I entered a "position" trade on Friday (as opposed to a daytrade) ... a "sell" of the S&P Futures (the Spoos) at 1:42 p.m. @1098.60 ... and I planned to hold it over the weekend. I changed my mind and have been asked "Why?" by a lot of the people who watch my trading at skansearch.com .... after all, they reasoned, my Voodoo Wave stuff indicated that the market would go lower. Why close out a potentially powerful position trade?
The answer lies in my belief that, often, Friday's closes aren't Happy Hour ... they're Whacky Hour ... crazy, nutty, totally unpredictable. At first, I was willing to hold, although I tightened my stop (from the usual 4 full Spoos points to just 2 handles), because I thought they might upcrash it into the close. But when it started to spike sharply lower, one of my trading "rules" stepped in. I will almost always sell a strong spike going in my favor, because, by definition, a spike is a market overreaction. There is often a bounceback (in this case, perhaps a nice gap higher on Monday?). The bounceback usually offers a good re-entry ... at a much more favorable position price.
That's why I closed the position with a tight, trailing stop that moved from 2-handles at 3:45 p.m. to 1-handle at 3:55 p.m. I was stopped out @1093.20 the Spoos.
Tightening stops like that is an effective exit strategy that can put a lot of extra bucks in your trading account. There have been some spectacular exceptions to this strategy, of course. I remember an interesting Friday in October of 1987. The Monday that followed has become quite famous. You know the Crash I'm talking about.
My free site is at skansearch.com |
