7 replies to this topic

[NAV]

It all starts with analysis. It's no good, if you can't translate it into a trade. Last week on my blog, i said we would bottom in the 1460-90 area and start a rally. But did i go long ? No. The stops required for that kind of a volatile environment did not allow me to get into that trade. Yesterday was another example. My analysis said that the gap-up into the resistance would be sold based on my overstreched indicators. My analysis was right. My timing was perfect. I went short at 1465. Then the money management, which i ignored, cost me. I took 6 points profit on my 1/3 of the position. The rest 2/3 could have been sold for 10-11 ES points profit. But i ignored my money management rules and was waiting for a target (ES 1449) to be hit. It never got hit. Finally they even took out my stops at 1467.50 for a 2.5 points loss on the rest 2/3 position. Net i made 1 point on the overall position - thanks to the profit i took on 1/3 of the position. Otherwise, it would have been a losing trade. If i were allowed to go back in time, after taking 1/3 off for 6 points profit, i should have taken the next 1/3 off for 10 points profit and waited for the rest 1/3 to hit my target (breakeven stops on the rest 1/3). That would have netted me 5.5 points on my full position. This is what i normally do, but yesterday i lost focus. Just wanted to show how one can lose money even when one is right in their analysis and perfect in their timing. Money managment makes all the difference.

Edited by NAV, 22 August 2007 - 11:21 PM.

[TradeMark]

NAV, Excellent point, excellent post. I have been there, done that all too often. I have come to the conclusion that money management is the "Most Important" part of trading. If I could turn all the winning trades I have had into just breakeven trades, I would be a richer man today. Best TM

[89S10]

I was also short today according to my model. I tried to get out at the 1554 ESU7 area and did not succeed. I kept on waiting, all the way to the close. The make matters worse, the model said sell at the end of the day, so I did not cover. Took a nap and woke up to a 10 point gap up. The real killer emotion wise is when I read commentary here saying the S&P 500 is going down to 1410. Or that somebody plans to short on the open, that the current level is resistance. All kinds of theories as to why the market is likely to go down. It is painful to read because I don't believe it and I am short.

[TradeMark]

If you read tonite's Fearless Forecast, there are a bunch of people that don't believe it. Hmmm? TM

[denleo]

Excellent post NAV. It happens to me more often than it should. Well, that's why they say: plan your trade and trade your plan. Denleo

[OEXCHAOS]

Well, Nav, if that's the worst mistake you make, well, I hope you make lots of 'em! Seriously, this is a sign of a high end player. You fully expect to maximize your profit with the context of your discipline. A profit's not good if it's not done right. Your post mortem ought to be instructive to anyone who's trying to learn how to trade well. As for me, yesterday was funky. I wanted to try a short, too, or a long, but every time the ST trend would turn and confirm, it would either reverse before setting up a signal, or I'd get the set up, but the volume would look funny. I passed on 3 trades yesterday. Every one of them would have been a loser. The prior day, I did get a good Buy signal, but it came at 3:45 and that's too late in the day for me--I like to have enough time to get right and make a decision to hold and sweat overnight. My most rigorous disciplines are designed to keep me out of whipsaws and stress-making trades. So, I missed even the small profit you got. But I missed the losers too, which might have kept me from trading the next big winner. Mark

[HoseB]

Money management... controlling losses...

1. The only thing you can control is "how large the loss". Eliminating the large losses on individual trades (through use of reasonable stops) is essential to survival.

2. IMO, the single most important determinant of a trader's overall career success... the losses he doesn't take.

[tommyt]

Yes, very good post NAV, and a reminder we should never forget the money management part of our trading, or we won't be in biz anymore...This happens to all of us for sure, cept maybe da chief. And thank you NAV for sharing your valuable insights along this journey we are all on!

Edited by tommyt, 23 August 2007 - 10:01 AM.