 15:55 with 30 points stop loss and with close for 100 points profit (to be modest). That would make you 220 points profit on the day when daily range was 610 points or 36% of daily range.

So, two lessons to learn from today’s experience:

- Don’t try to catch tops and bottoms, especially when market is up or down 500 points;

- Patiently wait for good setup, as it will happen at least once a day and can easily make your day.

Our job as a trader is to make money, not to trade. If you can make your daily target in one trade, relax and enjoy.

Trade with trend!

9 comments:

Shane said...

Hi Igor,
Thank you for the updates on your trade system. Can you perhaps at some time explain the the VWAP indicator as shown on the chart and how you use it. Much appreciated.

Shane said...

Hi Igor,
Please be on the lookout for an email I have sent you. Thank you

4abe said...

Hi to all followers of ALSI Trader,

Yesterday must have caught a lot of Bulls by surprise and some of them might have got wiped out if they didn't enforce a stop loss strategy.

This can be used as one of many examples why it is so important to have stop loss discipline.

I was in profit and it really started to look good above 29400, but got stopped out on my LONG on Wednesday when ALSI broke 29125.

This all happened while I was away from my screen. I also expected a breakout and not a breakdown :o

At least I didn't make a loss.

Looking forward to the next opportunity.

Happy trading

Alsi Trader said...

Hi Shane

And thanks for following blog.

VWAP-volume weighted averaga price is moving average where volume is added as component. Bigger volume faster MA is moving.

Anyway replied to your e-mail in more details

Alsi Trader said...

4abe

Yes yesterday was very fast day, and from year to date high on Wednesday open to -500 pts yesterday.

Today is all together differnet story. Daily range 233 points, range bound market so far. No clear trend

But next opportunity will present itself sooner or later

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