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Serious Meditation Needed

Posted by Satuki On May - 19 - 2009

I need to take some time off to do some serious meditation.   Today’s trading was horrible, especially the short trade I took in RIMM near the market close.   I shorted 200 shares of RIMM around 3.  And I covered it RIGHT BEFORE it dropped hard big time. If you were tracking my portfolio today, you know how bad that trade was.  I do not know what I was thinking.   I was not even thinking or I was thinking too much.   When you are in thick action, you are sometimes blind to very obvious things.

 

Funny thing is that I kept telling myself “do not cover it. it will drop right after you do that.”    Then I asked myself “Midori, if you were right, why the hell did the short positions you took in the noon all go bad?”   Without further ado, I covered it right before it dropped.  What I did not ask myself was “Is the probability of this trade getting higher due to the fact that I already had a few losers in a row before this?”  If I had thought about this, I would have toughed it out on that trade.

 

Click on the images to have a better view

 

 

 

See the bad trade below.  Tradestation marks all my trades on their charts.  I turned that feature off because there are quite a few other RIMM trades I took before this one, which might distract you. 

 

 

 

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  • Jessa
    I don't think it was a mistake to cover, and here's why:
    Let's say you have four boys. You're pregnant. What is the likelihood that this child will be a boy? It is still 50/50. The past events don't influence the probability of the current event. The sperm that will make the new child a boy will not swim slower just because you already have four boys!

    I think the same is true in trading, just because you have a string of losses doesn't make the next trade any more or less likely to be a winner.

    I think we humans have a hard time believing that, because when all of the events are in the future, we can combine the probabilities of the individual events to arrive at an overall probability. i.e. the probability of having 5 losers in a row is low. The trick of it is that once you have a few losers in a row, those events are in the past and do not influence the calculation of the probability of an independent event still in the future.

    Bottom line: You were right to cover your position based on the information you had at the time (assuming it was your predefined stop loss)

    Happy Trading!
    Jessa
  • Jessa, LOL I like sperms that can think and swim fast. I was just wondering if having a boy or girl has anything to do with how fast a sperm can swim. Does it have something to do with xy chromosome?

    Here is what I think. It is true that past events do not have any influence on what will happen next. It is actually your system that has an influence on what will happen next If I have 4 losers in a row, it will be more likely that my next trade will be a winner based on my system under the condition my system has been statistically proved to have a hit ratio of 60%.
  • EasyE
    I agree with David. You are doing well. No need to get frustrated. Just look at the mistakes that you may have made, committe to learn from those mastakes, and move on.
  • That is why I post my trades here,especially mistakes. So other people an I can both learn from my mistakes.
  • Nick
    Hi, I'm just wondering what your entry was based on. Wasn't the stock making new highs at that point? Were you expecting a pullback in the last hour? I'm just trying to get a sense of your thinking because that looks like a great entry but not one that I'd be able to take.
  • You are right. That was a new high. But stocks always pull back. There are a lot of false breakouts. I was expecting a pullback because the candle sticks were suggesting that.
  • David
    Satuki, with all due respect to the chatists in your audience, is some of the chart analysis employed by traders a bit of seeing things in charts that we want to see? BTW, I pose this question acknowledging the value and importance of technical analysis, especially in day trading. Yet with charting, everything seems to make sense in hindsight, while very little seems to make sense when considering the how and why of sudden moves in the market.

    What if, say, RIMM jumped up to $78.20 (it’s May 6th high) after you opened your position, and it stayed there through the market’s closing? How do you think you would have interpreted such a chart? Your stop loss no doubt would have kicked in and perhaps you’d be relieved to be using an approach that is consistently successful, but how do you think you would have interpreted that pattern in contrast to what actually occurred?

    Speaking of success, by any standards, your system (despite it being in beta mode, as you frequently mention) is enormously successful. As of today, your 2009 earnings from trading is $27,128.61. This is no fluke. Not when such an outcome occurs after opening/closing 218 positions. Well done. Cheers…David
  • Sudden moves are caused by news. If a whale(mutual fund) is buying, he will scale in so no one will notice it. There is no way to intereprate news accurately. Of course there is no need to do it. Price action will tell you what others think about the news

    If rimm breaks to a new high. you will have to get out regardless its likelihood to continue moving up. In fact, it might pull back hard right after it breaks to a new high, which is a false breakout. False breakouts are all over the place. If breakouts were so predictable, then everyone would be making money. Even if I know it might be a false move, i would still close my short position just in case it is not. Keeping losses small is key.

    I think what I have been doing well is consistency. I try very hard to keep my equity curve steady. In other words, I try to avoid deep draw-downs.
  • camtrader
    Just let your predefined stops and targets take you out. Close the workstation and come back to it a bit later. I have a day job while I'm trying to daytrade so I actually have to do that.

    I shorted RIMM earlier that day around 10:40 when the rally made it to the top of multiday trendlines and made a quick $40 bucks on 2 option contracts.

    BTW both places were good areas to short based on the trendlines:

    http://img193.imageshack.us/img193/3894/rimm.png
  • Yeah, the problem was that I was not even thinking. Maybe I over used my head.
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