Tuesday, June 13, 2006

Don't Make This Mistake

First, I'm terribly sorry for the lack of updates. I've had about eight billion other things to do.

Second, I want you warn you about a terrible mistake I made so you can try to avoid it.

As you know, everyone's been waiting for "the bounce." Even I, bear of bears, figured it was long overdue. I had a bevy of charts that clearly showed that we "should" have a bounce.

Shortly after the market opened this morning, it started pushing higher, and I closed out every single position. Every. Single. One. And the market kept going higher, and I thought I was quite clever to get out.

Well, the market's got an hour left today, and we're down over 80 points. The missed profits from my closed positions could buy a really high-end BMW at this point. From just today alone.

The graph below shows the brief rallies in the midst of this bear markets. I was anticipating another one starting today.


My anticipation - - instead of simply tightening up my stops - - cost me a huge amount of missed profits in a matter of hours, and if I want to get back into these positions, it will be at a much higher price and much higher risk. Not good.

So I feel I have royally screwed up by not following my own bearish advice. For those of you hanging tough, my hat is off to you. This is a different market, and the bears are in control. I should have more faith in my own people.

5 comments:

Unknown said...

You'll have days like that. Sticking to my rules I met my targets and got out however had I staied in I would have doubled or trippled my wins.. Ah well.. there's always tomrrow.

RLgtGLgt said...

Interesting day to say the least. I closed out my credit spread (1200/1210) SPX for a slight loss on the bounce, also closed part of the credit side of another SPX trade I was in. To say the least, I agree we are due a bounce, but the market continues to come up with more and more bad news. I see nothing but selling (recent with the big financials). Think a lot of money is sitting on the side waiting.

I did keep open a few SPX puts at around 1200 since I had some time and they paid off very well. Continue to look for a bounce worthly of closure.

Tim - Keep postin' those trades, I think you are at this point on steroids just knockin' them out!

Good trading all!!!

Michael said...

Like others have said, don't be so tough on yourself. Many a trader has gone broke trying to catch the exact bottom (and/or top).

John Wheatcroft said...

The housing market is dead. The reason this market is selling off is simple - most smart traders looked around a month ago and saw absolutely nothing worth buying so they stopped.

In the next couple of days a lot of stocks are going to start catching bids because they are beginning to look good again. The SP500 PE ratio is at the lowest level its been since 95. For those of you who follow Demark methods today was the 16th declining day. One more = 17.

Don't get too overextended on the short side - I smell a short squeeze being put into place.

HPT said...

Christi25, There is a ton of index arb and trading programs making up the volume we are seeing lately, hence the high correlation between the indices and stocks. Check out the 5 day on the VIX. The lines are beautiful.

Tim, I too felt we were ready for a bounce. I'm going to stick to my rules though, and stay short until the trend line that has formed overhead the last few days is breached.