Saturday, October 20, 2007

Defending a decision

You might have noticed, if you read my last article, that I posted no exit for my YM long position.

Globetrader_43

I'm long the YM 13575 and 13535 for an average of 13555. Why? Well, when I took the first long into the cash close the tradeplan called for a short covering bounce upto YM 15600, as the DJ index held above the 13500 level.

That bounce was sold further as you can see and YM made a new low at 13521. I added another contract at 13535 to bring my average down to a level I -to use the right word: "hope" - will be retested on Monday.

Normally I don't swing positions over night, especially not against the trend. I've seen oil too often continue a move right from the close just in one direction, with no relief for the countertrend Market on Close traders. But YM is not CL, indexes range a lot more than oil. Even in a steep downtrend, as we saw yesterday, we have consolidation and ranges, as you can see above on the chart (labelled H or L)

So I hope for a retracement on Monday which gets me back to breakeven and beyond. But I have my doubts, I think about the position, I looked up daily charts, searching for bars where we had no retracement, where we had a gap down on a huge move down the previous day. There is no such occurence. Even that long bar down in August downto 12516 in the DJ overlapped the previous bar by 55 points. And my average position entry is now below the official close on Friday which is on the YM 13560. So most likely I fret about nothing, but you never know what these Asians will do Sunday night with their markets, even if they sold them off on Friday already, frontrunning the US or so it seems.

Here is the daily DJ I spoke about

Globetrader_47

I used no Heikin Ashi bars as I liked to see the overlap. There is very strong support coming up on the DJ, but that is still some 100 points below, so I expect a continuation of Fridays move during the next week downto the 13250 - 13200 area. Still, 400 points down is huge, so we should get a retracement first. And I admit that's why I decided to take the swing trade. Using the last clear retracement to apply my Fib-Tool I get the following levels

Globetrader_48

That's what I will be working with on Monday. A bounce should get us to the 13620 to 40 area and we will see if that tradeplan work.s Thats the rational trader side in me.

The other half has doubts, which is the reason I'm writing this article, trying to find reasons to defend the decision I made, with no possibility to alter it prior to the reopen of the electronic markets on Sunday.

At least I thought about disaster striking...me having an accident, which prevents me from entering an order on Monday or otherwise following the markets. I had that problem once, swinging a currency position over the weekend with Dayorders in the market...On Saturday I noticed these orders to have been cancelled as they should have been. We had to drive 500km that weekend and I felt terrible. Not because I'm a bad driver, but because you never know, when disaster will strike. You need to be prepared, do whatever you can as a trader to prevent disaster, to make sure the account ist safe in any event, even the event of myself being unable to return to the markets. And I had neglected that duty. Disaster did not strike, we had a safe uneventful journey that weekend, but I worried, I fretted, I felt terrible, because I had taken a risk, which was totally and absolutly avoidable.

From that time on I decided to use Good till Cancel orders only and check IB TWS aftermarket for any stray open orders.

I have a Stop Market and a Target order in the YM market and will now try to forget, that I have an open position over the weekend.

Enjoy a great weekend with your loved ones...

3 comments:

Anonymous said...

Chris,

Why did you play the YM? You'll make more per contract with the ER2.

Globetrader said...

Because the ER2 will sit dead in the water until the US opens. That's the reason, why I will not trade the ER2 prior to 8am EST (my trading day starts at 2am EST here in Germany)
On Friday I had orders in the ER2, ES and YM waiting to get hit. YM and ER2 were filled. In the ER2 I got out, after seeing a huge order defending the 800 level and noone willing to take out that 470c order on the offer. In the ES my target was a bit ambitious (1501 wasn't tested), in the YM I saw a bounce from the BB on a divergence which led me think, we might be in for a bounce up and caused me to enter the trade instead of waiting for my initial order at then 13530 getting hit.
The main reason, why I sometimes trade the YM is that while of course I make more with the ER2/tick, it's easier to scale in in the YM while keeping the risk/trade within my risk parameters. Trading 2 ER2 is equal to trading 4 YM, which then makes the average daily USD-range nearly equal.
Hope that explains it.

Albert said...

Interesting play. I hope it works out for you. I myself wouldn't be able to stand holding a position through the weekend.