Tuesday, February 24, 2009

Tuesday 02/24/09 - Fighting The Tape

Today was full of mistakes. I fought the tape/trend all day, shorting into most of the up swings, and looking back, I don't know why I did it. Two other critical mistakes I made were increasing size to 3-ES contracts, and widening my stop in the middle of a trade showing a clear loss of discipline! I could blame my work environment and the fact that I was in meetings for 3 hours, but screw that; I messed up, plain and simple. I was on the wrong side of the market. Now, even with all those mistakes, I was down a net 7.75 points by early afternoon, and was able to make back most of it, ending the day on a -1.50 point net loss. Not too bad considering the lack of discipline and the # of stupid mistakes. But wait, I made the mistake of being on the wrong side of the market yesterday, and still managed a 10+ pt gain; so this begs the question, what was different today? The difference was, yesterday, I was very quick to move my stop-loss to break-even, and I took quick single point gains on a few trades, which add up over time. Today, I had a strong bearish bias when price stretched out above 765, and my belief on reversion to mean was so strong that I refused to take only 1.5 or 2 pt profits. I was waiting for the big drop to cover my position for 4-6 points or more. Almost every trade I took today went 1-2 points in my favor before it reversed and stopped me out. So, the outcome for today could have been different if I eliminated my personal bias, and realized that I was taking counter-trend trades into a strong up-trend, so I should cover for quick profits and limit my risk. Today I was too "sure" that my trades were winners, and that's exactly why I ended up losing. Normally I trade from the perspective that I don't know what the market will do next; which helps me minimize risk. Today, I was so sure the market was gonna drop in the afternoon, that minimizing risk didn't even cross my mind. As a matter of fact, I added to my losing positions thinking it was just more cash to take to the bank. I'm going to take lesson from this and the next time I develop an overly confident and strong belief that the market is going to go a certain direction, I hope I'll be able to keep myself in check and simply stay out or correct my thought process.

Goal for tomorrow is to re-focus on discipline; maintain tight 6-tick stops (2 pts max), not move the stop-loss in the middle of a trade, and limit size to 1-contract.

Gap filled within first 40 minutes

ES/TICK (3-min) Note how TICK spent the early morning hovering above the zero-line, and then broke-out to higher ground. I should have noted this and stayed out of short positions.

ES Market Balance (5-min Day Session)

TF Market Balance (5-min Day Session)

TF/TICK (3-min)


  1. Sucks what happened today but its how you learn.

    Would your midpoint rules have avoided this outcome?

  2. Not necessarily. I was shorting above the upper value area which is a valid area to consider mean reversion trades, but I ignored all the other signals which were pointing to more upside, like positive OBV, positive TICK, etc. Today was lack of discipline, and not much more.


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